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Private label is tightening its grip on the childrenswear category in both the UK and the US. Euromonitor International’s recently released apparel data revealed that both countries saw private label in childrenswear grow in value by more than any of its branded rivals during 2012.
In the UK, private label, which already held a dominant share, added an extra two percentage points in 2012 and now accounts for a 39% share of the US$8.7 billion childrenswear category. Click to Tweet! The figures are all the more impressive when considering that in 2004, less than a decade ago, private label accounted for only 19% of childrenswear. Likewise, in the US, private label added more than a full percentage point to its share to reach 19% of the US$26.8 billion childrenswear category in 2012.
While the global economic downturn and its protracted after effects have forced consumers to cut costs where they can, the real driving force behind consumers’ shift to private label is that grocery retailers have invested heavily in their childrenswear offering, improving not only the quality of their clothing but also upping their levels of customer service. This investment has enabled grocery stores to successfully take on established childrenswear brands, steal sales and send private label to the forefront of the category.
A clothing line is now part and parcel of the supermarket offering and in February 2013 the last of the UK’s largest four supermarkets, Morrisons, made its entry into childrenswear, introducing its Nutmeg range for children aged 0-12. According to the company, Morrisons was spurred on to enter childrenswear when research revealed that children’s clothing was the main reason its customers would switch to another supermarket.
It is not difficult to see why parents have so quickly switched to buying childrenswear along with their groceries. Aside from convenience, given that children’s clothing is unlikely to fit for long, it is easy to see why parents will opt to pay less if they can. On top of low pricing, supermarkets have instigated strong customer service initiatives, with Asda for example promising a 100-day guarantee on all of its clothing items.
While supermarkets as clothing retailers is the success story of the moment – over the review period grocery retailers registered US$1.3 billion absolute value growth in clothing sales in the US and US$938 million in the UK – the marked switch in consumers’ preferred channels for childrenswear is causing a shift in the dynamics of the category that will make life more difficult for supermarkets in the years to come. As grocery retailers have taken control of the childrenswear category, as well as squeezing their branded rivals they have also created a threat to the category’s growth.
In the UK, childrenswear value sales are set to slow over the forecast period. The category is predicted to contract by 3% in value to 2017. Volume sales will, however, grow by 4% over the same period as price competition rages and consumers buy more for less. In the US, where private label is strong but still lags behind the UK, value growth is expected to fare a little better, with a 2% gain predicted to 2017. Again, predicted volume growth is higher, at 6%, highlighting that downward price pressure is affecting the category both sides of the Atlantic.
To date, the success of supermarkets in childrenswear has come at the expense of branded players. However, with branded childrenswear increasingly marginalised, over the years to come, particularly in the UK, the real scrap for share will shift to the lower end of the price spectrum, between the supermarkets themselves and the value high street retailers such as Primark and H&M. Grocery retailers are going to have to work harder than ever before to maintain their share.
With the playing field between grocery retailers largely level in terms of price, supermarkets will need to become more creative in childrenswear to find a way to differentiate themselves from their rivals. The bar is already set high in terms of product quality and customer service expectations but constant improvements are needed if retailers are to retain their edge in the category.
In the years ahead, to stay one step ahead, private label ranges will be required to adopt more characteristics from the branded rivals they have usurped, upping the number of dedicated advertising campaigns, launching designer or premium ranges and possibly bringing in unique branding for childrenswear. Although margins are tight as it is, in the now crowded private label childrenswear category grocery retailers must be prepared to spend to stand out from the crowd or risk becoming victims of their own success.