Analysis: Evolution of baby-care business in Indian Ecommerce Space
Indian online retail space has witnessed launch of business models across diverse niche categories such as stationery/school supplies, grocery, motor parts and baby products. While most of these categories are new to the etail biz, baby product has been there around for more than 18 months. The baby product segment was started with the entry of Firstcry and Babyoye in the Indian etail space and later on, segment witnessed rollout of Hoopos and Hushbabies including big etailers such as Homeshop18, Snapdeal and recently Flipkart selling baby-care products.
So why mass etailers are moving towards this already crowded niche and what sort of opportunities and potential foresaw by early niche players catering to this segment only? According to the players operating in this niche, the market size for baby products in India is estimated around INR 15-25 billion. Out of this, the estimated online market for baby product hovers around INR 100-120 crore range and experts opine that it tends to double in every 6 to 8 months. Online baby-care market comprises of segments such as baby food, skin care, toiletries/ diapers, toys, gears and baby nursery.
Around 27 million babies are born every year in India. Considering that even 10 percent of babies are born to parents who would spend annually a conservative figure of INR. 5000 on baby products (diapers, lotions, strollers, toys, gears etc), the potential is huge. Additionally, baby product is one of the underserved categories where there is a huge supply-demand gap. Most of the parents look for best in class and trusted brands of baby products which aren’t readily available in physical stores in India, especially in tier 2 & 3 cities. According to Homeshop18 research, 20 per cent of the people who shopped for baby products chose the online route in the growing Indian e-commerce market. Pointing out the demand in this category, Sanjay Nadkarni, Founder, Babyoye said that we are amazed at the number of parents that are buying baby care products online today. However, he feels that real volumes are still at least 18-20 months away in this category.
On the other hand, Snapdeal, which has entered into this category two months back also, sees significant opportunities. At present, Snapdeal has assortment of 2,000 products in its baby care category, however experiencing brisk demand; Snapdeal is planning to increase it by 3x in next two months. “in contrast of purchases happening in other categories, baby care products purchase are brand centric as parents don’t want to compromise on quality” said, Paritosh Bindra, Head (Product Sourcing), Snapdeal.
When it comes to growth in this segment, early entrants such as Firstcry are running into four digit orders with 25-30 percent growth MoM. Speaking about the growth of Firstcry, Supam Maheshwari, co-founder, Firstcry said “we are 3 to 4 times ahead than the other players in this niche and will continue to be a market leader. Currently we are shipping more than thousand products daily with average ticket size of INR 1,000”. Shedding light on Babyoye’s growth path in a little over a year time, Nadkarni said “prior to our funding, we were doing 30 to 40 transactions everyday, however, presently we are shipping 600-800 orders on daily basis. Meanwhile, HomeShop18 has also grown substantially in this category. It has been observing consistent growth in the baby care category over the past few months. “This category will grow further as online shopping becomes the preferred medium to purchase owing to more variety which is available, home delivery and multiple payment options that e-commerce companies offer. One key insight when it comes to this specific category, is that parents are quite price insensitive and are ready to spent to get the best for their child”, said HomeShop18.
Banglore based, Hoopos.com, a multi branded etailer of baby care product reports spurt in demands from last three months. Prior to May this year, Hoopos was consistently growing at 30 percent MoM, however since May it has reportedly been growing over 65 percent growth in terms of orders and revenue. According to Raveen Sastry, co-founder, Hoopos.com “Hoopos has been running into three digit orders and it is confident to maintain the growth over 50 percent MoM for the next one year”.
As far as gross margin is concerned in this niche, etailers usually make 20-30 percent in diapers, skin care and toiletries but in toys, trolleys and other gears it varies from 25 to 45 percent. Apparels seem to earn maximum margin as it fetches 32-55 percent margin.
Unlike other categories in etail space, baby-care segment sees higher number of repeat purchases. Consequently, most of the players in this niche report over 50 percent of repeat purchases and importantly 60 percent of overall purchases happen in this niche through women. The average ticket size of a purchase reported by most of the players has been around INR 1000-1500 in this niche along with 60 percent orders originating from Metro and tier 1 cities, rest from tier 2 & 3 cities. Although, mass scale etailers have entered to this niche, however its impact on only niche (baby care) focused site remains to be seen. Speaking about the impact owing to entry of big etailers in this niche, Nadkarni said “We welcome the competition as we strongly believe that with the kind of marketing spends that are available to some of the bigger players we will see the market expanding faster and hopefully better online adoption”.
In our view there is a scope for both, the niche segment focusing on baby care vertical and the big/mass etailers catering to multiple categories including baby care – will coexist and grow simultaneously as market size in online space for baby products seems to be growing fast. However, the real potential of this category is still 18-24 months away, it would be really interesting to watch how Indian parents respond to it.
Funding in this space: