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Little People, Big Business

Little People, Big Business
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In 2016, childrenswear accounted for more than $200B of the global apparel market (12%). While much of the retail market has been contracting, there are several bright spots to highlight in the childrenswear area. For the year ending 2016, Old Navy, one of the world’s largest kid’s retailers, recorded its fifth straight year of sales growth. And Children’s Place also clocked higher same-store sales in the last quarter of 2016, beating earnings estimates.

It’s a category that has to remain price competitive because of its short lifespan, and it’s also not immune from many of the same promotional and pricing struggles of the wider industry. Despite these factors and the pressures of declining birth rates across the greater swath of developed countries, childrenswear continues to grow, not only because kids grow out of garments quickly, but also due to the same macro trends impacting the greater apparel industry. China, Activewear, and Luxury? Yes, yes, and yes. These are all playing a major growth-driving role across the industry. So let’s unpack these business trends from the lens of some StyleSage e-commerce data.

(Fun fact: Did you know that 80% of the world’s population of people under the age of 14 are in Asia, the Middle East, and Africa?)

China: One Child No More

China relaxed its one-child policy starting in 2013 to allow couples to have 2 children to offset its aging population and boost its economy. But even prior to that, big spending on kids was the norm. With small families, the child received the undivided attention not only of its parents but that of both sets of grandparents. (You may have heard the term ‘little prince’ thrown about with regards to this topic.) A study by Fung Business Intelligence saw that growth rates for the apparel industry in China were the highest in, you guessed it, childrenswear (9.2%). For global brands actively trading in this market, how are they pricing to remain competitive, to capture the disposable income of the increasingly important Chinese middle class?
china, zara, tommy hilfiger, uniqlo, childrenswear

Fast and essentials retailers like Zara and Uniqlo are keeping their average prices below those of the US, while global brands like Tommy Hilfiger are taking big advantage of their brand perception and pricing at a premium. Brands wishing to succeed in this market would be wise to monitor their price positioning to keep them in line with the competitive landscape.

Made for Play: Activewear

If you think about it, activewear as a core offering for kid’s makes perfect sense. It checks the boxes in practicality, ease of care, and durability. And with activewear otherwise dominating the retail market right now, it likely comes as no surprise that our data showed that from one year ago to today, the average product count in activewear for boy’s and girl’s has more than doubled.
activewear, kid's

As a part of the entire kid’s assortment, across childrenswear retailers, we are seeing an average of 11.6% of SKUs dedicated to activewear.
childrenswear This category is dressed and ready to have some fun. (Heavy-duty laundry detergent not included.)

Please Don't Spill: Premium Brands

Notwithstanding the likelihood that that adorable little dress is going to be stained and the absolute guarantee that it will very shortly be outgrown, there is a developing market for designer baby and children’s duds. In fact, designer brands the likes of Burberry, Gucci, and Ralph Lauren are offering up miniature interpretations of runway classics for the little people. And it’s no small part of their inventory, as our analysis shows.
burberry, gucci, ralph lauren, childrenswear

What are the thresholds for designer pricing in childrenswear? We saw average prices for kid’s categories including shirts, dresses, and outerwear that were between one-third to one-sixth of their adult counterparts. (We see you over there, trying to squeeze into those children’s sizes.)
burberry, dolce and gabbana, childrenswear Dressing your kid as your pint-sized doppelganger is nothing new. What’s new, though, is that regardless of budget, the number of choices that won’t humiliate both the adult and child in this scenario is growing. Whether you’re shopping the value end of the spectrum or ready to shell out some serious dough for those aforementioned designer items, twinning is taking on a much more sophisticated vibe. In fact, we just caught word that our favorite brand, The Reformation, is soon to launch kid’s line and, well, we might just be reconsidering our stance on not having children. (Just kidding.) But in all seriousness, the twinning idea is more than an appeal to parent’s vanity; it actually makes a lot of business sense. You can design and source from the same materials, leave off unnecessary and potentially costly design details, and still price at a premium. That’s not only resourceful, that’s smart business. (Not to mention you’ve got a born-and-bred brand loyalist on your hands). Oh, and here’s a freebie: we don’t see a lot of mainstream retailers playing with a dedicated ‘twinning section.’ Something fun for the marketing team to run with.

And on that note, that’s all for our category deep dive of the week. For more competitive insights on the childrenswear market, contact us here. And you can find other category reports right here on our blog. 'Til next week!

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