At present, consumption habits of baby and children’s products are changing with increased focus on product quality, level of expertise and individualism. Research shows that in the making of purchase decisions, consumers are most concerned about product quality, followed by brand when buying baby's products, and are relatively less price sensitive. It can be derived that consumers in China are willing to pay a higher premium for high quality, high safety and high value-added baby products.
What is maternity and baby products industry?
It refers to consumer goods such as basic necessities and other necessities related to the consumption of pregnant women, infants and children. The maternity and baby supplies market can be divided into products and services, with the latter including service industries, such as education, healthcare and entertainment.
Maternity and baby products refer to industries providing basic needs such as clothing, food, shelter, transportation, education and entertainment, covering 11 main categories: formula, nutritional supplements, diapers and wet wipes, feeding supplies, toiletries, strollers and cribs, car seats, toys and books, shoes, clothes as well as bedding. This report is aimed at maternity and baby products, i.e., physical retail products, excluding services.
Size of Maternity & Baby Products Industry Expected to Exceed RMB 3 trillion in 2018
Compared to cosmetics and 3C (computer, communication, consumer electronic) products, online penetration rate of maternity and baby products was only 15.5% at the end of 2015, signifying huge growth potential for e-tailers. Data from United States-based consulting firm TABS Analytics show that e-commerce accounts for 20% of all baby supplies consumption in the country – a penetration rate far exceeding other consumer products.
Stage of Development: From Brick-and-Mortar Stores to Online and Multi-Channel
The development of China's maternity and baby products industry can be divided into four stages:
1) 1990s: The maternity and baby products industry was still in its infancy and such stores were rare in 1999.
2) 2000 – 2009: The industry entered a stage of rapid development with the expansion of retail channels to hypermarkets and convenience stores, as well as the launch of Leyou B2C online shopping platform in 2000. Online stores comprised predominantly the online presence of brick-and-mortar stores.
3) 2010 – 2015: The industry experienced a golden period of growth explosion marked by Taobao, JD and Amazon’s dedicated maternity and baby supplies channel in 2010, together with other e-commerce platforms, which became the main mode of online shopping for these products.
4) After 2015 – The industry entered a mature period. At present, most enterprises are still mainly doing business offline. However, penetration rate of e-commerce is expected to increase. With the implementation of the two-child policy, maternity and baby supplies industry will undoubtedly usher in great opportunities, which is also poised to intensify competition especially for e-commerce.
Industry trends: Over RMB 30 billion in additional consumption of maternity and baby products expected per annum
Looking forward, the industry is expected to see consumption growth of more than RMB 30 billion each year, in particular with the two-child policy, which could drive growth by at least 13%. According to estimates by China’s National Health and Family Planning Commission, there are about 90 million couples of childbearing age that are expected to add 2.5 million newborns every year from now. Birth rates in the recent five years have seen an apparent increase. Policy-related factors have caused a net growth of more than 3 million in population yearly, and based on an average annual consumption of RMB 12,000 per infant, this could generate an annual increase of at least RMB 30 billion in additional consumption.
With the post-80s and post-90s generation of baby boomers entering into marriage and childbirth stage, coupled with huge existing population of infants and young children, the demand for maternity and baby supplies will be substantial. This is especially so when such demand is inelastic and lasts for a long time, typically until age 12, compared with consumption of other products. According to the country’s National Bureau of Statistics, the population of 0-14 year-olds stood at 241 million in 2015 – an enormous figure. In view of the large population and growth rate, the industry is bubbling with immense opportunities.
The demand for quality products and change in parenting concept is expected to become the foundation for long-term growth of the maternity and baby supplies industry. Another unique characteristic of the industry is the separation of consumers and buyers, where the purchasing power of parents and relatives determines the level of consumption. Currently, the post-80s and post-90s categories are the main spenders. With the improvement of living standards, these groups pay more attention to the safety and quality of maternity and baby products. China’s unique “421” family structure also means that both the child’s maternal and paternal grandparents as well as parents and will invest more on the third generation.