Bata's power trip

On a May evening, Dhawal Malekar and Mayank Nair walk into the 3,000 sq ft Bata showroom in Malad, a bustling Mumbai suburb. Malekar, 29, and Nair, 28, both advertising executives, are comeback joggers, and have dropped by at the store (one of the footwear company’s 70-odd stores in Mumbai) to buy a pair of running shoes from a brand that they associate with value and affordability from their school days. 

They stop at the aisle where the Power range is displayed. “Bata is known for value, affordability and longevity. In its sportswear range, Power has been popular among those looking for affordability,” says Malekar. They try out a few pairs, including the just-launched Plazma range in the ₹2,999-3,500 range, but postpone their purchase to check out the best deals in the market.

“Power still retails its trademark running shoes under the ₹2,000 price point. They have also added newer designs and colours, and its range looks appealing, but we’d like to explore the market to check if it’s possible to buy a bigger brand in the ₹1,500-2,500 price range. If yes, we’d go for that,” says Nair. 

Perhaps it is this competition from the ‘bigger’ names that has pushed Bata to spruce up Power, its sports-shoe brand, which was introduced in India in the early 1970s. You may remember Power from your many visits to a Bata store, where the range would be hidden somewhere at the back. But things are set to change. The company plans to bring Power out of its flagship Bata stores and set up exclusive brand outlets (EBOs), a strategy that worked for its Hush Puppies brand, which was introduced as an EBO in 2007.

A growth track

About a decade ago, Bata India — plagued by union trouble and manufacturing issues — struggled to get its house in order. It piled up losses until extensive restructuring led to a comeback. Workforce was trimmed by 30%, low-margin products were taken off the shelves loss-making stores were shut down. These tough decisions helped Bata get back on its feet, and the last few years have been about a focused approach, the results of which are visible today.

One of the company’s strategies of late has been to set up larger stores, expanding from an average of 1,500 sq ft to 3,000 sq ft. The company recently opened an 8,000-sq-ft showroom in Bandra, Mumbai. This is its second largest store in India, trailing behind a 20,000-sq-ft anchor store in Thane, a Mumbai suburb.

“Bata is moving into a completely different direction. We have already successfully tried many things in the recent past, including turning our showrooms into a destination store for buyers. We have also worked continuously on our product mix and quality, which is now more colourful and trendy, thus bringing down the average age of our customers,” says Rajeev Gopalakrishnan, group managing director, south Asia, Bata.

While already on a growth path, Bata now intends to surprise its customers with a name that is familiar and yet not quite so much. As part of its strategy, the company aims to ramp up its 1,400-plus store footprint along with a focus on individual brands, starting with Power, based on their previously successful experience with Hush Puppies.

Since 2007, Bata has opened 60 Hush Puppies outlets and aims to add 30 more in CY15. “Hush Puppies was received well and we are continuing to grow our presence and expand the brand as it is one of the major contributors to the business,” says Gopalakrishnan. The Hush Puppies line comes in the price range of ₹1,600 to ₹6,000, while the Bata label is priced in the ₹170-₹3,500 range.

And now, it intends to make a fresh start and unlock value with Power in CY15 (See: Going exclusive), followed by Marie Claire, for which the company did not give out a timeline. “Power contributes significantly to total sales and is one of the best selling categories. Marie Claire, too, contributes a good percent to the top line. Both the categories are very promising and we plan to further invest in widening the catalogue for these brands,” says Gopalakrishnan.

Since 2007, Bata has been pursuing a long-term strategy to bring Hush Puppies outside its flagship stores. Prior to launching the exclusive outlets, Hush Puppies had about 50 stock-keeping units (SKUs), which was eventually scaled to 300 SKUs when the EBOs were rolled out.

Hush Puppies’ current contribution to the Bata top line is about 15%, from under 5% prior to 2007. Power, on the other hand, currently has about 50 SKUs and contributes just under 10% of the turnover.

“Power has changed; it is young, trendy, colourful and comes at a 30-40% lower price than the leading sports brands. We are taking Power outside Bata and making it an independent brand. The objective is to position Power as the best mid-segment running brand of the country,” says Gopalakrishnan.

Bata will open two Power stores in CY15, starting with Delhi, which will carry out close monitoring and cater to the high demand that Bata anticipates. In CY16 and CY17, the company aims to open 20 Power EBOs, the average size of which will be about 1,000 sq ft.

Power play

Following in the footsteps of Nike and Adidas, Power stores will also sell garments and sports accessories along with handbags and ballerinas, so that customers needn’t go elsewhere for their shopping needs. Placed between regional brands such as Action Shoes and Liberty and established national players, the new Power range will be priced in the ₹1,400-₹3,499 range — slightly higher than its current price range of ₹899-₹2,999 — and will cater to the middle-income segment.

