FirstCry expands its presence acquires BabyOye

One of the largest Online baby products retailer FirstCry has agreed to acquire Mahindra & Mahindra Ltd’s baby-care business BabyOye in a cash-and-stock deal that will help it consolidate its presence in the growing segment through an omni-channel strategy.

The deal is worth Rs 362.1 crore ($54.3 million). The move will help FirstCry expand its offline presence. BabyOye has about 120 physical stores, including some franchisee outlets, while FirstCry has almost 180 stores & Both companies have e-commerce.  As per the deal, Mahindra will operate all company-owned stores under a master franchise agreement with FirstCry, the companies said.

FirstCry was founded by serial entrepreneur Supam Maheshwari, in a statement  Mr.Maheshwari said the deal with the Mahindra Group will bring in synergies that will help FirstCry expand and achieve its profitability goal much faster.

Mahindra Group had acquired BabyOye in February last year. Later that year, Mahindra renamed its offline babycare store chain ‘Mom n Me’ as ‘BabyOye by Mahindra.’ This was the first M&A deal by an Indian business group in the e-commerce segment, which had until then seen mergers mainly among companies backed by common venture capital firms.

 FirstCry has emerged as a strong player in the segment over the years.  FirstCry has branded franchisee stores across 85 cities, besides its e-commerce site. In addition, it also has distribution partnerships with over 6,000 hospitals across the country. It runs its private label under the BabyHug brand.

In an omni-channel model, companies can create a large online brand supported by a large offline business and then you can integrate, leverage your inventory, own product brand or private label and leverage your customer behavior and loyalty to help build a more pervasive retail brand.”

Kids-wear retailers take the franchise route to expand

Kids-wear retailing has never been easy. Yet, the lack of a significant national retail brand is making existing retailers expand their stores through the franchise route.

“While there are severe challenges in kids wear retailing, there is also an opportunity. Today, there are hardly any kids specific retail brands at a national level. We intend adding 30 new stores this fiscal, all of which will be through franchises in new markets in the west and the north-east,’’ says Sharad Venkta, Managing Director, Toonz Retail.

Viable business model

Estimated at ₹25,000 crore, kids wear retail is pegged to grow at 20 per cent annually. Toonz India, with its 50 stores, believes that having the right business model in the kids wear segment holds the key to viable business.

“Since the average selling price of kids wear is generally less than that of men’s or women’s wear, we have decided to have smaller stores at 1500 sq to compensate lower net sales,” he added.

Going forward, all its future stores will be franchisee led with negligible investments from the promoters of the company.

Meanwhile, having crossed 100 stores, Mahindra Group-promoted Mom & Me Stores is also using the franchise model to expand into new territories.

“While the opportunity is huge in kids wear retail, there are challenges in terms of creating the right price point and products. We intend adding 20 franchise stores in smaller towns like Kolhapur and Sholapur and also in the north eastern states,” said K Venkataraman, CEO, Mahindra Retail.

Importing almost half its portfolio, Mom & Me has decided to focus on product procurement and sourcing while leaving the job of running its stores to franchises.