Growth bump for Baby Bunting
Baby Bunting chief executive Matt Spencer, left, with Jaime and Louise Easaw and children Isabelle, 2, and Maya, two weeks. Picture: Stuart
Helped by a mini baby boom, one retailer is bucking the shift to online and is planning to grow its network of stores.
For Baby Bunting chief executive Matt Spencer, his customers, who are either new parents or parents-to-be, like to physically see and touch a product before buying it. Advice also plays a big part.
“A lot of our staff are parents themselves and that’s useful especially when you’re having a baby for the first time,” Spencer tells The Weekend Australian. So far, analysts think it’s a formula that might work.
Shares in the company have shot up as much as 24 per cent since August after Baby Bunting flagged a stronger than expected year ahead.
Spencer’s confidence has increased as the wave of steep discounting across the baby goods sector comes to an end.
Indeed, rivals such as Baby Bounce and Baby Savings entered into administration earlier this year and Bubs Baby stores went into liquidation last August, allowing Baby Bunting to consolidate its leading position in the market.
In August, Baby Bunting posted a 9 per cent increase in sales for the year to June 30 at $303.1 million. Top line profit fell to $8.7m from $13m a year earlier as margins have been squeezed due to discounting.
Baby Bunting, which has increased its network to 48 stores nationwide, has plans to open five new bricks and mortar stores this financial year, in addition to its Toowoomba store that opened in July. The company is also looking at an additional three sites — former Toys ‘R’ Us sites — to potentially add to its network.
“While we do sell online, it’s relatively low compared to the overall sales performance,” Spencer says.
“For first-time parents, having a baby is pretty daunting. What we offer is to communicate to the consumer one-on-one and to look at and touch the product.”
Here, the retailer uses demographers to pinpoint where new stores should be, looking at a number of factors, including household expenditure, marriages and, naturally, population growth.
“It stands to reason that if there are people in our customer bracket, which are 0-3-year-olds, that we would want to have stores near there,” he said. “Population growth is really a key factor.”
Australians had a little more than 311,000 babies in 2016, according to Bureau of Statistics figures, compared with about 270,000 in 2006.
After the demise of a number of rival specialist baby goods retailers, Spencer sees department stores such as Myer, Target and chemists as his main rivals — but online giant Amazon isn’t high on his list of concerns. That’s because he’s sticking to his strategy to offer exclusive product ranges and focus closely on the target market.
“From our perspective, our market share has grown because we’ve got a very clear strategy.
“Our research shows that 40 per cent of consumers who come to Baby Bunting are coming through word of mouth.
“One of the things that differentiates Baby Bunting is that we’re very clear about who our customers are.”
Of the top 250 products the company sells, 197 of them aren’t available on Amazon.
“As a business we do travel and we go out and look at trends that are happening overseas and to make sure that what we are delivering to the Australian market is special and unique,” Spencer says.
While there has always been demand for baby products, Baby Bunting is seeing a move towards items becoming more fashionable.
“Prams can be seen as a trend product, we’re seeing a lot of innovation at the top end of prams,” he says.
“While people have been having babies forever and a day, at the end of the day the products on offer continue to get better, more fashionable and the elements that make up the product are becoming more technically advanced.”
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