The Clothing Boom in the Land of the Little People : Companies Are Finding the Move From Big Folks to Kids Can Be Very Rich . . . and Very Competitive.

When 5-month-old Emma Pierce Rempel heads for the pool, she wears her hat, shorts, T-shirt, sun block and infant shades that slide down her blip of a nose. In Southern California, sunglasses for newborns are just plain “functional,” explains her mother, CBS evening news producer, Barbara Pierce.

Before he could toddle, 6-month-old Charley Yoshimura owned a pair of Charles Barkley black Nikes, purchased by his father, Akira, a New York production designer, who works for “Saturday Night Live.” While the foot coverings lack the Nike air technology, they have flexible soles. They are not intended for shooting baskets.

Chicago Investment adviser Georgeanna Fischetti can reel off baby labels as if she’s reading stock quotes from NASDAQ: “Flapdoodle, Cows and Lizards, Gap, Nike, Patagonia.” Her favorite pastime is shopping with Fela, her granddaughter. Fela’s father tends toward $25 polka dot shirts and thrift shop Bermuda shorts. Her mother favors campy clothes. Fela is the family’s only clothes pony. Fischetti has spent more than $800 on her “year to date,” sans regret.

Baby clothes used to cover babies bodies, not to amuse, amaze or make a statement. “Twenty years ago,” says children’s designer Margaret Holt, associate professor at Fashion Institute of Technology, “children looked like children.” Babies’ clothes had a waddling duck or a silly elephant on them. Infant and toddler hues mimicked Baskin-Robbins’ flavors: mint chip, pale lemon, muted strawberry or bubble gum blue--predictable pastels. And synthetics were acceptable.

But no longer. Today, parents can dress their kids like miniature adults. At Neiman Marcus, they can plunk down $110 on a TSE cashmere sweater for a 3-month-old girl, or $220 toward a Ralph Lauren ivory linen suit for a year-old boy.

And there are labels for people who aren’t wealthy but who prefer higher-price point clothes than are found at Target and Kids R Us. Gymboree, babyGap and Baby Guess? were designed for them. Walking into a Gymboree boutique is like jamming yourself into a kaleidoscope. The Bay Area company, now nationwide, makes 38 strongly colored apparel lines a year for children up to age 6. A few doors away in many upscale malls, GapKids stores offer adult styling--in tasteful, chalky tones--for kids not yet toilet trained, including, for example, pants for boys with faux flies. Little Charley Yoshimura, owner of baby Nikes, wears a pair of babyGap khakis that “look sleek, with sort of a wide-butt effect,” says his wisecracking, New York writer and teacher Sara Nelson.

For the parent wanting a retro style, Baby Guess? chief designer Dawn Bigley is creating a line that includes Marilyn Monroe pedal-pushers (Capri pants) in denim, pin stripe or mini pastel plaid, for toddlers through adolescents.

For infant feet, Reebok sells shoes with heavy-duty-sounding names such as BB4600s, Revenge Crest and Pay Dirt, styles just like Dad’s. Nike provides 13 choices, including hiking boots and volleyball, street hockey and aerobics shoes.

Tiny eyeglass frames for 2-year-olds and up, made by L.A. Eyeworks, can be modified with tiny clip-on sunglasses. Parents can buy all-cotton clothes for baby’s sensitive skin. Or they can purchase baby clothes made from only organically grown cotton. Then there’s Patagonia, which says that with baby, you can still kayak and climb, as long as the kid is properly outfitted. Patagonia sells baby aviator hats, for cold, windy climates, in “heron blue” or “rhubarb,” as well as other baby gear made from “Syncilla,” a melange of “virgin fibers and fibers recycled form plastic bottles.”

