This category includes establishments primarily engaged in the retail sale of children's and infants' clothing, furnishings and accessories. Such establishments may specialize in either children's or infants' wear, or they may sell a combination of children's and infants' wear.
448130 (Children's and Infant's Clothing Stores)
The infants' and children's wear business consists of hundreds of small independently owned shops and dozens of larger retail chains. Because many of the companies in this industry are privately owned, the exact size of the industry is difficult to determine. The U.S. Census Bureau's 2000 listing of 5,600 infants' and children's wear stores included only those with a payroll that totaled $700 million.
Children's wear, a relatively small market in the apparel industry, has traditionally lacked the fierce competitiveness of other clothing sectors. Even in children's specialty shops, apparel on average only accounts for 17 percent of floor space and 16 percent of sales (baby furniture accounts for two-thirds of space and revenues). From 1995 to 2001 space dedicated to children's apparel in malls more than doubled but still only totaled 2.7 percent. However, during the first years of the twenty-first century, more national brands began producing small-sized versions of their teen and adult lines and invested heavily in expanding their infant and children clothing brands.
This industry has traditionally been highly seasonal, as with other clothing businesses. Industry sales generally peak between late August and December. During this period, stores compete for precious back-to-school sales and holiday gift purchases. Stores typically generate between 30 and 40 percent of their annual sales in these months. With record high numbers of infants, toddlers, and children attending preschool throughout the year, clothing purchases for this segment are becoming less cyclical.
Because children's and infants' wear stores carry narrow product lines, they are classified as specialty retail stores. Traditionally, children's and infants' wear stores, and specialty stores in general, were small boutique-style operations. These "mom and pop" stores were often undercapitalized and had high overhead costs in proportion to their sales; however, they did not compete on the basis of price alone. Rather, they pursued customer satisfaction strategies, such as offering products with low turnover rates and providing more sales expertise than their competitors.
Competition. Until the mid-1980s, department stores were the main competitors of children's and infants' wear specialty retailers. As this industry moved into the mid-1990s, however, the growing popularity of off-price and discount retailers presented new challenges. By 1994, discount stores accounted for 36.5 percent of children's and infants' wear sales. These low price retailers expected to expand by outselling both specialty children's wear stores and department stores. Department stores accounted for approximately 35 percent of sales in 1994; children's and infant wear stores accounted for 13 percent.
In addition to off-price and discount retailers, smaller children's and infants' wear stores experienced increased competition from chain stores. Eager to capitalize on growth opportunities in the children's wear market, apparel chains such as The Gap, Inc. and The Limited, Inc. launched children's versions of their successful adult stores—GapKids and Limited Too. Toys "R" Us launched their children's wear stores, Kids "R" Us. All of these companies are publicly traded and have access to tremendous amounts of capital. Their entry into the children's and infants' wear industry during the mid-1980s began a shift toward consolidation in the competitive structure of the industry.
At the beginning of the 1990s, the industry felt the impact of a minor recession. Buyers were markedly value-oriented. Children's wear retailers noticed that consumers routinely bought basic commodity-like items such as t-shirts but did not splurge on accessories. Although consumers resisted buying nonessentials, they were willing to purchase new and exciting children's fashions if the price was consistent with their concept of value. Some retailers speculated that infants' wear sales were not as affected by the recession as other retail markets because most items purchased for infants were essential clothing items.
Changing demographics made the children's and infants' wear industry attractive to new entrants and, therefore, extremely competitive. Large retail chains began to penetrate the market. As the industry moved into the mid-1990s the smaller shops experienced intense competitive pressure from these new industry players. Nonetheless, sales continued to grow. Fueling this growth was a rise in birth rates in the late 1980s and early 1990s, which increased demand for infants' and toddlers' wear.
One trend during the 1990s and into the 2000s in the industry is a continued relocation of stores to shopping malls. Working parents with limited time schedules like the convenience one-stop shopping malls provide. In the malls, children's and infants' wear stores and department stores are in close proximity. This arrangement gives customers an opportunity to comparison shop for price and quality. Price points become critical competitive priorities in the mall environment, particularly during a recessionary economic climate.
Product Lines. Casual merchandise was often carried by retailers throughout the 1990s. Customers purchased fewer frilly girls' styles and moved toward a more informal look. Denim, activewear, and fleece separates were popular fashions for both girls and boys. In the mid-1990s Osh Kosh B'Gosh, a large children's wear manufacturer, estimated that department and specialty retailers sold $500 million in fleece separates alone—a full 15 percent of the industry's total retail sales. Throughout the 1990s, a casual look continued to be in vogue for toddlers and kids as well as teenagers.
