"Luxury Bags Instead of Schoolbags"...The Mystery of Growth in Children's Apparel [Population Decline Impacting Industry]

Newborn Numbers Halved in the Last Decade
Children's Clothing Market Grows Over 30%
Ten-pocket Phenomenon... Impact of Luxury Children's Clothing
Domestic Children's Clothing Brands Continue to Withdraw

#Office worker Mr. K saves 200,000 won every month from his salary. As a DINK (Double Income No Kids) couple without children, he is secretly saving money for his elementary school-aged nephew without his wife's knowledge. Last month, he gifted his nephew a Nintendo game console, which the nephew had always wanted. In Mr. K's family, which has two sons, the only child is his nephew, the daughter of his older brother. On the maternal side, there is also one son and one daughter, but aside from the nephew, there are no other children. Following the 'Six Pocket' phenomenon (where six people?parents, grandparents, and great-grandparents?each contribute money for one child), even the aunt and uncle couple have joined in, creating a 'Ten Pocket' circle that cherishes Mr. K's nephew dearly.

Despite the sharp decline in Korea's birthrate, the infant and children's clothing market continues to grow. As the number of couples who either do not marry or choose not to have children increases significantly, the entire family opens their wallets wide for the one and only child in the household.

According to the Korea Fashion Market Trend Yearbook on the 26th, the domestic children's clothing market size was 1.1281 trillion won last year, an increase of 400 billion won (33%) compared to 847 billion won in 2009. Although the market size decreased by about 70 billion won from 1.193 trillion won in 2022 due to reduced consumption amid high inflation and economic downturn, the growth rate of the children's clothing market over the past 15 years was much steeper compared to the overall domestic fashion market, which grew 12% from 40 trillion won to 45 trillion won during the same period.

More Children Carry Luxury Bags Rather Than Schoolbags

The secret to growth is premium children's clothing. The 'Ten Pocket' phenomenon, where ten people spend on one child, and the emergence of the 'VIB (Very Important Baby) group, who want to raise their children in the best possible way, have led to increased purchases of luxury clothing products.

In fact, major department stores have seen the sales growth rate of children's luxury goods significantly outpace that of overall children's clothing and accessories over the past five years. According to Hyundai Department Store, the overall children's sales growth rate was 34.8% in 2021, while children's luxury sales approached 88.5%. Although this was influenced by the COVID-19 special demand, the growth rate of children's luxury sales has since remained above 25%.

Last year, the opening of the French luxury brand 'Baby Dior' store at the Apgujeong main branch and 'Fendi Kids' and 'Moncler Enfant' at the Pangyo branch contributed to the high sales growth rate. The Pangyo branch recently added a 'Baby Dior' store as well. Shinsegae Department Store, which first introduced kids' luxury brands in Korea in 2022, showed a similar trend. Shinsegae Department Store's kids' luxury growth rates were 29% in 2021, 24% in 2022, and 15% in 2023, while Lotte Department Store recorded 30% in 2021, 55% in 2022, and 10% in 2023.

A department store industry insider said, "Although consumption has decreased compared to the COVID-19 period, demand for gifts of kids' luxury goods is increasing," adding, "Typically, in the first quarter (March), sales growth in the domestic children's segment is high due to demand for schoolbags, but this year sales actually declined. It seems this was overshadowed by the number of luxury brands." It is analyzed that the number of students entering school has decreased and the preference for luxury goods over schoolbags has deepened, preventing growth in domestic sales.

Luxury brands see sufficient demand for domestic luxury kids' products. For this reason, fashion company Handsome launched the brand 'KITH' at the end of May, offering not only adult fashion but also kids' clothing to target demand for family looks matching dad, mom, and daughter or son.

Jacquemus, which debuted in Korea last year, introduced its kids' collection for the first time domestically in March this year. Samsung C&T Fashion Division's SSF Shop and offline stores distributing Jacquemus are located in Hyundai Department Store Trade Center branch and Shinsegae Department Store Centum City branch. Armani Kids, imported and introduced by Shinsegae International since 2007, saw its online sales growth rate approach 43% last year, fueled by increased demand for kids' luxury goods. A fashion industry insider explained, "Overseas luxury brands also recognize that the kids' business is doing well in Korea and seem to be expanding their product lines into kids' categories."

