While COVID-19 has caused economic activity to decelerate in almost every other area, it has created a sudden boom in e-commerce; 2020 has seen an exponential increase in online sales, mainly due to the pandemic and the lockdown which has become the new normal. This created a situation where daily essentials were no longer considered available for purchase in local stores, either due to blockages or consumers’ reluctance to increase their risk of exposure.
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At a time, a reduced birth rate in the United States and Europe, in part due to financial uncertainty and declining consumer confidence, has caused demand for the baby products industry to plummet to such an extent that it is no longer even recognizable for its strength. former. This compounds the challenges these retailers face, such as the increased competition that has accompanied the rise of e-commerce and the increased interest in buying second-hand goods.
Despite this, global brands in this industry need to be aware of the future of baby products. Unlike in the rest of the world, birth rates in developing countries (i.e. those in Africa) have skyrocketed and represent an enabling environment for massive trade growth if this potential can be realized and their current trade barriers lifted.
Birth rate in the United States and outside the United States
For the second year in a row, US fertility rates hit a new low, leading to a drop in births that has occurred since 2008. In one year, between 2016-2017, the birth rate fell by 3%: from 62 births per 1,000 women of reproductive age in 2016 to 60.2 in 2017.
Several major manufacturers in the baby products market have been extremely vocal about the struggles they face due to this drop in birth rates. For example, Kimberly-Clark, the diaper maker Huggies, announced that it needed to lay off 13% of its workforce globally (at least 5,000 jobs) in 2017 in order to cut costs as revenues dwindle.
Additionally, the Johnson & Johnson (NYSE: JNJ) megalodon of baby care has been powerless to do anything but sit idly by as it suffered a 20% drop in sales in its baby care unit since. 2011. The company now plans to implement a redesign of their products that focus on natural ingredients in the hope that this meets the “evolving needs of millennial consumers.”
The COVID-induced lockdown has only exacerbated the situation, prolonging the growing trend of expectant parents to push parenthood even further, and companies providing baby products feel the walls are closing. America’s birth rate stabilized at 12 births per 1,000 between 2019-2021.
Although it is not just an American phenomenon. Birth rates drop sharply in Europe, with Turkey, Kosovo, Moldova and Estonia which should experience the most drastic drops in the number of births per 1000 between 2005-2025. This of course contributes to the problem, not only for companies based in these regions, but also for those operating globally who are suffering these losses on multiple fronts.
However, what appears to be a trend that is happening on a global scale is actually only happening in developed countries. In contrast, it is often a characteristic of the poorest countries in the world to have some of the highest fertility rates. This is why, when looking at the ranking of the top countries for births per 1000, African countries will dominate the list.
The top ten countries for the birth rate are all African: Niger, Somalia, Congo, Mali and Chad which make up the top five. Additionally, social media has given parents in these countries a better understanding of the tools available to their counterparts in developed countries, resulting in increased demand for these products.
This represents an opportunity for globalized companies in the baby products industry to recoup the losses they are sustaining in developed countries. If they can remove the trade barriers associated with these countries, there is the potential for extreme profit to be made.
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 dramatically since the 18th century thanks to superior technology in the transportation and communications sectors.
Globalization is a central issue in the discussion of the baby products industry because, in layman’s terms, it describes a process by which free trade can be allowed to countries that these companies most want access to but cannot. currently not. So that global companies operating in the baby products market can capitalize on the aforementioned emerging markets.
It turns out that these same regions are also experiencing a massive tech boom due to recently built infrastructure. Due to the increased use of the Internet in these developing countries, parents in these regions are increasingly aware of the tools available to their counterparts in developed countries for raising their children, which has created an increase in demand. of baby products. of the world market.
This technological growth represents both a removal of trade barriers in these emerging economies and a growth opportunity for these global companies. However, this reduction in barriers to entry through greater use of technology (i.e. congestion, theft of goods, import permits, inefficient bureaucracy, and sourcing location requirements.
Trends in the baby products industry
While the emerging markets of Africa represent a new opportunity for companies in which, due to a lack of competition, all general baby products will thrive, the mature markets of the United States and Europe are saturated with producers. This means that products require specific qualities, determined by market trends, which set them apart from their competitors.
As in many other industries, consumers are expressing a growing desire for ethical, natural and sustainable products; companies that appeal to these trends seem to dominate. For example, in the baby food market, key drivers of success include “the ‘user-friendly’ packaging and advertising it uses, as well as the sustainable initiatives it pursues,” says Paul Lindley, founder of Ella’s kitchen.
In addition, the brand tries to protect the planet for future generations by helping to fight against climate change. In 2019, he joined over 500 other B Corps in pledging to reach net zero by 2030, and works with conservation partners to restore, regenerate and protect the ecosystems so many people rely on.
The same trend of “environmentally friendly products” can be seen in other baby product markets. For example, many parents have collectively decided that everything that is not good for nature will not be good for their children at the same time. Natural products are perceived to be gentler on the skin, especially the delicate skin of a newborn baby, so parents who can afford better products are safer.
Convenience is another big factor sweeping the industry, with retailers such as BabyOutlet are very successful because of the wide variety of products they keep in one place and the ease with which customers can access them. On top of that, their products are environmentally friendly and they make it much easier for customers to purchase previously hard-to-acquire items, such as personalized baby clothes, extremely quickly.
Overall, the face of the baby products industry is changing – both globally and locally. On a local scale in the United States, the saturated industry that currently exists due to the mature market demands specialty products that adhere to specific trends, such as durability and convenience (primarily peddled by Amazon.com, Inc. (NASDAQ: AMZN) ‘s generational leaps forward in delivery).
The growth of technology in emerging markets in Africa represents the first step in removing trade barriers in the region, which will only worsen as it becomes increasingly exposed to globalization. This represents a hitherto untapped market that can be capitalized by attentive companies in the baby products industry.