Growing pains are hitting children’s and infants’ clothing stores, leaving more than a few crying over their messy bottom lines.
Gymboree Corp. is closing hundreds of stores to stay viable after bankruptcy and The Children’s Place this year closed a store at King of Prussia Mall, to name a couple.
Yet, despite a shrinking baby pool, there has been no shortage of new entrants — such as e-commerce player Orchestra-Premaman of France which is opening stores in the U.S. — all vying for the hearts and wallets of current and wannabe parents.
The fragmented industry is becoming more so, with the weakest being pushed aside, posing the question: Are there enough babies and young children to support existing retailers and newcomers?
In 1990 the birth rate per 1,000 was 16.7. That fell to 14.3 by 2007, according to Statista Inc. And since the Great Recession, the rate has dropped further to 12.4 in 2015. This represents a 13 percent drop in the birth rate since 2008 and almost 26 percent since 1990, translating into fewer customers.
Yet from 2012 to 2017, the number of companies in children’s wear is expected to grow at an annualized rate of 2.0 percent to 11,833 operators. The number of children 9 and younger will grow only 0.3 percent over the same period.
Slowing population growth, sluggish income gains, and intense competition “suggest the U.S .market does not have room for a number of new entrants,” said Ken Perkins, president of Retail Metrics Inc. The growth in buying online “is resulting in even successful chains such as Children’s Place reducing their footprint. Chains such as Target, which recently introduced its successful and stylish Cat & Jack line, are putting additional pressure on the space.”
Adding to the pressure are e-tailers, which sell only online, and non-specialty clothing stores, said Anya Cohen, an IBISWorld analyst. “E-tailers can pass on cost savings due to their relatively low overhead expenses, while non-specialty stores often have stronger buying power due to their economies of scale and can therefore offer lower prices.”
With the crowded field, IBISWorld estimates that total revenue for children’s and infants’ clothing stores will fall at an annualized rate of 1.7 percent over the five years to 2017, reaching $9.6 billion.
Most of the largest retailers, such as The Children’s Place, Gymboree, and Justice, have seen sales fall in recent years, even as a few have grown revenues. Carter’s Inc., the parent company for Carter’s and OshKosh brands, notched strong gains — its revenues rose 8.9 percent from 2012 to 2017 — “due to its reputation for selling durable, stylish, and high-quality apparel,” Cohen said.
Physical stores remain the dominant retail channel, but the internet’s influence is growing. About 86 percent of retail sales in 2016 occurred in stores, with 66 percent influenced digitally, according to Statista.
“The most important thing is a good product with a good value,” said Agathe Boidin, chief executive officer of Orchestra-Premaman U.S., the French children’s wear and maternity retailer which opened its first U.S. store at King of Prussia Mall last May. Orchestra took over the space of The Children’s Place after it closed in March.
Orchestra, a discount fast-fashion retailer that began online and has expanded to 700 stores worldwide, is one chain that analysts say is getting it right in terms of quality, style and cost. Its price wars with other stores are common and steady, analysts say.
But even Orchestra called off a merger in late July with Philadelphia-based Destination Maternity because of uncertainty in meeting securities regulations in both France and the U.S.
Boidin said keeping parents’ shopping experience simple — in-store and online — was key to success.
“Some retailers are struggling because they have too much store with too high a rent,” Boidin said. “The landlords have to understand that they have to lower the rent if they want to keep children’s businesses in their malls because the average price of a children’s product is a lot lower than women’s or men’s.”
King of Prussia Mall, a premier center, captures the diversity.
There are 13 stores there whose primary category is “children.” They include Abercrombie Kids, crewcuts at J. Crew, GapKids, Gymboree, Janie & Jack, Justice, Kids Foot Locker, and Orchestra.
An additional 19 specialty retailers carry children’s products or have a children’s department. They include Champs Sports, COS, Flip Flop Shop, Forever 21, H&M, North Face, Skechers, and Old Navy.
Seven department stores also carry kids clothing, including Nordstrom, Neiman Marcus, and Lord & Taylor, along with five specialty retailers that target families with young children: Yogibo, Build-A-Bear, Learning Express Toy, the LEGO Store, and Pottery Barn Kids.
Pennsylvania Real Estate Investment Trust (PREIT), which owns several area malls, has no plans to add children’s wear retailers to its properties here. “But many of the retailers we are adding will cater to this segment [including Zara at Cherry Hill Mall],” said PREIT spokeswoman Heather Crowell. “With children’s apparel, the end user isn’t driving the purchasing decision — the parents are. Rather than making an additional stop on their shopping trip, they can purchase children’s clothing at stores they’re already visiting for other needs.”
Parents continue to spend on their children even when they curtail spending on themselves, said Steven H. Gartner, managing director for retail services at CBRE, Inc., the commercial real estate firm that brokered the deal to bring Orchestra to King of Prussia Mall. The weekend trip to the mall remains a popular family event.
“While online shopping seems like a natural fit for a time-constrained parent, much of the children’s sector remains impulsive, and that can best be accomplished in stores,” he said. “Children’s clothing purchases drive a high amount of traffic to these doors that then permeate throughout the entire store.”
While pushing a stroller with her 8-month-old grandson, Suheb Dill, last Saturday, Sherita Dill perused the 40- to 50-percent-off sales racks at the Gymboree Outlet at Philadelphia Mills Mall in Northeast Philadelphia. Dill, 38, had an entourage with her that included two daughters, a granddaughter, and a son-in-law.
She said her biggest fear was that children’s stores will go the way of some department stores, such as Sears, Macy’s, and J.C. Penney, which have had steady closures.
“I came here all the way from North Philly for their baby clothes,” she said. “The prices are reasonable and they have a good selection. I would hate to see this store close.”
But 8.6 miles away, the non-outlet Gymboree store at Oxford Valley Mall in Langhorne didn’t make the cut and will be closing “by January,” said a sales clerk that same afternoon.
Jeanine and Kyle Clarkson, both 30 and from Northeast Philadelphia, were taking advantage of the closing for good markdowns, as 2½-year-old daughter Adriana watched from her stroller.
“I’m sad a little bit,” said Jeanine Clarkson, who also likes shopping at OshKosh, Carter’s, and the Children’s Place. “I like to go in and see the clothes before buying and making sure they feel right. I can’t do that online.”