Licensed-clothing is among the best-selling casual lines. Items featuring characters from popular television shows and movie releases sold extremely well in the 1990s. Every successful children's show or movie was released with a line of clothing connected to it. The clothing, featuring cartoon, television, and movie characters, was extremely popular. Sharing the spotlight with the ever-popular Disney characters are new characters such as public television's Barney the Dinosaur and other commercial cartoon characters such as Power Rangers and Pokemon.
Other popular children's clothing items in the 1990s included sports apparel. The proliferation of new sports franchises during the 1990s and the fact that children who grew up with team logo apparel in the 1970s were buying this look for their own kids in the 1990s, contributed to the success of sports-team clothing.
National brands are jumping on the bandwagon of children's wear. Dolce & Gabanna, Mudd, l.e.i., Unionbay, and P.L.U.G.G., all successful marketers to the teen crowd, have introduced small-sized versions of their clothing lines. With the introduction of national brands to the sector, there has developed a trendiness in children's clothing. National brands are not just making kids' clothing, they are replicating the same fashions for the younger, smaller crowd. The challenge has become to shape more mature fashions, such as low-rise jeans, into an age-appropriate product for the younger set.
With the infants' and children's wear sector growing, the industry's foundational products continue to be licensed apparel, such as Scooby Doo, Star Wars, Bob the Builder, and Blues Clues as well as sports-related licenses. For younger kids, new licensing deals are being struck daily, including Carter's new line of author Eric Carle's characters and Kushie Baby Products introduction of clothing based on the best-selling children's book Guess How Much I Love You.
As has all apparel-related industries, infants' and children's wear has been adversely affected by the sluggish economy and the overall apprehension that was brought to focus by the terrorist attacks of September 11, 2001, and perpetuated by the United States' initiation of a war with Iraq in 2003. However, such uncertain times are likely to add additional fuel to the growing children's wear sector as the birth rate has seen a significant increase since the terrorist attacks, promising to bring new customers who need the smallest sizes into the stores over the next several years.
Discount/Department Store Retailers. Although the children's and infants' wear retail market was comprised primarily of small independently owned stores, a few large retail chains dominated sales. The large retailers' competitive strategies ranged from aggressive price-cutting to unique product offering. Typically, since such firms derive income from a variety of operations, sales figures are not reported by market sector (e.g., children's/infants' clothing sales) but rather as gross sales from retail operations. Regardless, total revenue reported from retail operations provide some insight regarding the presence these firms have in the children's/infants' clothing wear industry. After the close of fiscal year 2002, J.C. Penney reported $32 billion in retail sales (43 percent of revenues came from the company's drugstore chain Eckerds); Target, $43.9 billion; Sears, Roebuck and Co., $41.3 billion; and Wal-Mart, a whopping $244.5 billion.
In 2002 Wal-Mart was the largest retail operation in the United States and the largest retailer in the entire world. Operating some 4,600 outlets as Wal-Mart, Sam's Club, and Wal-Mart Supercenters, the firm was larger than the combined market presence of its nearest U.S. competitors, Sears, Kmart, and J. C. Penney. As Wal-Mart entered the new century, it planned to continue its historically unchallenged growth by converting older outlets into Wal-Mart Supercenters and continuing to expand operations in Canada, Mexico, South America, Asia, and Europe.
The business strategy of Sears, Roebuck and Co. depended, in part, on promoting apparel in its 1,300 specialty stores, 870 mall-based outlets, and 770 independently owned dealers in the United States. Slow to reach out into the global marketplace, Sears operated seven department store outlets in the Americas and, through Sears International Marketing Inc. (SIMI), sought to increase sales not solely by following the industry trend of promoting discount pricing at department store retail outlets. The company strategy also depended on wholesale export of the Sears brand name products. Sears added significantly to its apparel line by purchasing catalogue company Lands End for $1.9 billion in 2002.
Target Corporation owns more than 1,475 stores in the form of its Target discount chain; Mervyn's, a midrange department store chain; and Marshall Fields, its upper-end department store chain. Target stores, along with its large-scale store versions of SuperTarget and Target Greatland, account for 80 percent of the corporation's revenues. The company had found a profitable niche in the market by providing more fashionable, trendy clothing than Wal-Mart, but at prices lower than its department store competitors such as Sears and J.C. Penney.
J.C. Penney Company operated about 1,150 J. C. Penney department stores; a majority were in the United States, but some were in Mexico, Puerto Rico, and Brazil (operated there as Renner department stores). Only a nominal amount of revenue from clothing sales is derived from its 2,600 stores operated by subsidiary, Eckerd Corporation. J.C. Penney projected an increase in sales into the new millennium based on its strategy to operate boutiques within each store and by expanding private-label brands such as Arizona Jean Co., St. John's Bay, and Worthington.
