First Cry (Brainbees Solutions Limited)

Sunday, Mar 31, 2024

First Cry was founded in 2010 by SupamMaheshwari and AmitavaSaha in Pune, India. It was born out of the founders' desire to provide access to the best baby and kids' products for Indian parents. The company started with an inventory-based model, shipping products from warehouses across India, and has since expanded to include local retailers on its platform. With over 350 franchised brick-and-mortar stores across more than 125 cities in India, First Cry has become one of the largest platforms for baby and kids' products. It operates under the parent organization BrainBees Solutions Pvt Ltd

First Cry has over 300 stores across India. Regarding their online presence, First Cry has amassed 7.5 million registered users on its platform. These parameters indicate the company's significant reach in the Indian market for baby and children's products.

The shareholders of Brainbees Solutions Limited, which operates FirstCry, include SoftBank as its single largest shareholder, holding approximately a 30% stake in the company

Products and Services

  • Boy Fashion: Clothing and accessories for boys.
  • Girl Fashion: Clothing and accessories for girls.
  • Footwear: Shoes for children of various ages.
  • Toys: A wide range of toys for different age groups.
  • Diapering: Diapers and diapering accessories.
  • Gear: Baby gear like strollers, car seats, etc.
  • Feeding: Baby feeding products like bottles, breast pumps, etc.
  • Bath: Baby bath products.
  • Nursery: Furniture and decor for a baby’s nursery.
  • Moms: Products for mothers including maternity wear and care items.
  • Health: Health-related products for babies and kids.
  • Boutiques: Premium clothing and accessories for children.

Business Model

First Cry operates on an integrated hybrid business model, combining a robust online presence with an extensive network of offline stores, which includes both company-owned and franchised outlets. Their online platform offers a wide range of baby and kids' products, while the offline stores provide accessibility and convenience to customers who prefer in-person shopping. In addition to retail sales, First Cry's business model also includes private labels like BabyHug and CuteWalk, contributing to its product diversity. Furthermore, the company enhances its customer engagement through initiatives like the 'FirstCry Box', which are distributed to new parents across India.

Industry Analysis

India's Kids Apparel Market:

  • Valued at USD 16.62 billion in FY2020.
  • Expected to grow at a CAGR of 5.89% through FY2026, reaching USD 22.53 billion.
  • Projected size of US$ 26.5 billion by 2032, with a 2.28% CAGR from 2024 to 2032.

Global Baby Apparel Market:

  • Valued at USD 62.36 billion in 2022.
  • Projected to grow to USD 95.22 billion by 2030 at a 5.69% CAGR.

Worldwide Children's Apparel Market:

  • Expected to grow by 2.57% from 2023 to 2028, reaching US$309.10 billion by 2028.

Global Kids Apparel Market:

  • Valued at USD 187.29 billion in 2022.
  • Projected to grow to USD 318.34 billion by 2030 at a 6.96% CAGR.

Global Baby Clothes Market:

  • Expected to grow at a 4.5% CAGR, reaching USD 8.2 billion by 2030.

Global Children’s Wear Market:

  • Reached US$ 275.7 billion in 2022.
  • Anticipated to reach US$ 369.5 billion by 2028, with a 4.9% CAGR.

These projections suggest a healthy growth trajectory for the children's and baby's clothing industry, both in India and globally. This environment is likely to benefit First Cry, which has a significant presence in this market, allowing the company to potentially capture a greater share of the expanding market. The growth factors, such as rising disposable income and increasing number of births, align with First Cry's business model and its emphasis on offering a wide range of products catering to the needs of parents and children.

Key Highlighters of the company

  • Extensive Product Range: First Cry boasts a selection of more than 200,000 products, indicating a vast inventory catering to various customer needs.
  • Wide Brand Association: The platform features over 6,000 brands, showcasing a comprehensive range of choices for consumers.
  • Significant Offline Presence: With over 300 stores across India, First Cry has a substantial physical retail presence.
  • Community Engagement: It operates India's largest community for parents, offering articles, Q&A sections, and tracking for baby's growth and vaccination dates, which indicates strong customer engagement and support services.
  • Operational Milestones: Key milestones include starting operations in 2010, reaching 1 million happy customers by 2013, and receiving a significant investment of $400 million from SoftBank in 2018.
  • International Expansion: First Cry expanded internationally with the launch in the UAE in 2019.
  • User Base: The platform has over 7.5 million registered users, reflecting a large and growing customer base.
  • Customer Convenience: Features like easy return, replacement, and exchange policies, as well as free shipping on orders above ₹699, enhance customer satisfaction and loyalty.