“The average ticket price for Power brands used to be between ₹1,700 and ₹2,000, and has moved up by about ₹500 after the company introduced the Plazma range, priced at ₹3,500, in February. This rise has been on account of Bata’s play with technology. Power Plazma is a gel-based shoe and competes with the likes of Nike’s premium shoes, which are in the ₹8,000-₹9,000 price range,” says a Mumbai-based Bata retailer. 

Bata’s strategy is expected to be well-received in the market. “Bata has a top-of-the-mind recall. And it is playing in the right price points. If you look at the top three sportswear brands — Nike, Adidas and Puma — close to 60% of their sales come from the ₹3,000 price points, though the premium range that they market heavily is priced higher, at ₹8,000 and above,” says Rajiv Mehta, CEO, Arvind Sport Lifestyle, a subsidiary of Arvind Ltd, which is a large player in the apparel brands and retail space.

Mehta quit Puma India as its MD in September 2014, after a nine-year stint with the German shoemaker’s Indian subsidiary. “Bata has the right product in the right price points. It will be easy for it to unlock the value for a brand that had a fan following in the 1990s and is known for affordability. But they need to move fast. They started out with Hush Puppies but even after so many years, the pace of expansion has not been significant, while newcomers such as Clarks have caught on,” he says.

In a ₹25,000-₹30,000 crore footwear market, where Nike and Adidas lead the sports segment, Bata aims to offer customers a mix of sportswear catering to different sports including cricket, soccer, running, etc. Sportswear currently makes up for ₹3,500 crore in value terms and is growing at 18-20% a year for the last two years. The company is confident that Power has a high potential to grow when given more space to showcase its entire collection, in the process bringing in incremental revenue from independent stores at key locations.

“In the sports market, we need to tap into the tier 2 and 3 markets, and that’s exactly what we will do with the Power brand. We are eyeing these markets in north India to launch exclusive Power stores starting Q2CY15. The pilot project will comprise five stores before a full-fledged expansion,” adds Gopalakrishnan. 

Other players in the market, too, think this is a good strategy for Bata. “Bata has been in the country for the longest period. They have an amazing reach and they know India better than anyone else. Over the last few years, they have been very focused,” says Harkirat Singh, MD, Woodland India. “It’s high time Bata took Power out of the stores, as there are consumers who identify with it as a value brand. Smaller cities are coming up in a big way, and no new player will be able to assess the Indian market as well as Bata, which is a brand for the masses. But Bata will certainly have to innovate big time and play on design and technology,” he adds. 

Mehta, too, chimes in on the potential of smaller cities, which he says will help save on rentals. Also, unlike the top three players, which have to import shoes, Bata does not have that constraint, thus helping it deliver at lower price points with decent margins. And Bata is well aware of this advantage. “Most of the international players are playing at a higher price point. Power has the scope to reach out to consumers at a lower price point in smaller cities, where it will be competing against regional brands,” says Gopalakrishnan.

In a similar initiative, Bata will roll out standalone stores for Marie Claire in CY15, though it has not revealed details. Another good idea, according to analysts. “Bata needs to try out new concept stores like Hush Puppies, whether it’s on the lines of sportswear, women’s or children’s wear,” says Rakshit Ranjan, VP, research, Ambit Capital.

“Customers who got introduced to Hush Puppies after 2007 did not really know that it’s a brand associated with Bata, which is viewed as a mass brand. Hush Puppies received far more visibility as an EBO than it did within the stores,” he adds. Ambit expects the due initiatives to translate into double-digit retail revenue growth for Bata by CY17 (See: Big strides). 

Jayant Kochar, MD, Go Fish Retail Solutions, also believes that Bata plays its cards right, the shoe major can reap similar rewards from Power. “Power has the roots and heritage to be a strong brand right off the bat, with the opportunity to become extremely valuable and successful if developed well. It will definitely need to be supported with appropriate storytelling, but the opportunity is huge,” he says.

However, he believes Power probably should not try to match the visibility and broad appeal of the top sportswear brands. “It could certainly be more profitable and more relevant for a focused consumer segment in India. Most large organisations tend to take the safer middle ground and, hence, progress is evolutionary rather than revolutionary,” Kochar adds.

While the need of the hour for Bata is clearly to go beyond being an affordable Nike to being an iconic brand by itself, can Power deliver? “I think the opportunity for a brand like Power is limited only by the imagination and guts of the management team,” says Kochar. That being the case, Bata has probably taken the first step towards recreating the magic of Hush Puppies with its over 40-year-old brand.