Babies ‘R’ Us Demise Sets Off Scramble for Baby Registries

(Bloomberg) -- The liquidation of Toys “R” Us Inc. has stoked fears about how the U.S. toy industry will absorb the blow.

But the shutdown of the company’s sister chain, Babies “R” Us, is setting off its own wave of disruption in the market for infant products. One of the biggest questions: What happens to all the customers who had baby registries at the soon-to-be-defunct retailer?

As the company begins holding closeout sales and planning store closures, other retailers are scrambling to scoop up customers and capture their registries -- a potentially lucrative prize. Buy Buy Baby Inc., Target Corp. and Amazon.com Inc. stand to benefit from the shake-up.

“All of those are going to really gain,” said Natalie Gordon, chief executive officer of Babylist Inc., a baby-registry platform that lets users shop from multiple chains.

Baby registries allow expectant parents to assemble a list of all the items they think they might need -- everything from car seats and strollers to burp cloths and diapers. For retailers, the hope is to lock in customers and keep them for the long run, said Bradley Thomas, an analyst at KeyBanc Capital Markets Inc.

“When you have a child, you buy a lot of things you didn’t know you needed,” he said. “As a one-off life event, the expectation and birth of a child can cause a long tail of purchases.”

Failed Comeback

Until recently, Babies “R” Us had hoped to use its registry business as the linchpin of a comeback. The idea was to spur sales of big-ticket items, such as furniture, rather than lower-margin fare like diapers. As of last year, the company had enrolled 23 million customers in the service.

But after the bankruptcy and liquidation filing of its parent company, Babies “R” Us told customers last week that it would no longer accept new registries. And people who are already registered with the chain are now racing to move their lists elsewhere.

“We encourage you to save or write down the products on your registry as soon as possible so you will have a list of those products you wanted before the registry is turned off,” the company said in a note to customers.

Babylist, which lets users order from multiple retailers, said roughly 500 users transferred their baby registries from Babies “R” Us during one 24-hour period last week. That compares with 25 to 30 in a typical day.

‘Up for Grabs’

The Toys “R” Us liquidation includes 735 store closings around the country, including at least 138 Babies “R” Us locations. And an estimated $2 billion of the company’s U.S. baby-related sales will be “up for grabs,” KeyBanc’s Thomas said.

The data in registry lists also is valuable, since it provides a window into consumer preferences and shopping trends.

Buy Buy Baby -- part of Bed Bath & Beyond Inc. -- is the closest thing to a direct Babies “R” Us competitor. Wedbush Securities Inc.’s Seth Basham expects that chain to capture 10 percent of the bankrupt company’s baby sales. Among mass retailers, Amazon is set to see the largest market gains in the category.

But the process may not be easy for customers. Some Babies “R” Us shoppers had built up rewards in the company’s Endless Earnings program. Now those benefits are in jeopardy -- a problem that’s similar to one suffered by gift-card holders.

Losing Rewards

Sarah Maiellano, a soon-to-be mother living in Philadelphia, said she spent two hours on the phone with Babies “R” Us customer service before learning she may not see her Endless Earnings benefits. She had accumulated $340 in cash-back rewards from the program.

Mia Drew is another expectant mom who had a Babies “R” Us registry. After reading news about the liquidation, she decided to transfer her registry last weekend.

“My biggest concern was waking up one morning and not having access to it any longer,” she said in an email. “Reading the news articles as they came out really made me like, ‘OK, the closing is really happening. I need to get on the ball.’”

To contact the reporter on this story: Justina Vasquez in New York at jvasquez57@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson

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