An overview of the research that was done for our Brazilian kids' clothing startup. Check my blog for a more descriptive overview: http://celosblog.com/post/39662322628/why-the-brazilian-online-kids-clothing-sector-is-a

1. The growth of the Brazilian online
kids’ clothing market
Marcelo Fujimoto
Co-founder at Babycub
marcelo@babycub.com.br
February 2013

2. A look at the overall market
‣ 15% growth over 2011 (R$ 16 billion)
1
R$ 18.6 billion
1
‣ 80% by economic classes B & C
‣ Will grow approx. 6% per year
2
(2012)
3
Where are moms shopping? Where is the demand coming from? (2012)
4
Number of children, per region / class (millions)
000’s of locations: Observations:
60% ‣ Chains / franchises
‣ Some sell online but
Small chains / ‣ Mom & pops mostly brick & mortar
‣ Losing market share to
independents ‣ Supermarkets
dept stores and to online
1
KIds’ clothing purchases, per region and class (R$ billions)
Observations:
39% ‣ Includes specialized (apparel-exclusive) and
non-specialized stores
Department ‣ Most also sell online
Implied average spend per child, per region and class
Observations:
< 2% ‣ Virtually non-existent a few years ago
‣ Fastest growing channel
Online ‣ Attracting new players & investments
1 Per IBOPE Inteligência; excludes sales of footwear, toys and accessories
2 Per ABIT (Brazilian Textile Industry Association)
3 Market share data estimated based on 2012 retail statistics of the overall clothing category from ABVTEX and Iemi (Instituto de Estudos e Marketing Indústrial)
4 Per DataPopular study of Brazilian children, ages 0-14, and their respective economic classes. Breakout of economic class was not available on a per-region basis, so assumed constant
throughout all regions. 2010 IBGE Census data of kids (0-14) per region was carried forward to estimate 2012 geographic breakout.
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3. Although e-commerce is growing quickly, online sales of
apparel and kids’ clothing will grow faster
The overall e-commerce …but kids’ clothing online will
category will double… more than triple
R$ 870mm
R$ 47bn 26% CAGR
2012-17
16% CAGR
2012-17
R$22bn
R$272mm
20%
26% 89%
41%
47%
--
... ...
N/A
2009 2010 2011 2012 ... 2017 2009 2010 2011 2012 ... 2017
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4. The numbers behind the digitilization of kids’ clothing
‣ E-commerce will more than double by 2017
- Increased internet penetration, access to consumer credit, continued emergence of Class C, etc.
‣ However, the real story is how sales of apparel is growing even faster
- In 2009, apparel was the 26th most purchased category
- In 2012, apparel was the 3rd
- Projected to grow 30% per year until 2016
1 Historical data per e-bit and IEMI. 2012E per e-Bit/WebShoppers report (26th edition). 2013-17 projections based on Forrester and e-Bit / WebShoppers forecasts
2 Historical data including 2012E per e-Bit. 2013-16 growth rate of online apparel sales as per a Bain & Company study of Brazilian e-commerce, issued Jul-2012. Growth rate for 2017 is a
Babycub estimate (assumed same as overall e-commerce growth rate)
3 Babycub estimated the percentage of kid’s clothing purchased online based on IBGE family expenditure data, which shows that approximately 11% of total fashion & accessory category
spend is spent on children's clothing (vs. adult clothing, shoes, jewelry and other); this is also consistent with IBOPE data on the size of the kid’s clothing market relative to the overall
clothing market. Note that this is more conservative than the 15% estimate provided by ABIT (the Brazilian Textile Industry Association)
4 Although we believe the kid’s clothing sub-component will grow faster than onlines sales of the overall apparel category, for illustrative purposes we have assumed that they grow at the
same pace
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5. Why is apparel increasing faster than
the overall e-commerce category?
‣ Long-overdue standardization of clothing sizes by the ABNT
1
- Until recently, sizes varied between different manufacturers, which made purchasing clothes without first trying
them on a big gamble for Brazilian consumers
- Suggested standards of kids’ clothing was announced in 2010 (nearly all large manufacturers already comply)
‣ More Brazilian women from Class C are making first-time online purchases
2
- 61% of new e-consumers belong to Class C
- In 2001, women represented 39% of e-consumers 3
- In 2012, women represent a clear majority at 64%
3
‣ This same trend is also occurring in the U.S. and in the U.K.
- Innovative business models such as subscription, daily deals, verticalization, etc.
- An increased recognition of the role of customer service, free/low shipping costs, friendly returns policies
improve convenience and reduce purchase anxiety
- Technological improvements such as high-resolution images
- A deeper understanding of design, U/I, U/X, customer acquisition and conversion
- Social networks, such as Facebook and Twitter, allow brands to reach more people and engage with them
1 Associação Brasileira de Normas Técnicas, or Brazilian National Standards Organization, which sets technical standards across various industries
2 2011 25th edition e-Bit / WebShoppers 25th report
3 Per Fecomercio-RJ (Federação do Comércio do Rio de Janeiro)
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6. New startups and investors are also bullish on the space
As demonstrated by significant investments within the last 2 years
‣ Over USD $210 million of venture money invested into these players in 2011-13 alone
‣ All were created within the last 2-4 years (with the exception of Posthaus in 2007)
Founded Oct-2011 Founded 2009 Founded Nov-2011 Founded 2011 Founded 2007
Series A: Feb-2011 Round 1: Feb-2012 Round 1: Set-2011
Series A: Nov-2011 Joint Venture: Mar-2012
USD $4.4 million USD $2.9 million USD $50 million
$ undisclosed OTTO Group
Monashees Capital, SV Rocket Internet
Atomico Rocket Internet from Germany
Investment activity
Angel (Ron Conway), (co-founder of Skype) Round 2: Set-2011
Chamath Palihapitiya, USD $20 million (est)
Tiger Global Round 2: Jun-2012 AB Kinervik
USD$10+ million (est)
Series B: Jun-2012 Round 3: Aug-2012
USD $16.7 million Atomico USD $45 million
Accel Partners, Tiger J.P. Morgan Asset Mgmt
Global, Valor Capital, Round 3: Mar-2013
Round 4: Dec-2012
Menlo Ventures, USD$10 million
USD $65 million
Greenoaks Capital, W7 Brazil Capital, Atomico Qudrant Capital, AB
Chamath Palihapitiya Kinnervik and others
• All things baby • All things baby • All things baby • Men’s, women’s & • Men’s, women’s &
childrens apparel, incl.
•
Products
(diapers, toys, strollers, • Over 45,000 products Over 25,000 products childrens apparel, incl.
furniture, clothing and shoes and clothing shoes and clothing
more) • Over 60,000 products • Over 15,000 products
• Over 12,000 products
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