Apparel brands looking to expand are now giving the children’s market greater consideration.
Whether it’s Rent the Runway debuting a kids service earlier this year, Brooks Brothers testing a new infant collection in select doors, or Stitch Fix’s kids subscription box launch last year, companies are tapping into opportunities in the market.
While children’s wear can’t be described as the new kid on the apparel front, the category does seem to be gaining more attention than usual from brands of late. The question is, however, how viable are these businesses against the current retail backdrop where a retail stalwart like Gymboree–even if it faced significant financial pressures due to a leveraged buyout–filed twice for bankruptcy court protection and then ended up liquidating its operations?
Business model profitability
The idea when entering children’s wear, according to Gabriella Santaniello, retail consultant and founder of research firm A Line Partners, is to hook shoppers while they’re young and keep them as they age.
“The children’s business itself if highly competitive. Rarely does anything sell at full price, and sales are extremely reliant on the weather. Kids’ apparel more so because it is a buy-now-wear-now category,” Santaniello said. “People don’t want to buy ahead of time. It will be freezing and that’s when people think they need to go out and buy outerwear. Parents won’t buy in September because they’d rather wait until it’s cold since the kid could be a different size when winter arrives.”
Children’s apparel, said Santaniello, who used to work in the children’s business at Ralph Lauren Corp., is “one of those last frontiers, like athleisure, where everyone is going in because it’s one way to grow and find a new category.”
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Brands are always looking to grow, she said, but it poses a challenge for those that don’t fully understand the kids category.
“When I was at Ralph Lauren, nothing sold at full price and I remember that as being definitely a shock,” Santaniello said. “The other thing, too, is the labor required on kids apparel–the work for a girls dress is the same as an adult dress, and [there’s no break] on labor costs because it’s a smaller item.”
Where Gymboree is concerned, the Gymboree name—its intellectual property—was sold to The Children’s Place. Earlier this month at the 5th Annual B. Riley FBR Consumer and Media Conference, executives from The Children’s Place spoke about the Spring 2020 relaunch of Gymboree, noting expectations that the company will be able to recapture $140 million in sales.
Gymboree is a higher premium brand than what’s typically sold at The Children’s Place, and therefore has both a higher average unit retail, which means a higher-margin product.
“We’ll see [if that works],” Santaniello said. “It has a higher price point, but it’s always easier to trade down and harder to trade up. Maybe the Gymboree brand will be what parents buy for special occasions.”
The children’s apparel market landscape
Natalie Kotlyar, leader of BDO’s national retail and consumer products practice, said because the U.S. birth rate has been relatively stable, the children’s apparel market has been “stagnant” this year.
Looking ahead to 2020, she said, “We expect e-commerce and big-box retail to capture the majority of children’s apparel sales, as consumers strapped for time–especially those with young children–are looking for the most convenient options: shopping on-the-go or at one-stop shops, while conquering other items on their to-do lists.”
Target Corp., one big-box retailer that offers that added convenience, seems poised to capture even more market share in the kids category as it continues to expand the business. The discounter in 2017 created its private-label line Cat & Jack, and within one year of launch it tallied $1 billion in sales. Cat & Jack, which has now reached $2 billion in volume, also includes adaptive apparel options for differently abled children.
With talk of a recession on the horizon, whether it materializes or not, many have been left wondering what that will mean for consumer spending on apparel—but the kids’ wear category might be the one unscathed.
“As with other apparel markets, we’ll see peaks and valleys that align with consumers’ confidence in the economy,” Kotlyar said. “However, we know that consumers will cut spending on themselves before they cut spending on their children during a recession, which could help the sector perform slightly better than others in a slower time.”
Millennials and mini-me
What could help some brands is the shift in where millennial parents choose to buy apparel for their kids.
While there has been a recent resurgence toward the Mommy & Me look, there’s also now a Daddy & Me iteration, an option now available at Ben Sherman. Mark Williams, creative director at Ben Sherman, told Sourcing Journal in June that the smaller kids’ version is a reflection of the men’s line.
“All of the styling and adaptations are very closely tied to men’s in the mini-me version,” he said. “We’ve established the iconic lines for kids in apparel and footwear [incorporating] kid-friendly styling of the men’s wear elements.”
According to Hana Ben-Shabat, former partner in A.T. Kearney’s consumer goods and retail practice and now founder of strategic research consultancy Gen Z Planet, the uptick in the matching trend can be credited to social media and the celebrity culture, where Kim Kardashian West and Beyoncé are doing Mommy & Me and using Instagram to show it off. For millennial parents, the mini-me version is how they bond with their children, and also part of upping their ‘cool’ factor.
While some brands could garner incremental children’s apparel sales by capitalizing on the trend, it remains to be seen whether it has staying power.
The Gen Z cohort, Ben-Shabat said citing Gen Z Planet research, “prefers to maintain their individuality and uniqueness. They don’t like to blend in and fit in, not even with family members. One of their values is authenticity.”
As the younger Gen Z cohorts grow up, particularly when they reach their tween and teen years, they’ll very likely opt out of mini-me gear.
“We’ve seen more and more kids develop very strong opinions, even when they are much younger, about what they want to wear,” Ben-Shabat explained. “They are more aware of fashion trends because of social media. Gen Z kids like authenticity–they don’t like the sweet stuff.”
Some apparel brands might need to wait until the next cycle of young adults start having babies to resurrect what could become outmoded mini-me apparel, but for now, smaller indie brands could grab some incremental market share provided they offer a unique value proposition and have a good understanding of what moms and their kids want, Ben-Shabat said.