The kids are alright, they used to say. Well, in recent months we have begun to see what businesses serving the specific needs of children are doing quite alright. Furniture Today discusses the rise of children’s-category businesses in a thoughtful piece.
One sign of the thriving children’s-category businesses is the announcement by Ashley HomeStores that they are opening a Baby & Kids category in their stores. The company has earned plaudits for its strategic capital allocation decisions, decisions whose aim is to grow revenue through maximizing bets on key segments. Another example of the concentrated bets that the company is making, is its release, during the High Point Market, of gaming software with accompanying merchandise guidance in order to help dealers push the program’s impact on the floor. Not only is Ashley HomeStores the largest retailer and manufacturer in the furniture industry, they are also a business whose strategic bets tend to pay out handsomely. So this decision to add a Baby & Kids category to the company’s stores, certainly got the notice of the industry.
International home decor store, Crate & Barrel has made the category a centerpiece of their growth strategy since 2018 and have increased their investment in the category over that time. The investment has paid off, with the company reporting double-digit growth in 2020, ending the year over a third above its 2019 position.
The superficial reason for this arms race in the category is that the industry recognizes that millennials are entering their prime parenting years and that they are on the verge of becoming the wealthiest generation in human history. With nearly half of millennials sharing in the stock market boom, the market seems ripe for growth. When the first millennial was born in 1981, the landscape was much more different. Businesses such as Kids R Us were built to take advantage of the enormous wealth of Baby Boomers and their entering of their prime parenting years. Parents did not have internet or search engines to find the best match of product and price. Instead, they shopped at brick-and-mortar baby and children’s specialty stores for their needs.
This time round, we can expect some of the giant discounters to hoover up a sizable amount of market share. Firms such as Target and Walmart succeeded in their war against Toys R Us and its spinoffs, Babies R Us and Kids R Us, by taking advantage of the opportunities in toys and after that, the baby and children category. Amazon is another firm that seems well placed to hoover up a good chunk of market share.
Millennials seeking more guidance and assurance of quality will naturally drift toward furniture stores such as Franklin & Ben, for their needs.
In the years ahead, we can expect to see a great deal of growth in this category. Not just in this category though, but also in complementary categories. We could see the rise of giant firms on the back of this unique, generational market opportunity. It will be interesting to see which of the firms in this category best takes advantage of this opportunity and grows into something special.