RISING PRICES AND PROMOTIONAL CHANGES

In February 2023, the total market for Baby Care continued to see strong value growth. However, we started to detect declines in sales volume. Between January and February this year, sales value was up 5% across total Baby Care compared to the same period in 2022, and up 13% versus to the same period in 2019. Sales volume on the other hand dropped 5% versus 2022 and was 27% lower than 2019.

One of the biggest drivers of the increased sales value at a total level is that average price is continuing to grow at a rate higher than inflation. During January to February 2023, the average price at a total level for a Baby Care product was up 14% versus the same period in 2022, and up 19% compared to 2019. However, when we analyse this by the products that make up total Baby Care, not all saw price growth. Perhaps surprisingly, Baby Monitors was the only product group that saw a price decline when compared to 2022 (-9%) and 2019 (-1%).

There were some big differences in the average price for a product brought online versus in-store. Online prices for the last two months were 8% higher than in 2022. This is however 17% down on pre-Covid (2019) prices. Looking in-depth at products that make up Baby Care shows that the price drop experienced by Baby Monitors at a total level was driven by falls in online spending. This was down 13% compared to 2022 and 2% versus 2019. In-store prices saw a very different trend, as average prices have been rising steadily since 2018. For the January to February period, the price was up 21% versus 2022 and 16% compared to 2019.

Inflation is part of the reason why the total average price is rising. When comparing the top 200 like for like products sold from January to February 2023 versus the same period in 2022 the price rose by 8%. But part of the price rise is influenced by consumers trading up. We believe some shoppers are delaying purchases in order to trade up to more premium models in the hope that they will last longer.

The market for certain products is also changing and innovation tends to come at a higher price point. This is the case for car seats, where the new regulation model has an increased average price.

But what is driving the decline in the average price for Baby Monitors? This is partly explained by the technology they offer, increasingly with smart features. During the pandemic, many electronic technological goods like computer monitors and TVs experienced price hikes caused in part by the global chip shortage. As that continues to ease, prices for chip-reliant products have been slowly correcting back down to the pre-Covid level.

Promotional Activity

Over the last five years, promotional activity has been declining. On average, around 70% of volume during this time saw little to no price reduction. However, in January promotional activity increased in a bid to attract customers who are reducing spending in response to the cost of living crisis. This is in stark contrast to the experience of Covid when 75% of sales were made with no or little price reduction. Today, this has dropped to 71%. However, the share of volume sold with price reductions of 40% or more remains at the same level as in 2022.

Outlook For The Rest Of 2023

At GfK we expect the average price for Baby Products to continue to rise throughout 2023, in part due to inflation and changes in consumer buying behaviour. Promotional activity will increase in the short-term to attract more consumers during the cost of living crisis and is likely to remain at a higher rate than in 2022.