Young parents increasingly buy the necessary things remotely for their kids. Online stores become easier and more comfortable way to buy the products than usual one. Looking for baby goods, buyers are scouring the web today in both ways weather they are going to buy the goods though the internet or in the common shop.
According to ACNielsen, a leading marketing company which provides global market researches on food and beverages, the most profitable investments in today`s world market are in the children`s food industry. The company shows the following data: in the 2010 the profit, provided by the children`s food industry in the world, had the highest rate of growth and had increased by 20% since the previous year. According to ACNielsen, the second and the third place, in terms of growth, occupied the meal markets (19%) and beverages (16%). However, the sales of these products had decreased by 21% compared to the previous year. According to the statistics, the parents spend almost half of their salary on the child when it is youger than 3 years only on the products that are necessary. What is more, the index of the expenditure is higher in the richer families. That is why, the children`s shops are developing today (Denitto, Emily, 1998). There are several reasons for this. Firstly, it is the current demographical situation: each year the number of born children grows. Secondly, the well being of the society is increasing, that is why people have better access to different types of products and can spend money on the unnecessary products in order to make their child happy. Finally, the advertisement industry is developing and creating new approaches how to sell the products. Thus, even in the face of declining consumer demand, the segment of baby products will be, according to the experts, one of the most dynamic industries in the market. That is why, online children`s shop is very profitable way to earn money. However, opening the baby products shop, the major focus should be made on the accordance of the quality and the price. If in the case of the increasing cost of the product the seller has increasing profit, the demand on this product must be inelastic. If in the case of the increasing cost of the product the seller has decreasing profit, the demand on this product must be elastic (McConnell, 1987).
Analysis of Customer Type
Opening the shop with baby products is very profitable due to the variety of customers. Thus, the presence of the products of all the types will allow to have different customers of different ages. In the structure of spending on goods for children (excluding durables), baby food is a leader. In the first year of life parents spend on baby food 26.1% of their family budged. In addition 30.6% they spend on diapers. This is due to the lack of actual expenses on food for the first six months of life due to the breast-feeding, whereas this period is most active in the usage of diapers. As the child grows, the expenses increase. Thus in the second year of life food goes into a leadership position in the structure of costs (32.3%). In the third year of life, clothing and shoes come out on top as a child in many ways goes to the “common table” and the consumption of baby food is falling sharply. Of course, for some segments of baby food (juices, dairy products, etc.) consumption is not limited to 36 months and continues in a more adult period (Denitto, Emily, 1998). It can`t but mentioned, that among necessary products, such as food, diapers and cloth, there are also the toys. According to the surveys, parents spend 18% of their budged on toys constantly every year, it has been counted without the extra expenses on toys during the holidays. In addition, on average, parents continue to buy toys for their children up to 14 years (Denitto, 1998). Taking to consideration this statistics, the customers of this type of industry can be divided into following groups:
- from the birth till 3 years (necessary expenses on food, diapers and cloth);
- from 3 till 7 years (necessary expenses on cloth, developing toys);
- from 7 till 14 (necessary expenses on cloth, books, unnecessary on cloth );
- from 15 and up (customers, who buy presents).
Commonchildren`s shop in today`s industry can have many competitors, that is why, in order to have successful business, the region, where the business is going to be set, should be taken into consideration. The idea to create online children`s shop has a lot of advantages. The major one is that the customer from any place can buy the particular product. Nevertheless, the main office will be situated in Hong Kong, the products can be kept in any other place, where it will be the most convenient for the shop.
To conclude, online children`s shop would be profitable due to the constant demand of the products, the variety of customers, the necessity of the particular baby products, the convenient selling process in online regime, and the perfect access to the customers all around the world.
Online market is only at the first stages of development; however the competition in this field is already very tough. The online baby products shops should be divided into two types: regional and foreign. As the online store of the children`s products would be formed in Hong Kong and sell the product throughout the world, both types should be taken into consideration. In addition, the chosen baby shop will include all baby products for different ages.
The major competitor in Hong Kong is online store “BOBBOGI”. The shop presents very good combination of price and quality. Children's clothing is made from high quality natural materials and dyes. All kinds of children's clothing from “BOBBOGI” can be easily cleaned and cleared. In addition it has a bright style and decorations with embroidery, appliqués and bright colors. “BOBBOGI” creates collections for girls and boys for all seasons, including winter clothing from 1 to up 6 years old children (BOBBOGI).
