The U.S. market for baby products like diapers, car safety seats and baby food is the weakest performing retail sector so far this. Year over year, sales are down 10% to 15% and penetration is down by double digits in all five segments of the baby products market.
A significant factor uncovered by the TABS Analytics 2017 Baby Products Study is household income. The only income group showing an increase in penetration was the highest income group, making $150,000 a year or more. In every other income group, penetration fell by at least 33 index points.
High-income households accounted for about one-quarter of the total $30 billion annual market for baby products. Households with annual income of between $50,000 and $74,000 accounted for 18% of sales and households with incomes of $100,000 to $149,000 accounted for 17% of sales.
The 2017 TABS study surveyed 2,000 individuals age 18 and older to gauge their shopping patterns for five core baby product segments with a total of 28 different products. The five segments are baby seat and safety products, baby feeding needs, diapers and accessories, baby formula/food, and baby needs.
The study noted that online market share grew by about 2% in all segments, but overall sales totals fell. The TABS analysts noted:
We believe this signals something bigger at play, particularly the disparity at higher income levels, which has a depressing effect on the overall retail environment. Consumers now prefer to spend more on electronics – think iPhones, apps, etc. – than they did five years ago, and as a result, they are shifting their dollars away from other sectors, which are feeling the pain.
In the diapers segment, online sales rose from 20.1% last year to 22.1%. Amazon.com Inc. (NASDAQ: AMZN) and its Diapers.com subsidiary saw sales improve by just 0.2 percentage points year over year to 10.2%. Amazon announced in March that it is closing its Diapers.com site, along with others acquired when it purchased Quidsi for $545 million in late 2010.
Wal-Mart Stores Inc. (NYSE: WMT) posted a 0.9 percentage point gain in online sales, improving from 4.2% to 5.1%. At its brick-and-mortar stores, Walmart’s share of diaper sales rose from 17.6% to 18.1%.
Target Inc. (NYSE: TGT) lost share at its physical stores, posting a decline of 1.1% from 13% in 2016 to 11.9%. Target.com, however, boosted its shares by 1.1% to raise its share from 3.2% to 4.3%.
Overall, brick-and-mortar stores’ share of the diaper market is 33%, compared with 22% for the online share. Online sellers get their highest share — 26% — in the safety segment, where expensive items like car seats and strollers may see bigger price savings.
TABS Analytics noted several conclusions, the first of which is this one:
Baby products purchasing by income is a microcosm of the major shifts we see in retail, in politics, and in our economy and other Western economies. The bifurcation of the population based on income growth – resulting in inconsistent growth across most income levels – creates major disruptions and unrest.
More research is required into this puzzling extreme income skew. While it makes sense to have higher income purchasing for more discretionary products, diapers and food aren’t generally discretionary items.
Now, read that last sentence again.