Bata India is eyeing Tier III and Tier IV cities through a franchise model rather than opening new stores, according to Rajeev Gopalakrishnan, President, South Asia, Bata Emerging Markets.
“Considering the fact that retail business will grow rapidly in Tier III and Tier IV markets over the next five years, due to increasing disposable incomes and the fact that these markets are largely unrepresented by organised players, it was decided to enter new markets through franchising instead of opening own stores,” he said. “Most important point in managing the franchisee business is to ensure that partners grow consistently with brand and get decent return on their investment.”
In 2015-16, Bata recast its plans of opening 100 stores every year and decided to concentrate instead on achieving same-store growth. “We have been following dual strategy of driving same store-growth and opening new stores,” he said in an email interview.
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Bata currently has 64 franchise stores and about 1,300 retail stores. Bata has five manufacturing units and 7,770 employees. It sells 50 million footwear pairs annually. Bata India is part of the Switzerland-based Bata Shoe Organisation.
Bata is evaluating new locations and has currently identified “100 potential trade areas that cover both malls and high street areas. Almost 40% come from cities, while the remaining will come from low tier cities and towns where consumers are looking for convenience, latest designs and diverse-range for various occasions.
“We plan to open stores focussing on Bata, Hush Puppies, Footin thereby catering to various segments,” Mr. Gopalakrishnan said.
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GST will be a major revolution for the organised industry and will provide ease of business with all the taxes getting subsumed into one. “ This will lead to restructuring of the entire supply chain strategy . However a lot depends on the rate at which footwear is taxed”, according to Mr Gopalakrishnan.
On the impact of demonetisation, he said that after some initial hiccups, business was back to normal in small towns and cities and there is no significant impact . He said that the segment of credit /debit card purchasers were not at all impacted by the demonetisation. Bata also has a significant online presence . “ We are now speaking the language of the youth and our social media presence and blogs go beyond shoes and offer suggestions on entire wardrobe creation which our consumers can benefit from”.
BIL increased its turnover in the second quarter, although margins remained under pressure. It has announced a VRS at its Faridabad scheme. Mr Gopalakrishnan said that the company’s future plans would depend on the response to the VRS scheme.