Recent Developments in the company

  • In October 2023, there was a report on PR Newswire regarding RockItCoin bolstering its national presence, which might be related to First Cry's market activities. 
  • On August 21, 2023, First Cry raised INR 435 Cr (approximately $58 million) from three family offices, securing a stake from SoftBank. 
  • RanjanPai of the Manipal Group looked to invest Rs 250 Cr in First Cry, as reported on August 14, 2023. 
  • There were reports on May 12, 2023, about First Cry posting a net loss of INR 78.7 Cr in FY22, suggesting financial challenges in the fiscal year. 
  • On April 14, 2023, First Cry planned a secondary offer to sovereign funds at a $3 billion valuation. 
  • First Cry engages Amitabh Bachchan as their company’s Brand Ambassador.

Crucial Acquisitions and partnerships of First Cry

Acquisitions: FirstCry has acquired two organizations, with the most recent being Oi Playschool, a chain of premium playschools, on November 28, 2019. Prior to that, in 2016, BrainBees Solutions, which owns FirstCry, acquired Mumbai-based BabyOye for $54 million.

GlobalBees Acquisition: FirstCry’sThrasio-style venture GlobalBees acquired the women's health startup 'andMe'. This acquisition was a combination of cash and equity.

Brand Acquisitions through GlobalBees: GlobalBees, under the FirstCry umbrella, aims to acquire 30-40 direct-to-consumer (D2C) brands across various categories. They have allocated $2 million to $6 million per brand for these acquisitions, supported by capital raised from investors like SoftBank and TPG.

The Better Home Acquisition: GlobalBees also acquired The Better Home, a company focused on sustainable home care products. GlobalBees had previously raised $150 million in a mix of debt and equity in a Series A round led by FirstCry and other investors.

Financial Performance of the company

FirstCry, the kids-focused omnichannel retailer, experienced significant growth but also faced losses in the fiscal year ending March 2022. Their operating revenue increased by approximately 50% to Rs 2,401 crore in FY22 from Rs 1,603 crore in FY21. The sales of products contributed 96.8% of the total operating revenue, surging 49% to Rs 2,323 crore. However, their expenses grew faster than revenues, resulting in a loss of Rs 79 crore for FY22, compared to a profit of Rs 216 crore in FY21. The cost of materials, employee costs, advertising, and courier expenses all rose significantly, leading to this downturn.

Robust Revenue Growth: A nearly 50% increase in operating revenue indicates strong sales performance and market demand for First Cry's products.

Expense Growth: The substantial rise in expenses, particularly in material costs, employee costs, and advertising, suggests aggressive investment in scaling up the business, which could be a strategic move for long-term growth despite short-term losses.

Losses Incurred: The fact that expenses outpaced revenue, leading to losses, could indicate that the company is in a growth phase where it is prioritizing expansion over profitability.

Efficiency Concerns: An increase in the ratio of expenses to revenue (spending Rs 1.07 to earn a rupee) raises concerns about operational efficiency.

Investment in Workforce and Marketing: The jump in employee costs, including ESOPs, and advertisement spending reflects investment in human capital and brand building.

Unit Economics: The negative ROCE and lower EBITDA margin in FY22 compared to FY21 highlight challenges in maintaining profitability at the current level of operational efficiency.

These inferences suggest that First Cry is likely focusing on expanding its market reach and product range, possibly at the expense of short-term profitability. The financials point towards a strategic choice to capture more market share and establish a stronger brand presence, which, if managed effectively, could lead to long-term gains.

SWOT Analysis

Strengths:

  • A vast customer base, positioning it as one of Asia's largest online portals for baby and kids products.
  • An extensive range of products from over 1,200 brands.
  • Collaborations with reputed brands enhance its market credibility.
  • Successful fund-raising rounds from notable investors.
  • Expansion into offline sales through franchised stores in multiple cities.
  • Innovative customer retention strategies like subscription services.
  • Customer acquisition initiatives like the delivery of "gift boxes" to new mothers.

Weaknesses:

  • Focusing on a niche market in India that has yet to fully develop.
  • Over-reliance on word-of-mouth publicity, which may be insufficient compared to the aggressive marketing of competitors like Flipkart and Amazon.

Opportunities:

  • Potential for international expansion.
  • Diversification into new product categories such as home décor and sports.
  • The promise of its private label business, Babyhug.

Threats:

  • Competition from offline stores and other online platforms that are acquiring funding and consolidating, posing a challenge to FirstCry's market share.

Conclusion

In conclusion, First Cry, operating under Brainbees Solutions Limited, has established itself as a prominent player in India's baby and children's products market. Founded in 2010, the company's integrated hybrid business model, combining online and offline presence, has contributed to its significant reach, with over 350 physical stores and 7.5 million registered users online. The company is well-positioned to benefit from the projected growth in the global and Indian children's apparel markets. However, recent financial challenges, including a net loss in FY22, indicate a strategic focus on expansion over short-term profitability. First Cry's strengths lie in its vast customer base, extensive product range, and successful fundraising efforts, while it faces competition and over-reliance on word-of-mouth publicity as weaknesses. International expansion and diversification into new product categories present opportunities, while competition and market consolidation pose threats to its market share. Overall, First Cry's strategic choices suggest a long-term vision for growth and market dominance.

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