“I have yet to see any fashion in the adult market that I can’t find for a 2-year-old,” says Monique Greenwood, executive editor and associate publisher of Children’s Business, a trade publication. Greenwood’s 3-year-old daughter owns a little black dress with black chiffon and rhinestone stone buttons that can take her black-tie affairs. This miniaturization of adult attire provides the same inexplicable appeal as dollhouses, says Barrie Thorne, professor of sociology and women’s studies at the UC at Berkeley. Cute, clever clothes offer one way for parents to show that “their children are cared for and loved. It’s one thing to get pleasure from dressing up your children, but, she said, when kids are shoved into designer-label clothes, “that is simply saying, ‘we’re rich.’ “And that,” she says, “turns the child into an object--a designer child.”

This winter, Ralph Lauren began selling Polo to kids who still spend their hours in diapers. Nicole Miller and Dior (made by Carters) have lines of baby clothes. A year ago, The Limited Too, which sells hip children’s clothes, began offering infant-toddler sizes. This month, the collegiate style-minded (for the perfectly behaved kid) Talbots is introducing a baby collection, from layette on up. Talbots Baby will begin in four of its Talbots Kids stores, rolling out with its catalogue in September. “We’re all seeing that the infant and toddler market is a very viable one,” said Talbots spokeswoman, Ditas Mauricio.

Today, baby clothes represent a $5.5 billion industry. The largest hunk, some 48%, is sold at discount stores, but designer baby wear makes up 10.5% of the market share. And that segment is growing annually by 1%, according to figures provided by NPD Group, which studies the buying habits of 16,000 families each month.

“It’s the fastest growing segment of the children’s business,” says Alan Millstein, publisher and editor of Fashion Network Report, a newsletter for retailers, who’s followed the industry for 20 years.

There are tens of thousands of apparel shops that cater to women but only a limited number of chains that specialize in children’s clothing, he says. The baby market, with its built-in need for new and larger clothes every few months, remains “an underdeveloped area,” Millstein says.

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What is it that fuels the baby retail business? It’s the birthrate, stupid.

“You can’t have a babyGap or a Gymboree unless the audience is out there,” says Alan Millstein. And a confluence of ‘90s capitalism and evolving feminism has brought the needs of upper-middle-class babies to the marketplace.

In 1980, the number of babies born to women in their 30s was 711,000. By last year, according to the U.S. Bureau of Census, the number had doubled to 1,405,000. That represents more than a third of all babies born in this country last year.

“These women, who postponed having children, are the most affluent women, because they have the higher education level,” says Amara Bachu, who tracks fertility figures for the Census Bureau. Their babies are born primarily into double-income families. “These are the ones who are going to the upscale stores for their babies.” And their affluent friends are buying gifts, too.

Upscale career women would be aghast at the Blue Light Specials of K-Mart,” says Millstein. “They don’t want to shop that way, and that has given rise to the Gymborees of the world and is probably responsible for the great success of babyGap. It’s the “me generation” entering middle age. They’re so obsessed with their own appearances that they tend to overspend. They dress their children as miniaturized versions of themselves.”

By the time they are 2, says Fashion Institute of Technology’s Margaret Holt, children “must have the grown up look, which is a duplication of what the parents wear.”

Macy’s/Bullock’s is doing a good business selling Polo shirts for baby, because “it’s a look-like-Daddy kind of thing,” according to children’s division merchandise manager Karen Hook. “It’s absolutely status merchandise.”

“The real intangible is the guilt factor,” says retail analyst Mary Corrigan of William Blair & Co. “Older women who are still working want to give their children as much as they can, because they feel guilt,” she says. “With an infant at home, I’m one of them.”

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In the ‘70s and ‘80s, affluent mothers could turn to French imports or American brands such as Carters, Healthtex or rugged, reliable OshKosh B’Gosh. Those years brought “explosive growth” to the Wisconsin company, says Mike Donabauer, vice president of corporate marking and planning.

But the market for the traditional baby clothes faltered because, there was “way too much sameness. Manufacturers were not really innovating,” observes retail analyst Mary Corrigan. Department stores were selling all the same brands, and what they were selling, she says, had grown stale. Concurrently, discount stores such as K-Mart, Kids R Us, Wal-Mart and Target were building their massive customer base. The monster discount centers killed off the independents. “The wonderful little children’s stores that were on every main street, usually started by two women bored raising their kids, disappeared,” Alan Millstein says. “The discounters devoured the marketplace.”