The other shop that was founded in Hong Kong is “BuzzBeeToys”. Nevertheless, the shop was created in Hong Kong, it is already popular in many countries. If to compare it with “BOBBOGI”, “BuzzBeeToys” is young shop, however, it already works with lots of popular international children`s brands: AL-LEN, Altabebe, Alvi, Angel?are, Anna Club, Aprica, Aqua Doodle, Arti, ATM Sports, by Nurse, OK Baby, Omfal, Ontario Linen, Osann, Ouaps, Pali, PARADISO , Peg Perego, Perla, Pilsan, Play By Pl, PlayGo, Playgro, Playmates, PLEO, Priz, QUADRO, Quatro, Quelle, Quercetti, Quinny, RÖMER, Recaro, Reer, Renolux, RESCUE PETS, RICH, Roadbot, Ruggeri, Seca, SES, Shrek, Silver Cross, Silverlit, Smar, Trike, Smoby, Sport Tech, SRM, Starplast, Startright, STEP 2 (STEP 3), Stiga, Stokke, Sun Ce, Sweet secrets, Sweet Years, Taf Toys, TCV, Theo Klein, Tiny Love, Tommee Tippee, Toy State, and many others. Among them are also worldwide popular LEGO, Disney and Happy Dino. The biggest strength of the shop is that it sells not only clothes, but also the equipments and toys for children. A lot of customers buy children's furniture, transport, rocking chairs, swings, bathing, hygiene, cosmetics, playpens, cribs, playpens, changing tables, backpacks, kangaroos, slings, accessories for feeding and other stuff (Buzz Bee Toys).
Among the international competitors the major one is “Du Pareil” – French online shop. The main focus the shop makes on the quality clothes for the newborn children. In addition, the shop works with the famous social networks such as Facebook and Twitter and the searching system Yahoo and YouTube, which provide the shop good advertisements. What is more, this online shop has variety of goods for the children up to 14 years. The thing that makes the following shop the major competitor is its constant sales and discounts. “Du Pareil” is enough profitable to offer 70% discount for their customers (Du Pareil).
Business Strength and Weakness
Thus, after critical evaluation of the particular business, opening online children`s store has both advantages and disadvantages.
Firstly, the main advantage of the online store to simple one is time saving. It is very convenient especially for the young parents, who sometimes do not have time to go to the shop. The only thing needed is to have internet access. Our internet shop has door-to-door function: the customer buys the product and gets it in front of its own door. Secondly, in comparison to other online store, our store has all types of goods from clothes and toys to food. The survey showed that children`s online shops, created in Hong Kong, specialized on the particular type of products. Creating the universal shop with all the types of products and for the children of different ages will increase the amount of customers and make the competition to the existing shops. Thirdly, it is always hard to buy the chosen thing in some other color or shape, one of the main advantages of our shop is an access to all products which are available. In addition, the convenient web page allows to see all products, and modern searching system allows quickly to find the suitable one. Thirdly, in our online shop a lot of surveys, which help to improve our service, are carried out. The biggest advantage here is that the customers do not need to waste their time answering a lot of question straight forward; here they are proposed one question for a week. In addition, the results are calculated at once and are available to everyone who has participated. Finally, the uniqueness of our online children`s shop is the universal list of the children`s products. After analysis of the competitors, it can be mentioned, that none of them has been specialized both on the baby products and food. That is why, the major advantage of our shop is uniqueness. The customer will not look for the other internet shop if everything that he needs can be found in one. The main strategy of our shop is orientation on the people`s laziness, that is the biggest force for the world`s progress.
The main disadvantage is the competition. Nevertheless, the online shops are only developing; there are lots of them. The biggest problem is the time when the online competitor`s shop was set up. The age of the shop is equal to the level of development. Thus, the shop that was created 5 years ago will be bigger competitor to those, which was created 2 years ago. The reasons are simple. Firstly, it is customer`s loyalty. It is always hard to force the potential customer to buy the same products in your shop, when they have been constantly buying in the other. Secondly, it is the partnership with the suppliers. It is impossible to have the same suppliers with the other shops in one region. However, the online children`s shops, set up in Hong Kong, have worked already with all well-known companies. Finally, some shops have flexible system of discounts, that can`t offer the new born shop.
Reasons for choosing our Product
In the term of the high competition it is very hard to force potential customers to buy exactly your products. That is why, in order to have profitable business, first of all the quality of the products should be taken into consideration. The main focus here should be made on the food industry, as it is not popular in other competitor’s online children`s shops. According to the survey, in the top list of the most quality baby food companies are the following: Humana, Hippo, Nutrilon and Friso. Each of the named companies supplies both the necessary food for the children for the first 3years, and the juices, mixtures and vitamins (Davidowski, Grosser, Sarojam, PerkinElmer).
Not a minor thing plays a design both of the products and the shop itself. Thus, the clothes and the other equipment are going to be as colorful as possible. The major disadvantage of the children`s shops is following the common stereotypes that girls should wear pink clothes and boys blue. As a rule the shops are full of these two colors; our shop will make focus on the variety and uniqueness. Opening online shop is very important to have a pleasant design of the web page. However, here the focus should be made more on the female customer, than on male, as the major amount of the customers is young mothers.
As the shop works in online regime, there are only few workers, who doesn`t have straight communication with the buyers. The customers choose the product by themselves. Nevertheless, the fast delivery system will lead to the increasing of the customers. The partnership with the known delivery services will help to deliver the products within 24 hours. In addition the door-to-door service makes the purchase more convenient for the young mothers, who do not have time for shopping. Online children`s shop offers flexible service. The customers can have the access to the products 24 hours per day and 7 days per week. Such flexible service will make the competition to the existing non online shops. In addition, our online shop provides people not only from Hong Kong, but those from other regions with the necessary products.
