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Down with the kids

Low prices are helping kidswear chains escape the effects of the credit crunch, but a growing appetite for trend-led styles is increasing competition between retailers.

As the consumer downturn continues to bite, it seems that the kidswear sector is thriving. Woolworths has just launched what it claims is “the cheapest kidswear collection on the market”, George at Asda is vying to become the biggest kidswear retailer in the UK, and Mothercare has posted yet another set of stellar trading figures.

While adult shoppers can always rein in their clothing spend in tough economic times, children will always need new clothes, whether they have outgrown or outworn them. And most parents will always put their children’s needs before their own.

However, a combination of shrinking disposable income and increased competition on kidswear from the high street means that price and product differentiation are key drivers in the kidswear market.

Verdict Research analyst Maureen Hinton says that in the economic downturn, consumers are turning to low prices but also to increased fashionability, with boyswear in particular offering an opportunity for growth.

“In a recession, menswear is the first area to suffer. But children are always growing so need new clothes, therefore the market can stand up well to tough times,” says Hinton. “Price and convenience continue to drive the market, but fashion is playing a key role now too, especially in girlswear, while boyswear offers more opportunity in terms of fashion as it is quite sports-led at the moment.”

A combination of fashion-led lines and lower prices is helping the Adams Kids chain to turn around its fortunes. Sales of its girls’ and boys’ fashion-led ranges are up 25% on last year, according to chief executive David Carter-Johnson. Last year he appointed former River Island buying controller Lindsey Williams as buying director, to drive Adams Kids’ push to become a destination retailer for fashionable and affordable kidswear.

“We’ve found that mums like to buy outfits, not individual items, so we’re boosting our co-ordinated ranges, which means offering more trend-led collections but also increasing our accessories offer,” says Carter-Johnson. “But it’s a tough market, so we’ve reduced our prices too. It’s quite simple – customers want choice and low prices.”

Verdict’s latest research on the kidswear market showed it was worth £4.5bn in 2007. Of the nine leading retailers to have gained market share between 2002 and 2007, seven are value chains or have a low price positioning – George at Asda, Tesco, Primark, Matalan, H&M, New Look and Peacocks.

George at Asda has set itself the target of taking top spot in volume clothing market share by 2011 and overtaking Tesco as the number one supermarket in terms of clothing sales by the end of the year. It also has ambitious plans to become the kidswear market leader, and is already the biggest retailer of kidswear by volume. It will exploit the 25- to 45-year-old “mums’” market to achieve this – a market the retailer had previously moved away from.

George brand director Fiona Lambert says: “Kidswear, and babywear in particular, does well for us even when times are tough, and kidswear will grow as we capture the mums’ market again.” George at Asda launched a TV ad campaign for its latest kidswear range last month.

High street chain Woolworths also wants a bigger slice of the value market, and launched a new entry-level kidswear range under its Worthit! brand last week. The retailer intends to challenge Primark, Tesco and George at Asda, with prices starting at £3 for a pack of three kids’ T-shirts.

Last week, Woolworths returned its retail business to profitability with an adjusted profit of £3.4 million, compared with a loss of £12.9m the year before. Although like-for-like sales fell 3.2%, the retailer blamed it on its decision “not to chase unprofitable sales”, including electrical and computing products. By contrast, its kidswear brand Ladybird performed well, increasing both sales and market share.

Woolworths head of clothing Kara Groves says: “The grocers are doing very well in the value market, and retailers such as us and Next are doing well in the middle of the market. Clearly, we are looking to challenge for a slice of the value market with the launch of Worthit!”

But Groves maintains that price alone is not enough. “The kidswear market has been volume-driven for many years, but there are signs that prices are stabilising and it’s becoming more important to offer customers choice,” she says. “Price plus fashionability is what customers want. However, boyswear has become a stronger market for simpler items, with less detail on clothes proving popular for boys.”

Hinton points to Ted Baker’s kidswear tie-up with Debenhams as an example of a successful boyswear range. Last September, Ted Baker unveiled The Baker Boy and Baker Girl kids’ collections exclusively for Designers at Debenhams.

“Debenhams has devoted a lot of the space in store to the collection, and its boyswear in particular looks very good,” adds Hinton.

Ted Baker brand communications director Craig Smith says the tie-up with Debenhams gave Ted Baker the opportunity to work with the department store at the top end of its Designers at Debenhams offer, while reaching a wider audience. “The collaboration has allowed us to bring the brand to a wider audience, but it’s not about disposable fashion – it remains at the top end of the market,” insists Smith.
“Debenhams has a great kidswear offer and is pleased with the reaction to the Ted Baker range since it launched last year.”

Another industry winner is Mothercare, but its point of difference remains its positioning as a kids’ specialist, selling everything from pushchairs to clothing under one roof.

Mothercare’s online sales are booming, its international business is thriving and its social networking site, Gurgle.com, is attracting a growing number of users. Sales at Direct in Home, Mothercare’s mail order and internet arm, increased 79.2% in the fourth quarter, with sales for the full year rocketing 106.7%.

But chief executive Ben Gordon says the online growth is driven by bulkier items rather than clothing, with customers preferring to buy kidswear at the stores.

Gordon adds that adults are likely to sacrifice their own spending on clothes in favour of buying for their children, but says that the kidswear market has matured over the past five years.

“Mothercare’s latest results are good in what is generally a difficult market because of the work we’ve put in over the past five years,” he explains. “We’ve introduced a pricing architecture of good, better, best, and improved our supply chain and ranges. There’s also a certain energy in the market now, with more emphasis on fashionability. Online is another great channel where we’re introducing lots of initiatives, such as Gurgle.com. It’s doing really well.”

But despite the kidswear market’s resilience, Hinton warns that retailers should not become complacent. “It’s still a difficult market because it’s not growing demographically,” she says. Verdict predicts that the number of children aged between 0 to 14 is set to fall by 2.5% between 2007 and 2012, and says the winners will be those retailers that invest in stores, customer service and differentiation.

“The kidswear market is relatively small, but it is still a reflection of the wider clothing market, even if it has its own benefits,” says Hinton. “People still have to justify how much they spend and how often they spend.”

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