The void in innovative and interesting upscale children’s clothing would soon be filled. In 1986, two new concepts for selling baby clothes were quietly being developed in the Bay area. One would offer adult clothes for kids, the other sophisticated, fashionable play clothes in grown-up colors for babies and children up to 6. Both companies would become market leaders, beginning on the West Coast and rolling eastward.

Joan Barnes, a Marin County mother and a born entrepreneur, had built an unlikely business out of baby aerobics, offering a program that served as much to socialize isolated upscale mothers as to encourage infants to meander through an orange tube. Using Weight Watchers as her model--it had expanded from selling a service to hawking diet food--Barnes convinced investors that she had a base of women who were predisposed to buy comfortable, baby knit clothes with three-inch cuffs to account for growth. “We had a trusted brand name,” she explains, coupled with what she considered a hole in the market: “We really thought there were not great children’s clothes out there.

She considered potential licensing agreement with Healthtex, but “we liked controlling the product lines.” Barnes knew that malls would be receptive. “We could deliver to the malls’ high-end mommy shoppers.”

Barnes’ Gymboree had two clothing/toy stores in 1986 and 32 three years later. But Gymboree didn’t really take off until master retailer Nancy Pedot arrived to restructure and redesign the shops. She had come from Mervyn’s, where OshKosh, Healthtex and Carters were priced as loss leaders. “The philosophy was: The kids are small; they’re going to outgrow the clothes. So they discounted them. Even quality manufacturers were squeezed for price by retailers,” she says, “so quality suffered.”

Pedot secretly dreamed of Gymboree becoming as distinctive and recognizable as OshKosh, but back then, the idea seemed preposterous. Soon after her arrival, Gymboree switched from unisex clothes to distinctive lines of mix-and-match fashions for boys and girls. Gymboree makes and sells the clothes at its own shops, eliminating the costs of the middleman while allowing the manufacturer seem as close to the customer as possible. Its boutiques are stroller-friendly. Salespeople are Nordstrom-nice. Clothes are stacked on shelves, displayed so that a mother can stand in the middle of the store, twirl around and see nearly everything.

Today, there are 247 Gymboree stores with sales of $850 per square foot of selling space as compared with less than $500 for rival GapKids, which includes babyGap. Nancy Pedot, named president and CEO of Gymboree last year, is introducing a mail-order catalogue for 1996, and she anticipates 400 or 500 Gymboree stores in the country in three or four years. “With the whole world out there,” she says, “why saturate any one market?”

Two years ago, Gymboree went public, becoming a darling of Wall Street. Net income last year rose to $22.2 million, more than a 50% increase over the previous year.

Ten years ago, Pedot observed, the consumer had “very few alternatives.” Today’s children’s market is far more competitive, something she believes can often be helpful. “When you have a lot of offerings for children in one consolidated area,” such as Gymboree, GapKids and Imaginarium all on the same block, “it brings in more stroller traffic and is helpful to everyone.”

As Gymboree was expanding so was GapKids, which opened its first store in 1985 after Gap president Mickey Drexler grew frustrated trying to find clothes for his 6-year-old son. Five years ago, The Gap introduced its babyGap line. Today, babyGap is in virtually all GapKids 365 stores nationwide. And at the same time that The Gap is experiencing what corporate management calls “a challenging retail sales environment,” Gapkids and babyGap “are definitely still the fastest growing Gap brand business that we have,” says Richard Crisman, Gap’s vice president of public relations.

Baby Guess?, another style-conscious company, was granted license to use the Guess? name a dozen years ago. Today, the label is in almost every department store and more than 1,200 specialty shops across the nation. Much like GapKids, Baby Guess? draws on brand loyalty. “You can come into the world and immediately wear Guess?,” says sales director Lynn Iseppon, “and wear it for your whole life. Now you can even bathe in it and wash your hair in it.” (The company also sells Baby Guess? shampoo and hair wash.)

