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Babyshop Retailer’s Bucking Recession Case Study

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Updated: Apr 9th, 2021

Introduction

Babyshop is one of the leading retailers of children items in the GCC countries. Founded in 1973 in Bahrain, the company retails a wide range of baby items and children, up to 16 years. Items range from baby clothes, toys, baby’s accessories such as car seats, bathing accessories (for example, towels, baths suits, baby feeding tools and equipment), and school equipments such as desks, among others. Babyshop has experienced tremendous growth in its distribution network and now boasts of 133 stores in 11 countries world wide. The company also plans to add more than 77 retail stores in new market by 2015. According to the company’s CEO, Mr. Vinod Talreja, the company’s global market expansion strategy is in line with the company’s efforts to maintain its 20% annual growth rate (Rizvi para. 4).

Choice of Overseas Market

The company has embarked on an ambitious plan to expand to new markets. This will cost the company an estimated Dh1 billion for the next five years. This strategy will see the company roll out retail stores outside the GCC countries. The company’s immediate expansion plans targets countries in North Africa, with Libya, Kenya and Sudan as the primary targets. The reason for targeting these countries is due to the accessibility via major sea routes, especially along the Indian Ocean, as well as via air transport. Strategically, the company aims to use Kenya’s sea port as the main entry point for its goods from Dubai. Coupled with the regions inland connectivity through roads, transporting its merchandise to Sudan and Libya will be easier. The three countries are among the fastest growing economies in the region. Coupled with the fact that there are no major competitors from recognized international brands, venturing into these markets is a worthy investment. The company also plans to venture into Asia with countries such as Pakistan, India and Bangladesh on its radar (Rizvi para. 5).It is imperative to state that some of these markets are unexplored by major brands which deal with children items. As such, the rationale for the company expansion strategy seems to be aligned to exploiting untested markets.

Market analysis

Market analysis reveals a peculiar trend. All the targeted countries have experienced political turmoil in the recent past, most notably the political upheavals in Libya and Kenya. However, according to the company’s CEO, the company is unfazed by the political situations in these countries. Mr. Talreja says that the political scenarios in these countries are not as volatile as it seems and that they stability will be achieved soon (Rizvi para. 5). This confidence seems to emanate from the fact that the company growth and expansion strategy will be supervised from Dubai, a politically stable country. As such, the political uncertainties do not hinder the company’s growth plans. The company also seems to have considered the geographical location of these new markets. All the target countries lie along major sea routes, especially along the Indian Ocean. Additionally, each of these countries is served by a major airport connecting to the rest of the world. As such, their accessibility is made easier via sea and air. The economic analysis of the Asian and the North African retail market reveals positive prospects for Babyshop’s future growth. According to a survey done by Price Water House Coopers, the entire Asian region seems to have overcome the effects of global recession and much of its growth is experienced in the retail industry (Yu 2).

Furthermore, the retail industries in both Asian and North African markets are expected to grow by 4 % by the year 2014. This creates a favorable economic condition for the company’s expansion strategies. Demographically, the company targets the urban population. Even though most people live in rural areas, those who live in urban areas are relatively wealthy. This presents a ready market for the company’s goods. Moreover, the population growth rates of countries in North Africa and the Middle East are on the increase. According to a survey done by Credit Suisse, populations in these countries grow at an average rate of 0.39% (Roy, Sonali and Liyan 4). This can be linked to increasing rates of fertility and implies that children constitute a large part of the population. As such, Babyshop will find a ready market for its goods. In addition, the labor force in these countries is growing at an average rate of 0.5 % (Roy et al 4). This implies that the population is economically productive and as such can afford the products offered by the company.

Market Entry Strategies

Babyshop plans to explore markets beyond the Gulf Community Countries, into the North of African and Asia. Kenya, Sudan and Libya are the primary target markets for Babyshop’s expansion program. Estimated to cost Dh 1 billion, the expansion strategy is to see the company open more than 77 new retail outlets, which will increase its retail outlets to more than 200. This indicates that the company chooses to operate its own retail outlets instead of using agents, mergers, acquisitions or partnerships. As such, the company prefers to have a direct market entry strategy, where it has complete control and ownership of local retails outlets. To show its commitment towards the direct market entry strategy, the company has already opened two outlets in Nairobi, Kenya (Rizvi para.6).

This is to act as the launching pad for further expansion into the region. Additionally, the company plans to use price as one of the market penetrations tools. In its previous markets, the company has offered quality products at very competitive prices. As such, it clients are guaranteed “value for money spent” (Rizvi para. 6). This is expected to endear itself to consumers in these markets who are relatively sensitive to prices of consumer goods. The company also plans to continue offering a wide range of products and fashions styles. Currently, the company is offering more than 30000 different products ranging from children play items, all types of clothing wear, school wears, winter and summer wear, among others. Babyshop also plans to enter the market as an all stop shopping destination. Therefore, the company will offer a wide variety of price competitive products through direct investment.

Conclusion

To be successful in the new markets, the company has to adopt the latest marketing techniques. To survive competition, the company will have to market aggressively to penetrate the new markets. This calls for the company to look beyond the traditional marketing methods and explore more interactive e-marketing tools such as social media, blogs and internet marketing. This will not only enable the company to establish relationships with clients but also do e-commerce.

Works Cited

Rizvi, Muzaffar. “Babyshop Bucking Recession”. Khaleej Times, 2011. Print.

Roy, Amlan, Sonali Punhani, Liyan Shi. “Middle East and North Africa: Demographic Highlights”. 2011. Web.

Yu, Carrie. “Strong and Steady 2011 Outlook for the Retail and Consumer Products Sector in Asia”. 2011. Web.

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