Chain-Store Retailers. Many chain retailers realize that private label merchandise is more profitable than brand-name clothing. One industry leader, The Children's Place Retail Stores, Inc., developed its own label, "The Place," after years of selling branded merchandise. Children's wear retailers who sold private label merchandise did not have to mark up prices to allow for manufacturer and distributor profits; savings were passed on to the consumer. In a consumer climate that increasingly demanded retail discounting, this pricing advantage gave private label retailers a competitive advantage. Consequently, the Children's Place became popular among young mothers. The toddler and children's clothes there were modeled after adult styles. The Children's Place constantly added and updated its inventory to keep its merchandise current. In 1999, the Children's Place had revenues of $671.4 million.
One of the leaders in private label retailing was The Gymboree Corporation, a large franchise retailer whose 2002 sales were $546.8 million. The company was founded in 1976 by Joan Barnes, a part-time co-director of a children's recreation program at a local community center and mother of two. Barnes developed a popular 45-minute exercise-to-music class that she ultimately expanded to other sites. Her business was a success, and in 1979, Barnes began franchising her baby-exercise classes. By 1985, she had established 204 play centers, but she was not generating profits. Forced to re-examine her business, Barnes decided that "Gymboree could mean more than play classes. Gymboree would mean everything significantly wonderful for kids under five." In 1986, she decided to use the exercise class as a basis for selling children's clothing, which now accounts for 99 percent of Gymboree's annual sales.
The Gap introduced GapKids in 1985 to provide well-designed comfortable clothing for boys and girls aged 2 to 12. GapKids expanded its target market segment in 1990 when it opened BabyGap as a department of a San Francisco GapKids store. By 1993, most of the 272 GapKids stores also offered infants' and toddlers' clothes in the BabyGap department. By 1995 there were 369 GapKids stores in operation. By 2002, Gap operated nearly 2,100 stores in the United States, Canada, France, Germany, Japan, and the United Kingdom.
A wholly-owned subsidiary of Toys "R" Us, the world's largest and fastest growing children's specialty retail chain in both sales and earnings, Kids "R" Us focused on selling brand name clothing at cut-rate prices. By 2003, the Kids "R" Us clothing store division operated about 185 stores. A retail spin-off, Babies "R" Us, operated 113 outlets that focused on infant/toddler apparel and infant/toddler furniture and feeding supplies. Operations were conducted in 25 countries with the largest market presence in Canada, Europe, and Japan. Kids "R" Us sales for 2002 were $11.3 billion.
In the 1990s, the industry began to establish specialty retail operations abroad. Manufacturers of children's and infants' clothing and accessories were well aware of the opportunities overseas, and many had established joint ventures in various foreign markets. Such market penetration efforts, however, have not been very successful.
Japan and Europe were two particularly attractive markets for children's wear. In Japan, American products, especially licensed character and team logo apparel, were popular with young people. This demand, coupled with Japan's large market and high discretionary income, made the country a coveted retail market. Europe also boasted a large consumer market and historically high discretionary income. However, the stiff competition from European hypermarkets deterred smaller retailers. Nevertheless, GapKids stores were operating in the United Kingdom in the early 1990s.
Some of the barriers to global expansion in this industry were clothes sizing and fashion differences. GapKids and The Children's Place, which sold private label merchandise, controlled the manufacture of their clothing and were able to size clothing appropriately for any market. All retailers did not have this flexibility. Toys "R" Us, for example, successfully placed 167 toy stores in 11 different countries including Spain, Japan, and Malaysia by 1993. They had not, however, taken Kids "R" Us international because the brand-name clothing that they offered was difficult to sell overseas. Despite the obstacles, children's and infants' wear retailers continued to investigate opportunities abroad, and they expanded into new markets after the implementation of the North American Free Trade Agreement.
Inventory management through advanced automation was a major strategic priority in the retail environment, including the children's wear segment. Larger retailers, for example, implemented automated inventory replenishment systems management to reduce inventory ownership while ensuring that each store was supplied with the correct product mix. The system electronically linked distribution centers, inventory control, and store demand in order to determine the optimal individual store distribution. Other technologies implemented in the children's and infants' retail operations and the retail industry as a whole included cash registers that could calculate discounts, approve credit, accept credit cards, and schedule deliveries. Although this type of technology brought cost savings in the long run, in the short run, the cost of the technology was prohibitive to smaller stores.
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