Baby Guess?, like all Guess? clothes is “not necessarily product-driven,” Iseppon explains. “We’re selling a feeling.” The Guess? name “is very status.” And Guess?, like babyGap, is designed for parents who want to dress their children in their own image.”

These days, Baby Guess?’s chief designer Dawn Bigley is working up baby clothes with cute golf motifs for 6-month-olds: “I take a theme and make it so grandparents can’t pass it by,” she explains. For spring, she’s developing “a very soft tennis feeling for (baby) girls” and other outfits in a “preppy sports” line. Bigley’s got an upcoming line of “heartland” red, white and blue clothes to coincide with the Olympics. And always, Baby Guess? is “denim driven.”

Observing the success of Gapkids, babyGap, Baby Guess? and Gymboree, other major clothing companies have joined the market. The Schwab Company, a family-owned business since 1915--nine family members are active in the company--makers of the charming Little Me fashionable baby clothes, had been urging Ralph Lauren to license a line of baby clothes. This year, under a licensing agreement with Schwab, Polo met baby.

Schwab sent its first shipment of Ralph Lauren baby togs to Bloomingdale’s last Dec. 15. By Dec. 28, while Executive Vice President Leonard Schwab and 22 other Schwabs were vacationing on St. John’s, they came upon two small children dressed in baby Polo. “My husband wears Polo,” the mother said. “I wear Polo, and Polo’s the only thing I want for my kids.” Ralph Lauren, Leonard Schwab says, “has exceeded our expectations.”

“Ralph Lauren has his customer firmly entrenched at all levels in women’s and men’s clothes,” says Judy Toerge, a former buyer of baby clothes for I. Magnin and now a buyer of boys clothes for Macy’s/Bullock’s. She’s not surprised that parents are buying Polo for their kids.

Beautifully made French imports have always found an audience in the United States. But in recent years, the Dutch-owned Oilily company also has been making inroads. Today there are 14 Oilily locations, among them stores in Aspen, New York City and Beverly Hills. They sell T-Shirts from $12 to $50, or for several hundred dollars they can turn any baby into a rich tapestry.

With the entrance of sophisticated clothiers into the baby market and the continued success of the discounters, the more traditional labels, such as OshKosh, have suffered. Profits have dropped from $29.5 million in 1990 to $7 million last year. “We are the No. 1 children’s manufacturer in the United States, potentially in the world,” says OshKosh’s Michael Donabauer. “We have, at least according to our calculations, the largest brand share.” But, he says, the market “is more difficult today.” OshKosh faces multiple obstacles. Retailers, anxious to pull mothers into their stores, continue to offer children’s clothes at a discount. At Target, baby and children’s clothes are so inexpensive you can practically buy them by the pound. And stores such as Penney’s are actively pursuing their private labels. OshKosh faces competition from the very companies that once tried to emulate it.

In recent years, OshKosh tried to fight back by expanding its market to include clothes for older children. But many young customers complained that the clothes were too babyish. “If you’re an adult manufacturer like Gap or Levi’s, it’s fairly easy to go down in size,” Donabauer says. But if a manufacturer makes infant-toddler clothes, “it’s more difficult to go up in size.” That’s ironic, because OshKosh began 100 years ago selling bib overalls to Midwestern farmers and railroad workers. Not until the ‘70s and ‘80s did OshKosh become the byword for every cool little kid, with its clothes selling even at Bloomingdale’s and Saks Fifth Avenue.

Today, adult clothes account for only 5% of OshKosh’s business, while mothers shop elsewhere for what they consider smarter, hipper clothes for their kids. “It’s just the vagaries of the fashion industry as people apply it to children,” Donabauer laments. “The key to this business is to keep up to date with what the consumers are looking for, or to show them something new.” Until 4 1/2 years ago, OshKosh engaged in hardly any research. “If you were a great children’s-product designer, you did it intuitively,” Donabauer says. Now, the market is so large, he adds, you can’t afford to make many mistakes.