Talking about promotional aspects, the main advertisement would be places in the internet due to the partnership with the other web sites and shops. The general scheme is simple: those web sites, which would place our advertisement, can have their in our web page. This scheme will save money for both sides and make the background for the further collaboration. Secondly, in order to have fewer competitors, it would be necessary to form partnership with the schools, which teach how to be good parents. Our shop will follow four major marketing steps: clarify to whom we sell, and why we will buy; make adequate progress and plan the tasks with the assistance to determine the budget and desired results; carry out a plan, adjust the course, depending on the emerging results; work with visitors of the site - so that they become customers and to return for buying again and again.
All these will help to create the competitive online shop.
Marketing trends and the restrictions
As any other business the children`s product industry has many restrictions. However, judging from its natural side, the industry has all the necessary background to be developed due to the constant increase of the amount of born children and the development of well being of the society. The baby products as well as the high quality products will always be in demand.
However, there are still some restrictions in this kind of business. First of all, as our online shop will consist not only of clothes, but also of baby food some food will be thrown away. Expiration date for baby products are less than for other products. In addition the conditions of storage of the baby products are different. For example, juices should be kept in not very dry place, but vitamins and some other food in a very dry place. Some products should be kept in the fridge and some without. What is more, the baby market is controlled twice times better, than the others. Thus in Honk Kong the one time per two weeks special services checks the quality of the food. Due to the recent cases of poisoning, the better control has been established to baby toys.
Forecast business growth in the next three years
The further development of the shop will depend on the amount of the starting investments. In order to create the online shop the volume of investments will vary from 2 to 14 thousand dollars, another 10-20 thousand will be spend on the purchase of goods. According to business plan the amount of the investments would be returned during the period from 3 month to one year, depends on the activity of the customers. Profitability of the shop should be 20-30%, mark-up 30% on certain types of goods and up to 70% on the rest. The turnover of the developed online shop should consist of 700 000$ per month, and the profit should be near 5 000$ per month. From here such factors as contextual advertising, promotion, and optimization will be from $ 300 per month (Pinson, 2004).
Thus, it can be traced the development within the next three years. The first year would be very hard in terms of the profit and partnership. Some shops can have even the minus profit. However, the business plan, which has our children`s online shop, assure that during the first year the general profit would consist of 35 000$. The general year profit has been counted out of the formula of the middle proportion of the summary of the maximum and minimum revenue with all the exclusions on the other services, such as advertisement and salary for the people in the main office. The main peculiarity of the second year of the existing online children`s shop is the extension of the market, thus the increasing of the customers. More amount of money would be invested in advertisements both in the internet and on the billboards. The major focus is still made on Hong Kong customers and those who live on the suburbs. The main office would have already three people in the stuff. The expense will also rise on the special propositions and services, which the shop will have in order to gain more customers, such as discounts or free delivery for those who make big purchase. The general profit would be near 85 000$ per year. The third and the further years will be focused on the increasing the amount of customers not only in Hong Kong and its suburbs, but word wide. Thus, the opening of the new offices and the hiring new people will be money consuming. However, the first step will be focus made on the European market. That is why, a lot of money would be spent on the collaboration with the European web sites in order to achieve good advertisement. In addition, more and more variety of products would appear. Thus, the general profit would be near 126 000$.
Conclusions and Recommendations
Baby market has lots of possibilities to be developed. For the owner of the baby online shop there are several ways of development, which can be divided into following types. Thus, the main focus of our online baby shop is made on the customers from Hong Kong, during the second year the market of our shop would be extended to Hong Kong suburbs and the other step is the focus on the European market. However, in case of the developing of the business, the shops can be opened not only in online regime. In addition, working online gives the possibility gain the customers all over the world. Thus, with the increasing of the amount of customers, different branches can be opened in other countries. Especially profitable would be involvement of the customers from both developed and non developed countries. In the developed countries the price for the products will be in accordance with the quality in the non developed countries will be sold those clothes and toys that have a high quality, however couldn`t be sold for the existing prices in the developed countries. Thus, the cost in non developed countries would be less, than in developed. This would help to sell all the products and still gain profit on them. The only disadvantage of this approach is the impossibility to sell food products, because of the limited time of exploitation. The second way of developing the online children`s shop is to increase the types of products, which exist in the shop. Nevertheless, the major focus of the shop is made on the uniqueness and the shop already combines the clothes, toys, equipments and the food, the other step can be selling of the clothes for the pregnant women. As the result the pregnant women would search for the clothes for themselves and see the items of children`s products, which they will buy within few month. This approach creates very good additional advertisement for the main customers – young mothers. The major thing in all selling industry is advertisements and propaganda. Thus, the collaboration should be established with the new web pages, which are related to children. In the creating of the advertisement for the online shop the focus has to be made on the internet users, especially children and young mothers. The advertisements should be catching and colorful, in addition they should announce the main advantages of the products. The price policy should be evaluated with the prices to the competitor shops. The discounts and sales would always attract attention. The base of customers will help a lot in the advertisement process. Sending sms with the news about the products to each customer would create the personal approach.