Off-price slow to mature - marketing children's clothing - Special Supplement: AM Apparel Merchandising - Company Profile

Discount Store News, May 3, 1993

Off-pricers are growing by leaps and bound but in the lucrative children's wear market they seem to be taking baby steps.

As a whole, off-pricer's market share in children's wear increased to 11.1 percent in 1992, from 9.3 percent in 1990, according to MRCA Research of Stamford, Conn. However, the operations are behind other channels in capturing the potential dollars of the category.

Why should they settle for a tenth of the pie when discounters, for instance, enjoy a healthy 30 percent share of the children's wear market?

On the positive side, the off-pricers' 2 percent jump is the largest gain in children's wear share of any retail tier for the two-year period. Although off-price apparel retailers are now beginning to see the light, they still haven't renovated and expanded their kids departments the way discounters and mass merchandisers have.

There are a number of reasons why off-pricers' moves to capture the children's market have been slower than they could be. Most off-pricers depend on closeout merchandise to varying degrees, and that type of merchandise is generally scarcer than it is in men's and women's wear.

In addition, competitors like category killer Kids "R" Us and discount stores have themselves been doing such a good job in children's wear that some off-pricers may be wary about entering the fray.

Children's wear accounted for a whopping $23.4 billion in sales in 1992, according to MRCA. Predictably, discount stores have the largest share of the market, with specialty stores and department stores following. Off-pricers' 11 percent share amounted to $2.6 billion in children's wear sales for 1992, still trailing virtually all other outlets, except the combined numbers for Montgomery Ward and Sears (see chart).

Some off-price chains such as 50-Off, San Antonio, with 23 percent of sales in children's wear, already have a well-developed kids' department. Most off-pricers, however, are just beginning to look at the category in a new light and at the market numbers with a new gleam in their eye.

One of the off-price retailers that has made a concerted effort in its children's business is Burlington Coat Factory, the 184-unit chain based in Burlington, N.J.

"Seven percent of our business is done in the children's area," notes Monroe Milstein, chairman, Burlington Coat Factory. Outerwear, men's apparel, ladies' apparel and linens -- in that order -- generate larger shares of dollars at the $1 billion chain. Burlington, however, puts all types of outerwear in one category. The children's ready-to-wear area, however, is one Milstein anticipates will grow.

At Value City, children's also follows men's and ladies' apparel percentage of business. However, the chain has a much larger portion of its store devoted to the little ones than most off-pricers.

"Some off-pricers have children's areas the size of a postage stamp," says Ray Demers, merchandise manager, children's apparel, Value City. "We developed children's and the more business we did, the more space we got." In fact, of all off-pricers, Value City may devote the largest amount of space to the category--about 8,000 sq. ft. to 9,000 sq. ft.

"Compared to a lot of off-pricers, we overwhelm our customers with selection," he notes. Value City's children's department, in fact, is the same size as those found in an average discount store.

Demers concedes, however, that the category has probably reached its maximum as far as square footage is concerned. "We'll do more dollars per square foot, though," he notes.

One of the reasons consumers may be helping off-pricers gain in children's wear market share is that they are remaining true to their name. According to MRCA, the average price for a children's wear item at off-pricers only increased slightly, from $7.88 to $8.27, or a 4.9 percent increase. That's in line with an overall apparel price increase of 4.4 percent. The no-frills image that off-pricers radiate is also attractive to consumers seeking value.

However, specialty store prices went up 7.8 percent, while Sears and Ward saw price increases of 12.6 percent. Department store prices went up 3.6 percent, from $6.62 to $6.91. Discount stores still hold their ground in children's wear. Here prices remain the lowest and have increased the least. Item price went from $4.41 to $4.54, a 2.9 percent increase.

Like all retailers, merchandise and price is what differentiates each of the stores from its competitors. Milstein notes that his firm is different from discounters in that the merchandise Burlington carries in each category includes many department store labels.

In addition, he claims that other off-pricers do not pose a threat to Burlington because much of their children's and other apparel is bought as close-outs. "Our merchandise is not just closeouts, but includes a larger portion of in-season, up-front merchandise," he says.

Demers, on the other hand, notes that virtually all of its buying is through closeouts. He does admit to some special deals, but won't reveal too much. "The name of the store is Value City and that's what we need to get to our customers day in and day out," he notes.