BEST INDUSTRIES 2014

Looking for Growth Potential? Baby Products, Baby!

Whether you're making or selling gear for young kids, be ready to innovate--and to find out what makes parents happy.
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Editor's Note: This article is part of Inc.'s 2014 Best Industries package. Read on, for more on the top industries for starting a business now.

Interested in making and/or selling baby products online? Prepare to join a very large club: It's estimated that by 2018 there will be more than 6,000 companies looking to sell products via e-tail in this "niche" market.

Arriving fashionably late, however, just might work to your advantage, particularly if you are focused more on the making than the e-tailing. "When we started looking at the juvenile space, one of the things we liked was how crowded it was," says Rob Daley, co-founder of 4Moms, a Pittsburgh company that makes innovative baby products and surpassed $30 million in sales last year.

Daley says that, had there been only one or two companies in the space, those companies would have had substantial clout with retailers, who would probably be comfortable and happy working with a small number of suppliers. Instead, he says, the intense fragmentation leaves retailers open to working with many companies. "If you have an idea for something that is really differentiated," Daley says, "the roadblocks are not quite as high."

That's not to say that it's easy. "All retailers are scared because of Amazon and eBay," says Linda Bustos, the director of ecommerce research for Elastic Path Software, which makes ecommerce software. "They are covering the entire long tail and seem to have every niche covered."

That leaves you with two ways to stand out: via the products you sell or the online retail experience you're able to offer customers.

Keep Innovating

While it may seem that new baby products are springing up everywhere, Daley believes that few of them actually offer new features or benefits that customers care about. "There's a low level of innovation in the industry, historically," he says. Some companies have built powerful brands by selling cachet, or by more sophisticated design, but the products' functionality hasn't changed much.

Graco's Pack-n-Play, Daley says, was developed off a key patent the company won in 1987. In the early 2000's, that product still had an 85 percent market share. "Either the product is perfect," says Daley, "or there's a good opportunity to make it better, because it hasn't changed in decades."

Daley and co-founder Henry Thorne, a veteran roboticist, thought it was more likely that there was room to make better products. 4Moms now sells a baby bathtub that incorporates a digital thermometer and lets dirty water drain out, so baby isn't left soaking in soap scum. Its "Origami" stroller unfolds with the push of a button and comes equipped with running lights and an iPhone charger.

Your idea doesn't have to be all about tech, however. When Rebecca Cannon started her company, Asheville, North Carolina-based iPlay, she was importing diaper covers from Japan that fastened with Velcro. She expanded into selling cotton baby clothes, which at the time were hard to find.

Today Cannon employs 62 people and has annual revenues of more than $10 million. iPlay sells through its own web site, as well as at Whole Foods, Amazon, Buy Buy Baby, and Target.

While there are plenty of web sites selling all-natural baby everything, Cannon is still innovating. Her newest product, which is currently being reviewed by buyers at Whole Foods, is a kit that allows parents to make all-natural homemade baby food. Parents supply the fresh fruits and vegetables, and iPlay's kit provides fortifying ingredients such as sprouted grains, beans, oils, essential fatty acids, probiotic powders, and sea salts. "It probably won't sell as well as the pouches or puréed baby foods, but I think this is the healthiest thing," says Cannon.

Know Your Shopper

Andy Hoar, a senior analyst with Forrester Research, has some advice for those who hope to compete on the basis of an improved online shopping experience.

First off, says Hoar, you cannot do anything that requires people to change their behavior. It's just too much. In a somewhat different sphere, he cites Shopkick, a phone-based loyalty and rewards app. To get your loyalty points, you had to first download the app. When you entered a store that worked with Shopkick, you had to turn on the app. Then, and only then, could you scan bar codes to earn points. "A busy mom with kids is not going to open the Shopkick app," he says. Now, Shopkick's figured out how to make its app awaken the minute you walk into one of its retailers, and Hoar says that's made all the difference.

Second, you've got to add value. This sounds basic, but it's amazing how few sites do it. It's not just about competing on price. Instead, you can combine a recommendation engine with your own knowledge of what a customer has bought from you before. Smart curation helps too. As Bustos points out, customers who know what they want can easily buy it from Amazon or eBay. Your task is to show them what they didn't know they want, just the way a fantastic off-line retailer does.

Last, think about products that lend themselves to demonstrations. In stores, complicated products are often trapped in boxes, where they're rarely even assembled. Online, you can demonstrate exactly how something works, solicit reviews from customers, and provide a whole range of content that helps consumers make the educated decision: to buy from you.

IMAGE: Gallery Stock
Last updated: Mar 25, 2014

KIMBERLY WEISUL | Staff Writer | Inc.com Editor-at-Large

Kimberly Weisul is editor-at-large at Inc. and co-founder of One Thing New, the digital media startup that is rebooting women's content. She was previously a senior editor at BusinessWeek.




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