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TopStory – Why the Kids Industry is the next big thing

MarcoHamers-200x200

October 9, 2014

Marco Hamers, COO Goodbaby

The baby & kids industries are booming. Goodbaby, or GB, is a Chinese leading retail company with a network of 6,000+ stores in China, manages GB branded stores, and also works with international brands on a franchisee JV basis.

China Connect  : Do you see other strategic levers beyond higher disposable income, family policy (2 kids in certain Chinese regions), and obsession for food safety, to explain the fast growing Kids industry in China ? Where do you think this growth is heading to ?

Marco Hamers :Urbanization, loosening up of one child policy, rising middle class, policy, and most of all the willingness of Chinese parents to want to give only the best for their child are the top reasons. Besides the big growth trends such as ongoing urbanization, and the life style changes that come with it, there are also cultural factors further fueled by the one child policy that only the best is good enough. The updates and relaxation of the one child policy the last two years, are also encouraging the already well off urban middle class to consider a second child. For more specialty product groups, a combination of stricter (local) regulation and awareness is creating opportunities for instance in the car safety seats. For many European and Americans it is almost unbelievable that kids are not required by law to be secured in safety seats when traversing through the hectic Chinese traffic! Only most recently in some cities the government has started with soft enforcement.

Changes in the market have happened very fast in the last 3 years. In that short period, just by looking at the changes in tenant mix in mall projects, we can see what is going to fuel the next decade of growth. 3 years ago fast fashion was all, if not the only, rage that would driver traffic into the malls. Now to evaluate a good project 40% of the project should be food or entertainment related. All key developers have a very strong focus on creating special areas and zones for kids and families. Where they cover education, playing, shopping and special themed restaurants in one. Wanda is setting up a special project team to run about 5,000 Sqm of this format in each of their 100 malls. Wanda also recently made the public announcement that they will set up an online platform to compete with Alibaba in this area

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For Goodbaby Commercial this is an excellent opportunity to tap into the potential of the market. Goodbaby is a household name when it comes to strollers, kids bicycles and affiliated products already for decades. However in the last few years GB has build up an impressive portfolio of brands that give it access to high end and middle class consumers, accross the board from tier 1 to tier 3 and beyond. GB has a number of international brands either through JV or acquisitions such as Cybex, Mothercare China, Nike Kids, Maxi-Cosi, etc.

On average in apparel in China for international companies 10%-15% of sales can be generated through online sales channels. For GB the numbers are in the high double digits for some of its product groups. Especially baby care products (such as bottles, diapers, creams, etc), strollers, and bicycles are showing strong growth in the online channel. As for most retailers a clear strategy to differentiate the online and offline assortment product offering is important to avoid sales cannibalization.

China Connect : Do existing consumer behaviors across Tiers identically impact the kids industry ? How much does the “reassurance” factor play, and what it means for western kids brands willing to penetrate the market ?

Marco Hamers : In terms of online shopping behavior there are a few trends that can be clearly described. For instance higher price points and more accessorized products are sold in the offline channel vs the online channel. Shopping convenience and repeat purchases are key; as are membership communications. Well established brand names will drive more and more sales to them as the market is still fragmented and quality is not always where it should be. So in that sense, yes there is massive growth in the number of companies or individuals that are active in the kids market (apparel, care and hard goods), but there will be a strong wave of consolidation. The consumer demands quality, reliability. There are not many brands that can truly cover and ensure complete China consumer requirements

In terms of consumer engagement, Goodbaby uses a panel of experts and an extensive online platform to communicate with expecting and young parents. Not as much to sell, but really to educate them to make choices and seek professional advise. With the quick developments we have seen in social media in China, now this service is taking the next steps into WeChat communities. I see it is as one of the biggest opportunities in the market at this moment to set up a very comprehensive CRM and online communication platform to engage. What better target consumer group than young parents who are interested to learn how to benefit their kids ?

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The way to build a brand and reputation in China has changed dramatically in the last 3-5 years. The traditional view that you needed to open many, many stores in each tier 1 and tier 2 city have slowly come to an end. A more matured market development approach arises. A good mix between offline flagship real estate, good commercial terms, and online approach. In some ways, it has become easier probably to launch a brand in the China market at lower overheads. Immediate access to the people “in the know” of course can speed up and avoid beginner mistakes.

Retailing in China is probably one of the most challenging environments on the globe at the moment. The challenges are changing over the years. In the past it was the challenge of production, of rising costs, of talent retention and development. Now the big challenge is to engage and keep convincing the Chinese consumer through online and offline communication.

For a new brand entering the market, my advise today would be: Build 3 -5 impressive flagship stores, with a focus on brand identity and brand spirit, not so much on selling, build another level of 20-30 stores in tier 2 cities with a strong focus on West China (Chengdu, Chongqing, Wuhan), and a number of more consumption driven cities such as Xi’an, Dalian, Harbin, etc. From day 1, have a strong integrated approach for your online retail strategy and communication.

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China Connect : Brands are strong in China because they interact directly through social media. What does it take to “socially” leverage the power of Chinese Moms ?

Marco Hamers : Chinese Moms are very similar to mothers in the rest of the world in the sense that they like to validate their opinion on products and brands through an established network. These days the network goes way beyond the traditional circles of school friends and close family. Chinese moms use every means possible to link into online platforms to help them form their opinions. A lot of efforts from Goodbaby are going into educational broadcasts and information to be distributed to expecting and young parents. Also relatively new phenomena’s are to organize product and information sessions at consumer’s home setting, they then leverage their own networks to help in promoting the products. Obviously this works best with key network influencers.

Quick and efficient response to questions, but also to complaints, are an important part to keep a good reputation in the online community. For Goodbaby, this means a significant number of resources are spent on customer care.

In the next generation of retail stores we are preparing a truly interactive store environment. Where the consumer can have a seamless experience between the offline and online information and product selection. The availability of technology and retail applications are becoming more mainstream. I am personally very much intrigued by the possibilities that can be created by a combination of ibeacons and WeChat. Consumer identification, loyalty program communication, product story telling, membership shopping, etc. It can all start with relatively simple tech.

Laure de Carayon
Founder&Ceo China Connect

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