What’s making the business of selling Baby Care products online so attractive for entrepreneurs?
Vijay K, a techie from Bangalore, does not spend his weekends visiting crowded stores to buy baby products for his two-year-old kid anymore. With e-commerce ventures like Kidloo, Firstcry, Balgopal, Babyoye, A2zbaby and Hoopos selling everything from diapers, toys, clothes to skin care products for babies, “buying for baby care products was never this easy,” says Vijay.The internet is going through a baby boom phase and no one is complaining. End users now have the convenient option of buying baby essentials from a single online store and many of these firms are laughing their way to the bank. Firstcry based out of Pune received a financial backing of $4 million from SAIF partners earlier this year while Delhi-based venture Babyoye was recently funded by Accel Partners and Tiger Global for $2.5 million. And then there are other similar companies, aspiring to make a mark in the already crowded market -- Hoopos established by entrepreneur Vijay Jumani early this year offers 6,000 products including diapers, bath and skincare and health and safety products for kids while Hushbabies, Kidloo and Balgopal are the other recent entrants in the industry. Says Venture Capitalist Ankur Gulati, from Draper Fisher Jurvetson, “In markets where the potential demand is huge and the barriers to entry are quite few, this is expected. There is no doubt that e-commerce has the potential to be a huge industry in India across segments including baby care, which has attracted entrepreneurs from all walks of life. China went through a similar transition and today, there are more than 11,500 e-commerce ventures in China. I wouldn’t be surprised if India too records similar numbers.”
However, this growth has resulted in a market cluttered with firms selling the same products. Soumitra Sharma from IDG Ventures agrees that though the market for baby products and toys online is growing, there are very few characteristics that differentiate these e-commerce ventures from each other. Also, “attracting and retaining customers will be a challenge,” he adds.
The only way out for e-commerce companies is to work on their value proposition, believes Anirudh Singh, who tracks early stage tech startups. “Either you sell products that are different and exclusive or you position them differently,” he remarks. Sharma shares similar views and adds that value additions on services can also help boost sales. “By offering attractive elements like maternity calendars and informative content on pregnancy, ventures can differentiate themselves from their competitors.”
Venture capitalists have placed bets on some of these firms resulting in multiple funded ventures in baby essentials category. “The rest will find it difficult to raise funds and eventually become lifestyle businesses. They will struggle for cash, but could still make some revenues. But this is good news for the end consumer. Greater competition is likely to reduce prices, increase catalogue-depth and spur service innovation as firms try and differentiate themselves,” adds Gulati. Consumers like Archana Mohan from Mumbai, mother of a one-year-old, are happily buying from sites like Firstcry and Babyoye. “As a consumer, I am spoilt for choice and I am more than willing to explore other options as long as the products are delivered quickly and on time.”
Entrepreneurs remain gung ho about the segments growth and the opportunities it presents. Premanshu Singh, co-founder, A2zbaby, a recent entrant to this product category says, “The market for baby and mother care products in India is close to Rs 2 billion and the e-commerce sector caters to just one per cent of the total demand. Therefore, the sector can accommodate many players. However, what differentiates us from similar players is our post-sales management. Although our products are standardised, we believe in maintaining a quick and transparent delivery system. Our customers in metros receive their orders within 48 hours of ordering it online.” He adds further, “Although techniques like offering discounts and publishing content that helps a mother buy the right products for her and her baby helps in customer acquisition, in the long run, only features like an efficient delivery mechanism and a healthy return policy will help in retaining customers.”
We at YourStory are bullish about the essential baby care segment in the e-commerce segment. What needs to be seen is how these ventures differentiate and build customer loyalty in the long run. We believe that fast and efficient execution of services will hold the key to scale.