It is a paradox. Kids may not really have the money to buy anything but they still wield an enormous marketing potential. In other words, despite the economic slowdown, kids brands are netting promising returns.
Size is a factor for India?s resilience in this market. ?Children in India constitute 19% of the world?s children population. One-third of the country?s population is under the age of 14. The kids market in India today is estimated at more than $5 bn, distributed over different sectors and very fragmented in nature. The market as a whole is expected to grow at 25% per annum in the coming years. The economic slowdown may have led consumers to postpone purchase of few large-ticket items, but in general, the kids segment will be less sensitive to downturn,? says Asitava Sen, Director, Business Consulting Services, The Nielsen Company.
With a twist
Not just toys and apparels, kids are directly or indirectly driving consumption in several industries ? right from candies, soft drinks, toys, comics, video game parlours, automobiles, personal care, food, IT, telecom, entertainment and media. Anand Ramanathan, Manager, KPMG, marks that pester power is now a cultural phenomenon with the northern cities clearly taking the lead over south and east India. ?The trend seems to be further corroborated in the pocket money that children receive in the north, which is significantly higher than other regions. Kolkata is the most conservative amongst India?s top 14 cities,? adds Ramanathan.
Interestingly, children also seem to be asking for green products, feels NV Sivakumar, Executive Director, Consumer and Industrial Products Leader, PricewaterhouseCoopers India. ?Information from school, the internet, media and parental influences are making kids aware of the importance of eco-sensitivity,? he adds. And lest we miss, also brand conscious and demanding than ever before. And that spells boom for the kids brands.
Counting the bucks
Take for instance, Toon Kidz. The brand plans to expand its chain from 30 to 200 stores in the next nine months ? attempting to touch a turnover of Rs 100 crore. Clearly, the brand with a current turnover of Rs 42 crore per annum month is eyeing a bigger share in the ?Rs 28,800 crore kids apparel segment that is growing at 18% annually. Children hold enormous purchasing power and economic meltdown has shown that parents tend to cut back on their own purchases before curtailing expenditure on kids,? reasons Venkat RV, MD, Toon Kidz. The formula for success seems quite in place ? the entire merchandise is designed in line with the kid?s favourite
characters ? Ben10, Bakugan, Power Puff Girls, Bob-The Builder, Fafa & Junu, Spiderman, Hulk?. The expansion is looking to scale up essentially on the franchisee model. ?Each store requires an investment of Rs 16 lakh to Rs 25 lakh and comes with minimum guaranteed returns at 18% on the setup investments along with the complete monthly overheads,? adds Venkat. Next in line? Toon?s own range of chocolates.
Consider toy sales. In the UK, Lego?s direct sales to consumers rose 20% in the first six months of the year. The world toy market has gained another 2.3%, or $2.4 bn, according to Global Toy Trends and Forecasts 2009, the recent report from The NPD Group, a market research company. According to the Report, there has been growth in all the emerging markets with sales in Brazil, Russia, India, and China (BRIC) continuing to outpace total market sales. Asia and Africa are expected to strengthen their contributions to the world toy market in the next few years, with Asia likely to overtake the US and Europe by the end of 2012. ?In India, as per the current leads, we find that certain categories like toys have been not just recession-proof but have actually registered growth,? asserts Rahul Bhowmik, Head of Marketing, Mattel Toys India. The brand is introducing an average of 10 new toys in the market every month and considers India as a ?growth market.? Amongst the new brood, Hot Wheels Color Shifters, Barbie Dream Team Princess dolls and Fisher-Price Precious Planet range have given good returns. However, Bhowmik does share a shift in trend, while declining to disclose growth figures: ?The earlier trend of commanding long-term brand loyalty with a select range of evergreen products has waned. Today kids demand a short-term high-intensity fad more than a generic product with enduring play value.? A fact that Sanjeev Narula, MD, Lilliput Kidswear, agrees with. A glance on his accounts show promising figures ? a turnover of Rs 328 crore and a 40% annual growth. Encouraging, if one considers that the market for kids apparel in India is pegged at Rs 28,800 crore, of which branded kidswear constitutes Rs 4,000 crore.
?Growing at 20% per annum, India is one of the fastest growing markets in the world. The metros had been the hub of modern retailing so far but now retailers are awakening to the potential of the tier 2 and tier 3 cities.? Pester power, he says, is a boon for the industry he is in. He credits the sudden optimism in the market and the recently concluded sales for helping him achieve his financial targets. Reason enough for him to ambitiously plan 50 more stores in India, Middle East, Africa and China ? taking the chain to a total of 275 stores.
Joy ride?
While there has been no overall visible impact of the downturn, specific categories such as food (pizzas and burgers); impulse purchases such as cheese (pester power quotient – 42; chocolates and snacking (71) has seen limited impact. Relatively high value categories such as children?s bicycle (86); wrist watches for kids (77) etc have not been impacted as much, according to calculations KPMG did on the basis of data available. ?A possible explanation could be that Indian parents will still not compromise on spends that help in the development of the child but rather focus on cutting expenditure on consumption that is gratuitous rather than beneficial,? reasons Ramanathan.
Some wisdom, finally.
