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Revealed! Bata's secret to attract the fashion concious
Bata is aiming to be a brand attractive to the youth and to the fashion conscious.
Customers of this shoe brand can now place their orders online and if the shoe of their choice is not available at a particular store, the company will ensure home-delivery in two days.
In an age when one can get everything from personal care products to sundry services home delivered, this is unremarkable.
But consider that Bata comes with a baggage of being an old-school, no-frills footwear maker and retailer, and it is possible to understand the nature of change underway in what is, perhaps, the country's best known footwear company.
Besides taking orders at the store, the company is also in the process of ramping up its sales from the online business.
Currently, Bata sells about 2,500 pairs of shoes online monthly.
From being a player that dominated the no-frills section of the footwear wardrobe, the company is now looking to shed all its earlier image issues and is aiming to become a brand attractive to the youth and to the fashion conscious.
This, the company says, is the segment which will drive growth for the footwear market, currently pegged at Rs 25,000 crore (Rs 250 billion) in India.
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Revealed! Bata's secret to attract the fashion concious
According to Arindam Saha, associate vice-president at retail consultancy, Technopak, the market is growing at a compounded annual growth rate of 10 per cent a year.
For Bata, the growth plan is clear. First, it is planning to change its store format and concentrate only on the ones that are more than 3,000 square feet.
According to Rajeev Gopalakrishnan, managing director, Bata India, this will help achieve more than just a better look.
"A larger store means better display possibilities for all our brands. Also this means that we can service consumers better, besides ensuring better returns," he says.
This would also mean that the smaller stores would be slowly phased out and the existing ones would be moved into larger facilities within the same locality.
Bata plans to add 100 stores to its current network of 1,250 stores in 2012 at an investment of Rs 100 crore (Rs 1 billion).
Gopalakrishnan, who replaced the now legendary Marcelo Villagran at the company's helm as recently as October last year, says that much of the strategy going forward is a continuation of the things that the company has been able to do well over the past couple of years.
First, the emphasis on a more youth-centric strategy means that the company is willing to work with designers.
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Revealed! Bata's secret to attract the fashion concious
It has already engaged the services of Malini Ramani, ace designer, to come up with a range for Bata. Ramani will design three collections for the company over the next three years.
Each collection will have 10-odd pairs.
"Besides Malini, who is already designing for us, we plan on engaging the services of at least three to four designers per year, who will come up with exclusive lines for Bata," Gopalakrishnan adds.
The emphasis on style is an important way of appealing to the youth - something even its competitors recognise. In an earlier conversation with The Strategist, Anupam Bansal, managing director, Liberty Retail Revolutions, the retail arm of Liberty Shoes, had said how the company was trying to up the style quotient with a renewed focus on footwear design and by roping in Hindi-movie star Hrithik Roshan as brand ambassador to drive home the message.
The designs will be showcased across the 30 top stores in the metro cities only, which is where the company thinks the audience for the merchandise is to be found.
The hypothesis that the market will now be driven by the women's and children's segments is supported by a recent report by research consultancy Rncos, which specialises in BioPharma, IT & telecom, retail and services industries.
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Revealed! Bata's secret to attract the fashion concious
The report, Indian footwear market forecast-2014, states that "the consumption trend is expected to shift more towards women's and children's footwear market."
The reason, says the report, is that these segments, particularly the women's segment (as the number of working women is increasing), offer vast growth opportunities to both new as well as existing players.
The company insists that while it might be getting designers on board to come up with the new-look footwear, the story is still about volumes and the mass market.
The designer-led shoes are, therefore, still priced between Rs 1,200 and Rs 1,800.
"Bata has always serviced the masses; this is what we do best," Gopalakrishnan explains.
"The plan now is to change with the changing taste of the masses, which has become more discerning and more style conscious. So while designers might be part of the plan, the bottom line is to get high fashion to them at affordable prices," adds Gopalakrishnan.
Alongside, the look and feel of Bata retail outlets are also being spruced up. Even until a few years ago its huge stores resembled warehouses more than anything else, which did little to welcome foot traffic.
Now there is a conscious effort to make the store ambience inviting and comfortable with neatly stacked racks, attractive decor, and friendly yet unobtrusive sales people.
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Revealed! Bata's secret to attract the fashion concious
A large section of these stores, laid out on the Bata international standards, is devoted to accessories.
The retailer's message loud and clear: we are changing. Gopalakrishnan is also correct when he says that the new strategy is an extension of the process which has been underway for the past six years.
Consider the numbers: In 2004, the company's net sales stood at Rs 694 crore (Rs 6.94 billion), down 62 per cent from Rs 720 crore (Rs 7.20 billion) sales in 2001. Bata's was a classic case of an old-world brand with little aspirational value and no direction after the market was flooded with options for the consumer post liberalisation.
