Demographics, Beginning Charges and the Globalization of the Child Merchandise Business
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While COVID-19 slowed economic activity in almost every other area, it led to a sudden surge in e-commerce; In 2020, online sales grew exponentially, largely due to the pandemic and lockdown that became the new norm. This created a situation where everyday necessities were no longer available for purchase in local stores due to lockdowns or consumer reluctance to increase their risk of exposure.
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At the same time, a lower birthrate in the US and Europe, partly due to financial uncertainty and lower consumer confidence, has caused demand for the baby product industry to decline so much that it is no longer noticeable compared to its previous strength. This exacerbates the challenges these retailers face, such as the increased competition that came with the boom in e-commerce and the increasing penchant for buying second-hand goods.
Even so, global brands in this industry need to be aware of the future of baby products. In stark contrast to the rest of the world, birth rates in developing countries (ie Africa) have exploded and provide an environment for massive business growth if this potential can be realized and current trade barriers removed.
Birth rates in and outside the United States
For the second year in a row, the birth rate in the United States has hit a new low, resulting in a decline in births since 2008. In one year, between 2016 and 2017, the birth rate fell by 3%: from 62 births per 1,000 women of childbearing age in 2016 to 60.2 in 2017.
Several major manufacturers in the baby product market have been extremely vocal about the struggles they are facing due to this drop in birth rates. For example, Kimberly-Clark, the maker of Huggies diapers, announced that it would have to lay off 13% of its workforce (at least 5,000 jobs) globally in 2017 in order to cut costs as revenues decline.
In addition, baby care megalodon Johnson & Johnson (NYSE: JNJ) was powerless as it suffered a 20% drop in sales in its baby care division since 2011. The company is now considering redesigning its products that emphasize natural ingredients in the hope that this will respond to the “evolving needs of millennial consumers.”
The COVID-induced lockdown has only made things worse, adding to the growing habit of would-be parents of pushing back parenthood even further, and companies selling baby products are feeling the walls close. The birth rate in America stabilized at 12 births per 1000 between 2019-2021.
Although this is not just an American phenomenon. Birth rates are falling sharply in Europe, with Turkey, Kosovo, Moldova and Estonia seeing the most dramatic decreases per 1000 between 2005 and 2025. This, of course, adds to the problem not only for companies based in these regions, but also for those who operate globally and are suffering these losses on multiple fronts.
However, what appears to be a global trend is actually only happening in the industrialized world. In direct contrast, it is often a feature of the world’s poorest countries to have some of the highest birth rates. For this reason, when looking at the ranking, the countries with the highest birth rate per 1000 African countries will dominate the list.
The top ten countries in terms of birth rate are all African: Niger, Somalia, Congo, Mali and Chad make up the top 5. In addition, social media has given parents in such countries a better understanding of the tools available to their counterparts in developed countries, which has led to an increase in the demand for such products.
This offers globalized companies in the baby products industry the opportunity to make up for the losses they suffer in the industrialized countries. If they can remove the trade barriers associated with these countries, there is the potential for extreme profits.
What is globalization?
Globalization is the process by which organizations develop influence that spreads internationally or begin to operate internationally. It describes the interaction and integration between people, businesses and governments around the world and has accelerated sharply since the 18th century thanks to superior technologies in the transport and communications sector.
Globalization is a priority in the discussion about the baby products industry because, in simple terms, it describes a process by which free trade can be made possible with the countries that these companies want most to access but are currently unable to access. For global companies operating in the baby products market to benefit from the above emerging markets.
Coincidentally, these regions are also experiencing a massive technology boom due to the newly built infrastructure. As a result of the increased use of the Internet in these developing countries, parents in such areas are becoming increasingly aware of the tools available to their counterparts in developed countries to raise children, which has led to an increase in the demand for baby products from the world market.
This technological growth represents both a reduction in trade barriers in these emerging countries and an opportunity for growth for such global companies. However, this reduction in market entry barriers through increased use of technology (i.e. no physical stores are required and companies can sell their products digitally) is only a first step : Many of the relevant trade barriers for these countries still exist, such as traffic jams, theft of goods, import permits, inefficient bureaucracy and requirements for the localization of supply.
Trends in the baby products industry
While the emerging markets of Africa represent a new opportunity for companies where general baby products will thrive due to a lack of competition, the mature markets of the US and Europe are saturated with producers. This means that products require specific properties that are determined by market trends and that set them apart from their competitors.
As in many other industries, consumers are expressing an increasing desire for products that are ethical, natural and sustainable; Companies addressing these trends appear to dominate. In the baby food market, for example, the most important success factors are “’kid-friendly’ packaging and advertising, as well as the sustainable initiatives pursued,” says Paul Lindley, founder of Ella’s Kitchen.
In addition, the brand seeks to protect the planet for future generations by helping to combat climate change. In 2019, it along with over 500 other B-Corps pledged to be net-zero by 2030, and is working with conservation partners to restore, naturalize, and protect the ecosystems that so many depend on.
The same trend towards “environmentally friendly products” can also be observed in other baby article markets. For example, many parents have decided together that anything that is not good for nature is also not good for their children at the same time. Natural products are perceived as being gentler on the skin, especially on the delicate skin of newborns, so that parents who can afford better products no longer take any risks.
Convenience is another important factor in the industry. Retailers like BabyOutlet are very successful because of the wide variety of products they curate in one place and the ease with which customers can access it. In addition, the products are environmentally friendly and make it much easier for customers to purchase items that were previously difficult to obtain, such as personalized baby clothing, in the shortest possible time.
All in all, the face of the baby products industry is changing – both globally and locally. At the local level in the US, the saturated industry that currently exists due to market maturity demands specialty products that match certain trends such as sustainability and convenience (mainly sold by Amazon.com, Inc. (NASDAQ: AMZN) Generational Leaps in Delivery) .
Technological growth in emerging Africa is the first step in removing trade barriers to the region, which will only get worse as it faces increasing exposure to globalization. This represents a previously untapped market that vigilant companies in the baby product industry can take advantage of.
Updated October 5, 2021 at 9:39 a.m.