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Bata may rejig ops to boost sales, efficiency of staff

December 10, 2008 10:24 IST
Pradipta Mukherjee in Kolkata

Bata India, nation's biggest maker of footwear, is restructuring its operations by planning to close down some retail outlets, launch new range of sportswear, bid for new footwear orders from hospitals and armed forces in an attempt to boost sales.

The Kolkata-based company, which has already cut the number of unviable stores to 74 from 140, said it is open to shutting down more unprofitable stores.

The company has over 1100 stores in India and 2,000 SKUs. In an attempt to boost efficiency Bata introduced a voluntary retirement plan for its employees in the quarter ended September 30, 2008.

The scheme was accepted by 321 employees incurring an expenditure of Rs 9 crore (Rs 90 million).

"We will concentrate on large format stores of 3,000 to 10,000 sq ft. Most of the stores will be franchise-run. Each store will cost us around Rs 2 crore (Rs 20 million)," said P M Sinha, chairman of Bata.

The company plans to set up 60 stores every year over the next three years across the country using cash accruals, said Marcelo Villagran, managing director of Bata India.

These stores will operate in a four-tier retail format under a new retail model -- up market flagship stores, smart and trendy city stores and super stores and traditional family stores.

This will help the company service its customers better in places where currently it does not have presence.

The Indian footwear market is estimated to be about Rs 10,000 crore (Rs 100 billion) in value terms and is growing at 10 per cent annually.

Men's footwear accounts for almost half of the total market with women's shoes constituting 40 per cent and kids' footwear making up for the remainder.

According to industry estimates, The Indian footwear retail market is expected to grow at over 20 per cent from 2008 to 2011.

Footwear is expected to comprise about 60 per cent of the total leather exports by 2011 from over 38 per cent in 2006-07.

Bata will also upgrade 30 existing ones, in an attempt to redesign the stores according to consumers changing preferences as well as in terms of design and merchandise display.

The company also plans to scale up its institutional business to boost sales.

"We will also introduce new range of sports shoes in India this year which will be comparable to the best sportswear brands available here," Sinha said.

Bata operates in two segments, manufacture and sale of footwear and investment in joint venture for surplus property development.

In a parallel development, Riverbank Developers, a 50:50 joint venture between Bata and Calcutta Metropolitan Group, has signed on Intercontinental Hotels Group for running the proposed hotel and serviced apartments facility at Batanagar, currently being redeveloped.

Batanagar is a Rs 1,200 crore (Rs 12 billion) joint venture housing project in West Bengal by shoe major Bata India and real estate developer Calcutta Metropolitan Group.

Bata is developing around 262 acres. The land belongs to Bata and so Bata's equity in the project is in the form of land.

As part of the initial 15-year deal between Riverbank and IHG, the hotel at Batanagar would be branded Crowne Plaza Hotels & Resorts and have 200 rooms.

Both the hotel and 75 serviced apartments would occupy a single building. The construction of the hotel and serviced apartments will cost Rs 175 crore (Rs 1.75 billion).

While the first phase of the Batanagar project is expected to be completed in 2011, the township is expected to start functioning by 2013.

Although the global financial meltdown has taken a huge toll on realty projects in India also, the Batanagar venture has been insulated to some extent because it till has time on its side.

With the situation expected to improve over the next few months, the Riverbank venture should be able to escape the current crisis largely unscathed.

IHG is the world's largest hotel group by number of rooms and owns, manages, leases of franchises, through various subsidiaries, over 4,100 hotels and more than 600,000 guest rooms in nearly 100 countries and territories worldwide.