Australian retailer Baby Bunting is aiming to capitalise on the soft goods market, which includes clothing and footwear, in a bid to tackle its total addressable market.
Chair Melanie Wilson confirmed the news at the business’ AGM today, saying that overall, Baby Bunting operates in a large market with a total addressable sales opportunity of $6.3 billion across Australia and New Zealand.
“Baby Bunting holds around 10 per cent of the $5.2 billion opportunity in Australia and is a clear market leader in the hard goods space,” Wilson said.
“While we will continue to strengthen our position in sectors including car seats, prams and cots & furniture, there is substantial opportunity for growth in the soft goods market, which typically offers higher margins and allows for more frequent transactions with consumers.”
As well as clothing and footwear, which makes up the largest portion of the baby soft goods category at $1.34 billion, the market also includes nappies health and beauty at $1.29 billion and food, formula and feeding at $740 million.
Overall, the soft goods market accounts for $3.4 billion, which Baby Bunting claims around three per cent of. Meanwhile, the retailer reportedly holds a circa 23 per cent share in the hard goods market, which makes up a total $1.8 billion in Australia.
“Gaining an additional 1 per cent market share translates to approximately $34 million in incremental revenue, offering a valuable opportunity to complement our established success in hard goods and nursery essentials,” Wilson said. “Underpinned by our new strategy we are well positioned to capture more of our large addressable market.”
The news comes as overall sales for Baby Bunting in FY24 were down 3.4 per cent compared to FY23 to $498.4 million. This has since improved in the first seven weeks of FY25, when sales were up 3.5 per cent.
As at October 13, 2024, FY25 year-to-date sales were up 2.4 per cent, with gross profit margin up by 240 basis points to 40.3 per cent.
Also speaking at the AGM, CEO Mark Teperson said the overall goal is to return Baby Bunting to a 10 per cent earnings before interest, tax, depreciation and amortisation (EBITDA) margin business, with the strategy behind this including market share growth and improving ROI capital for shareholders.
“Since we announced our strategy, we have been working hard and have delivered on several initiatives aimed at achieving the objective of growing our market share,” Teperson said. “We have driven growth and reinforced our market leadership through new product innovations including the recent launch of five new premium prams and five new feeding brands with more than 100 unique SKUs.
“In leveraging the Marketplace, we are providing customers with more choice and convenience. We’ve integrated Marketplace into our Merchandise team structure, aligning our 1P and 3P product selection and development. We offer around 17,000 products online from more than 90 3P sellers.
“To bolster our omni-channel capability, testing of an Uber same day delivery service from our stores is underway. This new service is anticipated to go live in this quarter and will enable us to reach ~65 per cent of the Australian population with Same Day and on demand delivery services.
“We have also commenced the pilot of 1-on-1 personalised appointments. This service will provide customers with dedicated time with an experienced team member.
“And, our pram cleaning services trial is on track for launch in Q2 FY25.”