A bump for Baby Bunting’s growth plans

The Weekend Australian - - BUSINESS - SA­MAN­THA BAI­LEY

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 de­mog- ra­phers 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.”

STU­ART MCEVOY

Baby Bunting’s Matt Spencer, left, with Jaime and Louise Ea­saw and their chil­dren Is­abelle, 2, and Maya, two weeks

Source: Bloomberg

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