Sometimes we gain insights in the most unremarkable settings. While celebrating our granddaughter’s fifth birthday last week, it struck me how different the world of an infant is today, from when our kids were her age; and how companies that cater to the infant demographic have succeeded in getting us to spend way more on “basics” than we ever thought possible.
Let’s start with a basic essential, the car seat – gotta have one to get the infant home from the hospital. The car seat we bought for our first born, by today’s standards, was incredibly inexpensive and light weight – and by the way, it was just a car seat.
Today’s car seat will set you back anywhere from $200 – $580 and weigh in at 20 to 30 pounds; and it doesn’t stop there. The car seat can be integrated into a stroller if you wish at an additional cost. Strollers come in a variety of shapes, sizes, and functions such as joggers and can retail anywhere from $200 – $700! They typically weigh in at 25 pounds.
Then there is the day to day, how do we keep the kid(s) occupied in the yard during the summer months. In the past we bought an inexpensive blow-up baby pool that took about 10 minutes to fill up with a hose and combined with a few floating toys, provided hours of refreshing fun at low cost.
Today, these pools are passé. Now kids are getting their own bounce house which will retail for between $250 – $350; and please, no pointed toys in the bounce house as they can puncture the plastic and deflate the house.
As an investment thesis, I believe these are prime examples of why you want to own stocks for the long term. Even though family sizes are generally smaller today than in the past, people still need to buy the basics AND they are much better products today, at a much higher price point.
It also illustrates the adaptability of corporations to respond to the demands/wants of the marketplace with innovation and marketing savvy, at a price that drives profit margins which they are happy to share with you as a shareholder.
The bottom line is, there is an imperative for corporations to innovate or become irrelevant, the very definition of creative destruction. This creates a virtuous cycle for consumers, and by extension, for shareholders. While our granddaughter’s birthday gives us hope for the future, being a shareholder continues to offer us the best future for our money.
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