I had an invitation to speak at a meeting sponsored by the RDIA – Retail Diaper Industry Association – last weekend in Las Vegas. The RDIA meeting was located within the ABC Kids Expo at the cavernous Las Vegas Convention Center. It was a really BIG show (with apologies to both the NRF’s BIG Show and to the late-great Ed Sullivan) – with over 14,000 attendees, 3500 booths, and two international showcases. The event even boasted a runway show, featuring the latest in kids’ and maternity products.

The RDIA meeting itself was a much more modest affair, with about 60 attendees – mostly young and enthusiastic entrepreneurs who wanted to know more about the macro-trends in retail and how they apply to their industry. With that goal in mind, my talk was a two-part presentation: first, what RSR is seeing in the industry related to the convergence of the digital and physical selling environments, and secondly how that convergence affects small retailers.

To prep for the meeting, RSR ran a quick survey to get a sense of the challenges that the RDIA members are facing, and what opportunities they see coming from those challenges. Not surprisingly, the participants (virtually all which operate only one store plus a website) expressed concerns about overlap with the big chains (for example, I interviewed one Texas-based retailer who told me that there was a 20-30% assortment overlap with nearby competitors Babies R Us and BuyBuy Baby), and how to compete with the aggressive pricing going on all around them. The top opportunities that these players see revolve around getting the focus away from “low priced commodities ” and towards maximizing contact with customers “while we have them ” (after all, a baby-oriented offering has a pretty well-defined customer lifecycle), and building a strong “community ” message. In other words: truly connecting with their customers as people, not just consumers.

Where RDIA retailers have a particular advantage over the big guys is in their ability to directly address the community-oriented needs of young mothers. I know from close 2^nd hand experience (my own daughters are currently going through the baby years) that parents of young children are starved for a community connection – to exchange stories (and pictures!), learn from others’ experiences, and find sources for the best products and services. And not insignificantly, today’s parents are mostly millennials – people who are “net natives “, avid users of social media, and very comfortable with what us old geezers still call “cross channel ” or “omni-channel ” retailing. I didn’t have to explain that the digital and physical selling environments now work in concert to enable consumers’ paths to purchase – the RDIA retailers get it, because their customers assume it.

Who Knew?

In researching the very-specialized baby products & services vertical, I came across a big surprise – and the name of that surprise is “The Honest Company “. Like a lot of the RDIA retailers that I met, The Honest Company started with a very simple desire – to offer eco-friendly and healthy baby products. In the case of The Honest Company, that meant chemical-free baby wipes. In a lot of ways, the story of The Honest Company follows a familiar line: find a need (young families continue to have babies), find a point of differentiation (a lot of young people are concerned about the environment – and their babies’ health and well being), exploit it, and expand the offering to build traffic and profitability (expand into other product areas such as deodorants and face lotions for moms).

But just how big of a market is it? Well! If Wall Street is a good indicator of bigness, this could be really big. Just last week, The Honest Company received a pre-IPO evaluation of $1 billion. That’s getting into “technology company ” territory (for example, Chinese eCommerce giant Alibaba sought a $1B valuation for its U.S. IPO in May of this year). Part of The Honest Company’s value might be tied up in the fact that it has a very visible and well-known “face of the company ” in actress Jessica Alba (just how out of touch with pop culture am I? I had to ask my daughter who Jessica Alba is!). But the real point is that “babies’ health and well being ” is a big enough and profitable enough market for investors to get interested in.

Back at the RDIA Meeting

While the members of the trade association expressed a concern in our survey that “Black market co-op buying groups offer really low prices, but questionable quality ” is a top business challenge, I think (based on The Honest Company story) that the real concern shouldt be that big companies might see the value in what these small retailers do so well, and figure out how to scale it up. But at the meeting, we talked about the true value that the RDIA entrepreneurs deliver: they know their customers (and their babies) by name, and provide a place where those young parents can gather, socialize, learn from each other, and find good products and services that get the job done. There has to be a place in this world for that.

After all, as RSR found out late last year in looking at small-shop retailers, there’s a stunning fatigue with “generic retailers “. Our advice to the RDIA group – and all retail entrepreneurs, is straightforward: your customers like small business! Always emphasis your real ties to the community; be specific and congenial, and never stop asking yourself, “why would someone come into my store vs. someone else’s? “

That sounds like advice the big guys can use too!