Bottom Dollars

The recession has created a boom in the cloth-diaper business—even for used diapers.

This story originally appeared in Slate’s The Big Money.

The Ninth Semi-Annual Great Cloth Diaper Hunt kicked off at the beginning of May. This online scavenger hunt is sponsored by Diaper Decisions, a Web site that provides support to more than 400 cloth-diaper businesses run by work-at-home mothers (or WAHMs). Businesses that pay to sponsor the Diaper Hunt “hide” a badge on their Web site each day—an image of a diaper, of course—and shoppers flock to their Web sites with the hopes of winning prizes worth as much as $250. Interest in the hunt exploded since the last one was held in November, says Diaper Decisions co-owner Susan Arevalo, with sponsorship applications—from companies like Cute Caboose and Butt Chic—up 25 percent.

At a time when most of the economy is in the toilet, the cloth-diaper business is booming. Cloth diapering has long been a countercultural lifestyle choice, reserved largely for deeply committed environmentalists. It became more popular in the past couple of years as green went from crunchy to hip. Sometimes too hip: Parents in search of eco-status could shell out more than $300 for a single diaper made from designer-printed organic bamboo fabric. While luxury diapers still sell for upward of $100, most are no-frill models retailing for less than $20, converting a new generation of parents looking to cut costs and creating a growing market for entrepreneurs. Cloth-diapering site Diaper Swappers now has more than 67,000 members, and it is adding new ones at a rate twice as fast as before the recession, now around 100 per day.

To the uninitiated, the cloth-diapering world may seem oddly fanatical. For years, parents had a hard time finding cloth diapers that work well, and the Internet provided support and consumer advice to parents who sometimes felt under siege from Pampers commercials. Sites like Diaper Swappers evolved their own slang, and users zealously evangelize for brands with names like Fuzzibuns, Swaddlebees, and Urban Fluff. Cloth-diapering parents sometimes sound like junkies obsessively trolling the Internet for a hit. “I couldn’t stop researching CDs [cloth diapers],” wrote one Diaper Swapper mother. “I am addicted to them.”

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There are a bewildering array of options for cloth diapers, including basic cotton ones that must be paired with a leak-resistant cover (these include “prefolds,” “fitteds,” and “contours”); covers with pouches that hold either absorbent fabric inserts (“pockets”) or flushable pads (the gDiaper); or “All in Ones,” which have the absorbent layer sewn in. Parents who use cloth diapers swear that all these options are less gross than disposable diapers since they go straight into the wash instead of festering in a garbage bag.

While it’s possible to spend outrageous amounts on cloth-diaper setups, a complete bare-bones wardrobe for your baby’s bottom runs between $80 and $150 if you’re willing to do a wash every couple of days. (Green Mountain Diapers has a handy breakdown of packages for various budgets, though they’re limited to the brands the store sells.) With disposable diapers costing about $15 per week—an expense that adds up to more than $1,500 before a baby is potty trained—it’s easy to see the financial appeal, even when you add in the cost of extra laundry.

Cloth diapers seem even more cost-effective when you factor in that they have a resale value. Yes, there is a vigorous market for what are euphemistically known as “pre-loved” diapers. This is actually the market Diaper Swappers was founded to serve, and the site got a major boost more than a year ago when eBay (EBAY) blocked diaper resale. To those who find this disgusting, volunteer Diaper Swapper administrator Sarah Barron says used diapers are no yuckier than used baby clothes. “I myself have four children, and I can pretty much guarantee that everything my kids wore had some kind of bodily fluid on it.”

Jasmine Cianflone, a Diaper Swapper mother from Franklin Park, N.J., explains that she and her husband decided to cloth-diaper shortly after the recession cost them both their jobs. “We just couldn’t afford disposable diapers every week,” she writes. Using a combination of pre-folds, cotton fitteds, and SposoEasy All-in-Ones, Cianflone estimates that cloth diapers are saving her between $800 and $900 on her first child and will continue generating savings because they can be recycled on subsequent babies or be resold.

Jennifer Labit, founder and CEO of one of the most popular cloth-diaper brands, Bum Genius, says that “a person who’s looking to start a business in this kind of market … really [has] a huge opportunity.” Her sales are double what they were one year ago.

In fact, Labit started her business during the last recession. Labit lost her programming job in the dot-com collapse, as did her husband, who was forced to take a job at Kinko’s paying $8.50 an hour in order to get the family health insurance when their first son was born. Labit decided to start her baby-product business after a trip to Chicago, when several women on Michigan Avenue stopped to ask her about the sling in which she was carrying her infant. “I went home that evening and realized that if I had slings in my backpack, I could have sold them,” she remembers.

Labit started a company called Cotton Babies in 2002 to retail that sling. She soon started retailing diapers and designed her own Bum Genius line in 2005. The Internet catapulted her from a WAHM meeting customers at the local Starbucks (SBUX) to deliver products to a business owner with 50 employees and an additional work force of 500 in factories in Denver and Egypt. She now has a 15,000-square-foot store in St. Louis and plans to open a second later this year.

Mark B. Milstein, director of Cornell University’s Center for Sustainable Global Enterprise, corroborates the conclusions Labit has drawn from her experience. “Without a doubt,” he says, “the recession creates an opportunity for entrepreneurs to cater to thrift-conscious consumers.” There is money to be made off shoppers who are reducing their overall spending, and not just in diapers. “Their decision to reduce spending in some areas may translate into spending in others (albeit at net lower levels)” in search of better value for the dollar.

So if you’ve been wanting to go into business, Labit counsels, don’t let the downturn discourage you. You just have to be willing to look in some unglamourous places. Diapers hold this wisdom for entrepreneurs, she says: “Look at what people are still buying, and be ready to take their money.”

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