Buying for baby

Regardless of the overall economic downturn, industry revenue will hold onto a positive growth rate, averaging an increasing rate of 3.4% per annum over the five years to the conclusion of the 2009-10 financial year.

Birth rates, wealth and the number of working women have a large part to play in the growth of the baby products industry. A large proportion of parents who have delayed having children until their 30s have risen as a new breed of high-end baby spenders.

The booming baby products industry is a reflection of higher volume of baby merchandise purchases. Infant apparel and footwear prices at the retail end have declined, signalling an end to protectionist activities, namely a reduction in tariff rates. The impact on Australian consumers has been an overall deceleration in price.

Income stability will continue to be a hot topic over 2009-10, as the recorded unemployment rate continues its climb, further accelerating feelings of job insecurity.

Despite interest rates remaining unchanged, household disposable income will fall while Australian households continue their frugal purchasing habits. Household consumption will experience it slowest growth in over 50 years. The slow growth will be due to the absence of Government hand outs, limited interest rate cuts and restrictions in household savings; this will hit high-end premium baby retailers that will see a reduction in high-end baby wear, furniture as well as toys.

Industry revenue over the five year period to the conclusion of the 2014-15 fiscal year is expected to be very similar to what was experienced over the current performance period. As the considerable decline felt by the majority of industries will provide for a low base for growth into the future, this industry remains on its largely uninterrupted path.

Consequently, industry revenue will average growth at an annual rate of 3.5%. Over the longer term, the marketing machine will continue to ensure parents spend big for their children. Revenue generated for the baby products market will continue to out perform the entire retail sector in Australia over the next five years. Expenditure by first time parents will be particularly strong, as income growth and a strengthening labour market towards the second half of the outlook period will facilitate sentiment and discretionary spending.

Improvements in IVF technology is likely to impact fertility rates and hence the baby products industry in Australia. Demand will be driven by higher fertility rates, as older women begin having children later in life. The initial impact on increased fertility rates will see nappy, apparel and furniture sales rise, while placing additional demand on long-term child care. IVF technology has become a popular option for couples having difficulty conceiving, and some of the improvements have included higher success rates, and accessibility to the patients have increased dramatically.

Robert Bryant is the general manager of business information firm IBISWorld.