Growing luxury returns are pushing more quality products into the off-price market, according to Shraysi Tandon, CEO of Kidsy, a retailer of gently used baby and kids products.
“What Kidsy is seeing is a very strong blend of extremely premium and luxury brands that are now hitting the market at affordable prices to customers because they’re coming through the returns channel,” Tandon told Retail Brew.
Previously, she explained, medium-priced goods dominated the off-price market. But as more premium brands have loosened their return policies to compete with the likes of Amazon, returns have become a bigger portion of the products flowing downstream to discounters.
There was also a lack of off-price channels for returns of baby and kids products in particular, she added, which is where Kidsy comes in. Products previously destined for the landfill are now funneling into Kidsy’s online shop, offering “a pathway for revenue recovery” for retailers that sell in the category.
TJ Maxx for babies: Tandon said she got the idea for Kidsy four years ago when she was pregnant and looking for an off-price option for baby supplies. To her surprise, no such option existed. “I saw this wide open gap in the market,” she said. “There was no TJX for babies and kids.”
The category is also well-suited to off-price in the current economic environment, as baby products function more like an essential category than a discretionary category, according to Tandon, because shoppers are replacing products on a regular basis as their child grows.
“When people have children, buying a car seat, a stroller, a toy—these are all non-negotiables,” she said.
And lately consumers are more keen on affordable options: “20 years ago, I think the general consumer psychology was one of resistance and reluctance to shop off price,” Tandon said. “Today, consumers are savvier than ever.”
Moving discount online: The other differentiator for Kidsy is that currently it’s primarily an online retailer. This is something of a novelty in the discount space, as a number of major off-price retailers have retreated from e-commerce, noting that it’s hard to recreate the treasure hunt experience customers get in store.
Retail news that keeps industry pros in the know
Retail Brew delivers the latest retail industry news and insights surrounding marketing, DTC, and e-commerce to keep leaders and decision-makers up to date.
Tandon said Kidsy is continually refreshing its online inventory by leveraging AI software “in order to build that treasure hunt experience online.”
She also emphasized that when it comes to selling gently used products for children, quality control is crucial. “There are multiple quality control processes and checks that happen to make sure that the inventory being sold is safe, usable, and still has a lot of life in it,” she said.
No cannibals: But finding the right partners upstream is also crucial. David Brown, managing partner at Impellent Ventures, which was an early investor in Kidsy, told Retail Brew that Kidsy’s secret sauce is providing a channel for the category that is “additive to the distribution model for those larger brands and manufacturers” because it brings their products to a new customer base.
“Kidsy is doing a really good job of figuring out how to move this high-quality product, but to an audience that these brands have not been able to attract, because it would either cannibalize or hurt their businesses,” he said.
Returns over excess inventory: While products currently moving downstream to Kidsy are equally weighted portions of returns and excess inventory, Tandon said that ratio could start to shift.
In her view, the advent of AI applications will help bring down the level of excess inventory in the next two to three years. “We are going to start to see better forecasting models, better algorithms that get developed through AI, which helps brands and retailers do more accurate inventory demand forecasting,” she said.