While South Korea has a highly active baby care market with a range of high-quality products, it also suffers from one of the world’s lowest birthrates.

South Korea was ranked 219th among 224 countries, with an average woman’s total fertility rate at 1.26 in 2017, the lowest figure among OECD countries, according to CIA’s the World Factbook.

The falling birthrate, one of the gravest challenges the government faces, has been visibly hurting baby care businesses here in recent years.

After struggling with the declining market in the country, Agabang & company, a local babywear maker with almost 40 years of history, was acquired by the Chinese apparel company Lancy Group in 2014. Agabang’s co-president and largest shareholder Kim Wook sold a 15.3 percent stake, leaving him with 2.45 percent.

In January, local retail giant Shinsegae International announced its plan to scrap its babywear brand Tomkid, which was launched in 2011. The brand reportedly saw an accumulated 6.2 billion won ($5.6 million) deficit since its launch. Its operating loss was 1.6 billion won last year.

“Korea’s low birthrate, at least for us, has shown no sign of abating,” a Shinsegae official told The Korea Herald. 

Another babywear brand, Zero to Seven, operated by Maeil Holdings, also shut down its kids outdoor brand business Skarbarn.

Instead of fighting in the low-demand local market, many Korean baby product brands are now shifting their attention to foreign markets -- most notably China, which is seeing a booming baby market.

Suhyang Networks, which owns several babywear brands such as Blue Dog and Minkmui, was acquired in 2013 by Li & Fung, a global supply chain management firm based in Hong Kong.

Maternity and baby health care product company Boryung Medience began exporting to China in 2008 and it established a Chinese branch in 2013. Its milk powder and laundry detergent for baby clothes are selling well in China, the company says.

To beef up the market competitiveness online, Boryung Medience recently signed a memorandum of understanding with Chinese e-commerce giant Alibaba.

“Through a partnership with Alibaba, our products will be exposed to various e-commerce platforms of Alibaba -- Tmall, Tmall global -- not only allowing access of Chinese customers anywhere, anytime but building a whole new retail model,” said Boryung Medience in a statement last month.

In 2016, China had a 17.8 million newborns, about 1.31 million more than in 2015, the year China ended its one-child policy. About 45 percent, or 8 million of the newborns in 2016, were the second child in the family, according to statistics.

Experts say China’s baby care product market will reach 360 billion yuan ($57 billion) in size by 2020, making 15 percent increase each year for the next five years.

According to a report on China’s e-commerce platform released by Kantar Retail, Alibaba’s Tmall secured 69.4 percent of B2C market share in baby care products category. Tmall said the age of purchasers of baby products are decreasing each year, with parents aged 25 to 30 are accounting for 60 percent of the consumers of baby care products as of 2017.

Meanwhile, China’s Ministry of Finance has implemented a policy to reduce import tariffs on certain consumer goods, starting from December. Tariffs on diapers and baby milk power were reduced to 0 percent, a move reflecting the government’s acknowledgement of high consumer demands on quality baby care products.

According to Korea Trade-Investment Promotion Agency, South Korea’s diapers were ranked No. 2 in terms of import volume in China’s baby care products market, recording $150 million of sales last year. South Korean baby milk powder took the 8th slot, with $100 million of import volume.

To keep pace with China’s relaxed child care policy and high consumer demands on overseas premium brands, experts said product quality will be the key to drive the popularity.

“China’s baby product market is only to expand in the next several decades, with consumers who prefer premium brands for high quality regardless of the price and find Korean brands attractive,” said Song Ji-hyun, a KOTRA official managing Korea Business Center in Nanjing, China, in a report released in January.

“To compete with other premium companies such as European brands, South Korean brands should beef up its strengths, targeting customers on both on and offline markets and actively joining hands with China’s major brands,” she added. 

Korea’s biggest baby fair, BeFe Baby, which began in 2000 and attracts 100,000 visitors each time, has been inviting foreign buyers from eight countries such as China, Malaysia, Vietnam, Singapore and Turkey to connect local brands with overseas opportunities.

“From diapers to baby bottle sterilizers, child safety seats and even postpartum care center services, local brands are making an aggressive foray into overseas market with all they can offer,” said an official from BeFe.

According to CBME China -- the world’s largest trade fair for child, baby and maternity products and services with over 4,300 brands participating -- an average Chinese couple with children spend 1,065 yuan (184,000 won) or 11 percent of their monthly income to purchasing baby care products, each month.

“What we expect (from inviting foreign buyers) is their big, luxurious but valuable spending for quality products from Korea,” an official added.

By Kim Da-sol (ddd@heraldcorp.com)