READY FOR SPRINT Fit-Again Bata Set For Rapid Expansion

Shoe retailer to launch four designs every day, open 70-100 stores of at least 5,000 sq ft every year, and push its online sales to target middle segment of the market and woo the Indian youth WRITANKAR MUKHERJEE & CHAITALI CHAKRAVARTY     After turning around an ageing giant that Bata India was when he took it over six years ago, Marcelo Villagran has started the second part of his unenviable mission – to rejuvenate the 80-year-old shoe brand to make the 20-25 olds, and even the teens, fall for it. "If the last five years were all about consolidation, the next five years will be all about expansion," says the Bata India MD and CEO, who transformed the company from a point of bankruptcy when he took over six years ago to one of the most profitable operations of the Swiss multinational globally.  Bata will introduce almost four designs every day, open 70-100 stores of at least 5,000 sq ft every year, and push its online sales to shed its image as a lowcost functional footwear brand that appeals to the 40-plus age group.  It's an uphill task for a brand known for its sandals and entry-level shoes.  But going by how Villagran has changed the company since taking it over in early 2005, Bata has all the rights to believe in a rival's tagline: Impossible is nothing.  A soft-spoken astute Spanish in his late 60s, Villagran closed hundreds of unviable stores and spawned them into large-format outlets, overhauled product portfolio with the help of Bata's global design centre and refined manufacturing and sourcing strategies, to help Bata come out of three years of continuous losses that peaked at . 62 crore in 2004 and steadily grow since then. In 2010, its net profit rose 42% year-on-year to . 95 crore.  The company scrip too bounced from . 31-35 in 2002 to . 460.55 on the Bombay Stock Exchange at Friday's closing.  Villagran, who has spent almost four decades in Bata, led this transformation from the front. He is usually the first to enter office and the last to leave. And he travels extensively around the country to implement his agenda.  "Turnaround is just a financial word. What is more important is how the organisation has been completely able to reinvent itself," he says.  Experts believe Bata will need to do much more to win over the youth.  "The brand has already suffered a lot and still carries the old baggage of a low-cost, functional, daily-use ration shop imagery," says brand expert Harish Bijoor. "To shed this imagery, it will need to continue to do what it is doing with a greater thrust. Such changes in consumer perception requires sometime," he says.  Villagran, however, says the consumer perception towards the brand is already seeing a change and the youth interest is also making a comeback.  NEW RETAIL REALITY  So, how did Villagran, who had a successful stint in Chile before coming to India, change Bata here?  The first thing he did was to adapt the Bata stores in line with the changed retailing landscape with the arrival of malls and big retail chains.  Bata stores during the 2005-06 would remain closed on Sundays and most would down shutters by 6 in the evening. Manoj Chandra, a key member of Villagran's turnaround team, says 40% of Bata outlets were unviable and 90% of them were not renovated for a long time. "These stores were generating minimal sales that they were not even profitable," he says.  The company shut down all unviable stores and ensured the stores remain open every day for 12 hours.  Bata has shut down almost 400 small stores, which looked more like warehouses with hundreds of pairs of footwear staked in 1,000 sq ft or less, and opened 270 large-format stores at prime locations.  "In footwear, higher display tends to drive higher sales," says Chandra, who is the vice-president for marketing and customer service at Bata India.  The company now plans to increase the average store size to 5000 sq ft.  It plans franchisee route and online expansion to push sales.  Bata board is considering a proposal to start franchisee operations this year in smaller cities where setting up company-owned outlets may not be viable. Villagran says Bata will decide the location and then choose the partner. "It is not that anybody with real estate space can open a Bata store and the stores have to be according to our specifications so that customers do not feel the difference,'' he says.  Meanwhile, its online sales are growing at 200% and the website has had some four lakh visitors since its launch a year back.  Bata is delivering to 315 towns across India, including tougher and difficult to operate markets like Jammu and Kashmir, Arunachal Pradesh and Andaman & Nicobar Islands.  MERCHANDISE OVERHAUL  Bata has also overhauled its merchandise strategy. It literally threw out its entire low-margin inventory in 2005. "We have fixed a certain operating margin and have decided not to sell any shoes whose margins are below this," says Chandra.  It has formed a team of 100 professionals for product design, procurement and merchandising. It will roll out new designs for each of its main brands such as North Star, Marie Claire, Bubblegummers, Hush Puppies, Weinbrenner, Ambassador, Mocassino, Power and Comfit every 15 days. The product design team meets its counterparts in Europe every quarter to improve its international designs.  Villagran says Bata customises the design for India. "For instance, Indian women still prefers small-sized heels and there is a growing demand for closed shoes," he says.  Bata would open 20-30 single-brand stores every year through a mix of standalone and shop-in-shops in retail chains like Lifestyle and Central. It also plans brand-licensing deals with global shoemakers to widen its portfolio.  Bata India has changed its sourcing strategy too. It would make each of its five plants in the country a specialist for a particular type of footwear. Bata, which had cut its factory staff strength through voluntary retirement schemes, also plans to source from China and domestic third-party manufacturers to drive cost efficiencies.  SCALE GAME  "The new Bata is all about quality, contemporary design and customer-centricity. It will be a brand consumers will be happy to wear rather than to show-off," says Chandra.  Of course it will be difficult for any rival to replicate its scale of operations. But industry insiders say it will be equally tough for Bata to compete with established sports and fashionable brands such as Adidas, Reebok, Nike, Lee Cooper, Woodland and Puma in the youth market.  In fact, these companies don't expect much competition from Bata.  "Bata is almost a generic shoe brand in India with huge penetration. Its main brand strengths are quality shoes at value-for-money segment, which is its main core area and would generate much of the volume," says Delhi-based premium shoemaker Woodland's Managing Director Harkirat Singh.  Bata's Chandra says the company will not transgress into the boutique space as it will be a misfit with its scale of operations.  Bata has also decided to completely exit the low-end of the market where shoe selling has become commoditised. "It is the middle-segment, which is the fastest growing one, that we are placing our bet," he says. "If the last five years were all about consolidation, the next five years will be all about expansion.... Turnover is just a financial word. What is more important is how the organisation has been completely able to reinvent itself"MARCELO VILLAGRAN, MD & CEO, Bata India