The increasing use of the Internet for shopping has opened up opportunities for online-first startups like FirstCry which cater to the baby and childcare market. FirstCry, backed by SoftBank has recently refiled its IPO papers and plans to raise ₹1,816 crore through a fresh issue of shares, with existing investors planning to sell 54 million shares.
According to analysts, FirstCry has an early-mover advantage and replicating its growth path may not be easy for other such firms.
“With regards to creating an aggregator as a competition to FirstCry, I think the ship has sailed and FirstCry has an unassailable lead. There have been some attempts such as BabyOye and The Nestery, but they did not meet with success,” Harmanpreet Singh, cofounder and managing partner, Prath Ventures and an e-commerce expert told Fe. While The Nestery has shut shop, FirstCry bought Mahindra’s BabyOye for ₹362.1 crore in 2016.
“With early market entry, FirstCry was able to interact with a lot of consumers as the idea was novel. This allowed it to gain trust and thereby gain significant market share,” Milan Sharma, founder and MD, 35North Ventures said. He added that this further helped the company refine its business model time and again and become the most successful online baby care product company.
Redseer forecasts the market for childcare products to grow at an annualised 14% to $60 billion or ₹4.8 trillion by 2027 from around $31 billion or ₹2.5 trillion in 2022. The average spend of ₹8,000 per child in India is expected to double by 2027.
Little wonder, the segment has attracted so many players. Within consumables, there is SuperBottoms offering cloth diapers and R for Rabbit which sells diapers, wipes, baby gear, etc and within nutrition, there are Slurrp Farm, Little Joys, Nutrizoe, Babyorgano, among others. Under apparel and footwear, there is Aretto in footwear and Hopscotch and Alia Bhatt-backed Ed-A-Mamma in apparel. Further, just like FirstCry, many companies including Healofy, Mylo, Imumz and few others have taken a community-building approach. According to Tracxn, companies in the mom and baby care space have received a total funding of $5.75 billion so far.
Analysts say that while the scope of profitability for e-commerce marketplaces (aggregators) is higher, it’s a tough place to be in considering the presence of not just FirstCry, but giants like Amazon and Flipkart with massive SKUs in these categories.
Another big challenge for an early childhood-focused brand remains the short lifetime value of a customer. “Further, in categories like apparel and footwear, managing inventory with many sizes has been a challenge,” Singh pointed out. He added that most parents tend to spend less on something that the child will outgrow in a matter of months (toys, shoes, clothes).
To overcome the challenges, most of these businesses are skipping the marketplace route taken by FirstCry and launching a direct-to-consumer (D2C) brand. Once a scale is achieved, they opt for product and offline expansion. This, experts say, can put startups on the path to profitability. Mamaearth, for instance, started as a baby/early child-focused brand but realised quickly that an expansion was necessary to scale further. Mamaearth’s parent company Honasa Consumer today houses The Derma Co, Aqualogica, and Ayuga and has acquired stakes in BBLUNT and Momspresso.
There is also a move towards premiumisation, which may also open up huge opportunities for businesses in the segment. As FirstCry’s DRHP reads, the growing number of urban nuclear families with both parents being formally employed is driving the adoption and premiumisation of hard goods and toys, supported by growing awareness through social media. This, analysts say, is also a huge opportunity for D2C brands, which is currently being tapped into mostly by global brands like Chicco and Sebamed.