The company was on the brink of collapse, and talks of bankruptcy were rife. According to Krunal Mehta, vice-president, management & corporate communication, Angel Broking, problems arose from the fact that people wanted more than just value for money, which was all that Bata was offering.
"Well designed Chinese shoes got the fancy of the lower middle class. That was when the real problems started for Bata which was unable to work on product development and cater to a broader category," Mehta sums up the issue.
Others blame the fact that the company refused to budge from tried and tested designs.
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Revealed! Bata's secret to attract the fashion concious
"The products became downright boring. There was nothing on offer for the brand conscious youth. Bata had become a brand for their grandfathers," says a creative director with a top five advertising agency who doesn't want to be identified.
In 2005, the management was changed. Chilean Marcelo Villagran took over. The task was cut out for him: streamline the production process, become relevant to the market, change retail strategy, and get a product mix in place, among other things.
Since then sales have ballooned from Rs 693 crore (Rs 6.93 billion) in 2004 to Rs 1,275 crore in 2010, a growth of 80 per cent. The company, which follows the calendar year for results, reported net sales of Rs 1,100 crore (Rs 11 billion) in the first three quarters of 2011.
Also, from a net loss of Rs 62.7 crore (Rs 627 million) in 2004, the company has moved on to making profits of Rs 47.44 crore (Rs 474.4 million) in 2007 and Rs 95.35 crore (Rs 953.5 million) in 2010.
According to analysts tracking the company, the figures would have jumped to over Rs 140 crore (Rs 1.4 billion) by the end of 2011. Besides this, Bata commands 30 per cent of the organised footwear market in India.
Considering that 40 per cent of the Rs 25,000 crore (Rs 250 billion) footwear market is estimated to be organised, the 30 per cent share that Bata boasts of in this segment works out to be substantial.
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Revealed! Bata's secret to attract the fashion concious
Markets have registered this growth in balance sheet figures. The Bata scrip gained 40 per cent in 2011.
This was among the highest gains for BS-200 companies. Ask company executives, and the explanation is that the stock bull run is rooted firmly in the company's performance.
"Look at what we have achieved in the past five years. Besides the past, my understanding is that the market is reacting to the good things we have planned for the company's future," says Kumar Sambhav, head, marketing and customer service.
Analysts say this growth can be explained by the fact that the company has been able to tap into the changing footwear preferences of the Indian buyer.
"The reason Bata has been able to accomplish the turnaround is primarily due to the fact that the company has accepted that it needs to change with time," says Shushmul Maheshwari, CEO, Rncos.
According to Maheshwari, another area where Bata has been able to derive an advantage over other homegrown brands like Kolkata-based Khadim's and Haryana-based Liberty is the fact that the company has been able to change its business model from just a volume play to a mix between volume and margins.
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Revealed! Bata's secret to attract the fashion concious
"While Khadim's and Liberty are still perceived as purely Indian brands catering to the middle to lower income groups, Bata has been able to reposition itself as a brand that has a play in the premium segment as well," Maheshwari elaborates.
Ask the competition, and they agree that Bata indeed has an advantage. "Bata has a scale, lineage and production team different from ours. They have the advantage of time, in as much as they have been around for 100 years. Also they have a network of 1,000 plus stores as opposed to us with 600-odd stores," says Suman Barman Roy, CEO, Khadim's.
This, analysts say, will be Bata's biggest baggage going forward. Mehta of Angel Broking argues that shedding an old image is a tedious process, and the need for Bata is to change from being just a 'value for money' brand to 'value for experience' brand.
"Bata needs to move the brand from the lower middle class categorisation to an upper middle class one. Also the company would want to change the positioning of the brand from just being reliable to a brand which is both stylish and also reliable. Herein lies their biggest challenge," Mehta explains.
It should therefore come as no surprise that the company now has 20 sub-brands including premium segment brands like Marie Claire and Hush Puppies.
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Revealed! Bata's secret to attract the fashion concious
In fact, Bata plans to open 150 exclusive Hush Puppies stores by the end of 2012.
Bata has also invested heavily in the technology that goes into manufacturing that perfect pair - the success of the therapeutic shoes for old people, the Dr Scholl's line, is well documented.
Barman of Khadim's points out one chink in Bata's armour: the company is not strong enough in tier-2 and 3 cities, where companies like Khadim's and Liberty are better placed to serve. In all probability Bata is aware of this fact and is taking corrective steps.
The company is looking to extend its reach into at least 40 smaller towns through a better organised wholesale distribution network. According to Gopalakrishnan, the company is looking to extend its network to towns with populations of 1 million through a web of priority dealer stores.
"We are aiming to open 200 such stores in the next couple of years," he says. Indeed, the company is trying to be in step with the times, with presence across social networking platforms including networking site Facebook.
Old might very well be gold, but for Bata, new is definitely the flavour of the season.
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