Platforms selling designer brand children's clothing are also growing rapidly. While unique-style domestic designer brands are gaining popularity in the adult fashion market, this trend is also emerging in the children's clothing market. E-Land's online platform 'KiddyKiddy,' which sells street and designer brand children's clothing, recorded a transaction growth rate close to 40% in the first quarter. This year, pop-up stores were held at Hyundai Department Store Pangyo branch and Lotte World Mall in Jamsil, drawing long queues and attracting significant interest from moms raising children.

Domestic Infant and Children's Clothing Companies Shrink... Brands Closing One After Another

On the other hand, the domestic infant and children's clothing market has taken a direct hit over the past decades due to the sharp decline in birthrates. The three domestic infant clothing companies?Zero to Seven, Happyland, and Agabang?have consolidated or closed 12 brands over the past ten years.

The number of births in Korea dropped sharply from 435,000 in 2014 to 270,000 starting in 2020. Since 2022, it has not even reached 250,000. Due to this, Agabang made the bold decision to close its offline franchise business. An Agabang official said, "During COVID-19, we focused on cutting costs by streamlining the high-cost overseas segment," adding, "We have closed all franchise stores and are now operating offline stores as directly managed outlets in department stores and marts."

Agabang Company recorded sales in the 200 billion won range in 2011 but has experienced a continuous decline since then. Sales increased by about 40% from 146 billion won in 2001 to 204.7 billion won in 2011, but with the declining birthrate, sales dropped by 34% to 134.2 billion won in 2019. Last year's sales rose back to around 180 billion won, but this was influenced by the withdrawal of infant clothing companies and brand renewals.

Currently, Agabang operates two main brands: 'Agabang' and the premium brand 'Etoile.' Looking back to 2014, Agabang operated the representative infant brand 'Agabang,' the European luxury brand 'Elle,' and the practical brand 'Dear Baby.' The number of brands increased thereafter. They expanded their brand portfolio to include 'Etoile,' a collaboration with a world-renowned designer; infant mats 'Design Skin'; imported children's clothing select shop 'Petit Marchon'; infant skincare 'Futo'; and maternity wear brand 'Destination Maternity,' operating about ten brands in total.

However, due to the impact of low birthrates and poor overseas business performance leading to decreased sales, the company's strength weakened, and ultimately, with the arrival of COVID-19 in 2020, the company shifted to a strategy of downsizing by merging or eliminating brands.

Happyland drastically reduced its brands. Over the past decade, it operated 'Absorba,' 'Paco Rabanne Baby,' 'Creation ASB,' 'Happyland,' and 'Happy Baby,' but in 2017, Creation ASB was absorbed into Happyland, and Paco Rabanne Baby withdrew from the domestic market in 2019. The company reorganized to focus more on online sales, and currently, the main products on Happyland's online mall are Absorba, Happyland, and Miffy Kids.

Some companies closed due to the continuous decline in birthrates. Zero to Seven withdrew from the infant clothing market in August 2022. Its major brands included Allo & Lugh, Foras, Alphonso, and kids' brand Chervan. About ten years ago, these brands accounted for nearly 50% of the company's total sales. Zero to Seven also entered the Chinese market with successful domestic infant brands, with 12% of sales coming from China. However, due to intensified competition in the infant and children's clothing market caused by the declining birthrate, the company decided to cease its fashion business and now operates with Gungjung Bichaek (60% of sales) and packaging business (40%).

An official from a children's clothing company explained, "The children's clothing market was severely damaged as inventory burdens increased significantly during the COVID-19 period when companies were already struggling due to the declining birthrate," adding, "Cash flow deteriorated over ten years, and the largest shareholders changed to foreign capital." Seoyang Networks, which operates Allobot, Blue Dog, Minkmu, and Little Ground, saw Hong Kong's Li & Fung Group become the largest shareholder in 2013, and Agabang was acquired by China's Langxi Group in 2014.