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Kidswear retail has seen some popular brands going downhill. But inspite of the difficulties faced by brands such as Lilliput, Catmoss and Gini & Jony, kidswear players such as Mothercare, Mom & Me and Arvind have been marching ahead.
Senior retail consultants say the problems of Lilliput, Catmoss and Giny & Jony did not lie in their business prospects. "I do not think there were any issues with the business model of Lilliput or Giny & Jony. It was just a case of mis-management. The market is growing very well and even a new player can come and make money," says Prashant Agarwal, joint managing director with retail consultant Wazir Advisors.
Industry analysts point out that the kidswear market is the fastest-growing in ready-to-wear apparels, expected to maintain an average growth of 13 per cent till 2016. The Rs 38,000-crore kids apparel industry is seeing players honing their expansion plans.
The UK-based kidswear and maternity care retailer Mothercare had entered a joint venture with DLF to enter India in 2009. It is looking at a 50 per cent growth in 2013-14 at Rs 200 crore, says DLF Brands Managing Director Timmy Sarna. In 2012-13, it grew by 25 per cent and witnessed a same-store growth of 20 per cent, mentions Sarna. "This year we are looking to make money," he adds.
Mom & Me, run by Mahindra Retail, is also growing. It plans to open 30 stores in the current financial year, similar to its expansion in 2012-13. It runs as many as 110 stores. Though the chain is yet to break even, most of its stores are profitable, says a top executive with the company. While Mahindra Retail had reported net losses (provisional, before tax) for the nine months ended December, 2012, of Rs 79.9 crore on net revenues of Rs 134.6 crore, Agarwal says that retailers like Mahindra are not making money because they are in the expansion mode. It is acceptable to focus on the topline by attracting more customers initially, he says.
Experts point out the success of Mothercare and Mom & Me will stem from being one-stop shops for childcare and maternity needs. Mom & Me and Mothercare sell products ranging from strollers, child car-seats, furniture, food, skincare, footwear for babies to literature, maternity clothes and equipments for mothers, apart from kidswear. "Affluent households do not mind spending more on kidswear . They are looking at a complete solution. Both Mom & Me and Mothercare fit the bill," says Arvind Singhal, chairman of Technopak Advisors, which has a stake in Mahindra Retail. Mahindra Retail's managing director, K Venkataraman says, "The customers want differentiated offers in a large range".
While Catmoss and Lilliput ran into legal tangles with their PE investors SAIF partners and Bain Capital and TPG, respectively, over fund misappropriation, Gini & Jony, backed by Reliance Capital, defaulted on payment to creditors, HSBC and Barclays Bank, and faced a winding-up petition.
However, the existing retail chains are focusing on a premium clientele and a profitable strategy. Mothercare, for example, sells private brands under its own name as per single-brand retail norms, but saves on import duties on 30 per cent of its products by sourcing from India. Its range of kidswear starts from Rs 300-400.
Mom & Me has licensed brands such as Disney and Fisher Price, apart from its private labels, focusing primarily on the zero-nine years of age, with an average price tag of Rs 600. To manage inventory better in smaller stores, Mom & Me has started e-corners where customers can browse and buy from the entire collection online, irrespective of the in-store availability and get their purchase delivered at homes.
However, as kidswear thrives, pure-play brands are not far off either. Ahmedabad-based textile major Arvind is straddling segments from value, premium to super-premium in this market. "We are looking at kidswear aggressively and want to be a leader in this segment," says Suresh J, managing director of Arvind Lifestyle Brands.
If its licensed Cherokee caters to the value shopper, Elle Kids and US Polo Kids are for premium consumers, and Nautica (to be launched in September) and GANT are super premium brands. It also sells kidswear at its speciality retail chain Next and UK-based department store, Debenhams, for which it has the India rights.
"Kidswear is a huge latent market. If you enter the market with the right products at right prices, they get a good response. For instance, US Polo and Cherokee are profitable from day one," Suresh says. The company is looking to grow its kidswear 3.5 times to Rs 175 crore by 2014-15. It saves on operational costs, in both rentals and supply chain, by retailing its kidswear brands within the stores of their parent brands which it already has up and running.
But Arvind, a pure-play kidswear purveyor, might have to look out for the leverage the all-in-one stores have. Mom & Me provides in-store play areas for kids, feeding area, reading lounge, nappy-cum-wash areas for parents with kids browsing through its stores. It holds parenting fora at its stores to discuss pertinent topics. Mothercare also holds parental education programmes in stores. "Each product carries a lot of literature, based on research. There are not many retailers who provide 360-degree parenting advice to customers," says Dipak Agarwal, CEO, DLF Brands.
Mothercare has struck a franchise agreement with Raheja-owned Shoppers Stop for shop-in-shops, making the most of double digit growth of the latter's stores, according to industry experts. Mom & Me too has taken the franchise route, and is looking to enter West Asia and Africa.
