Sumit K Lal, Director & GM, ECCO Shoes, on how to address the issues of burnout in the footwear sector
At a time when the economic downturn has become a global concern, one sector in the retail arena feeling the heat the most perhaps, is footwear retail. However, even before the organised players in the segment started to enjoy their honeymoon period the majority of the market being uptapped, a slowdown has affected the industry. This, and the country’s hostile import policy, have been much highlighted by the media time and again. How is the industry dealing with these problems and what is the way forward? IndiaRetailing gets a perspective from Sumit K Lal, Director & GM, Ecco Shoes India. Lal has the responsibility of spearheading ECCO India operations, including the strategic direction and focus for customers management. He has over 15 years of diverse footwear industry experience. Prior to joining ECCO, Lal was the National Sales Manager with the TATA Group, responsible for their footwear business. Excerpts from an interview:
IndiaRetailing: How do you see the footwear retail industry in India?
Sumit K Lal: One word, growing! It is growing at a phenomenal pace. With branded segment growing at 25-30 per cent, there is a tremendously promising market in the premium category out there
IR: How do you differentiate unorganised footwear retail in India with oraganised one?
SL: I have grown up in this trade and have spent close to 15 years here. Earlier instances had unscrupulous retailers making 300 per cent profit and perhaps give a discount of 30-40 per cent to the consumer on the selling price thereby making the consumer feel good about it and still enjoyed huge profits. The consumer hence could not really get the value for his spends. When big brands like Mescos, Woodland etc. came in with the aim to organise the footwear retail market and to provide the Indian consumer with a value for their money they pressurized the local retailers to fall in line with the trade policies being dictated by these biggies. Today to an extent all of footwear trade is getting fast organized and it is key to their survival.
Further, major international brands are also foraying Indian market, which are making this segment grow not only in quantity but also in quality.
IR: Do you expect more players to come in the near future?
SL: I know that there are already more players planning to enter the Indian market and are waiting at the fringes. Due to global recession — some may have delayed their plans; where as some others are in a wait and watch mode, analysing the market and waiting for the opportune moment to strike and some are actually in the process of entering. In terms of numbers more than five global brands will enter the Indian market by 2009 for sure, irrespective of slowdown or otherwise..
IR: Despite the fact that organised footwear retail does not enjoy healthy figures in India, a tough competition still exists. How is it shaping the market?
SL: The organised market is increasing at a never before rate. At the end of the day it is for the consumers that the company offers the product. The companies have defined the product line according to their target consumers. Hence, most of the organized trade has been able to address their own niches. Clearly the key focus area for all organized trade is going to be further refining their segments and making their offerings even more unique to the consumers. The more they refine, the more will they consolidate and secure their future.
IR: How about targeting the bottom of pyramid market?
SL: There are enough players to cater to this burgeoning segment like Bata, Relaxo, Liberty, Action etc. and they are doing a great job. Premium segment is where ECCO feels comfortable in operating in worldwide and see its future.
IR: At any point of time do you believe these organised retailers will overpower and diminish the market of unorganised retailers?
SL: Small retailers have also modernised themselves now. They sell brands like Lee Cooper, Red Tape along with other leading domestic brands. Additionally, small wholesalers source from China, give them in-house labels/brands and offer value for money to retailers and consumers. This ultimately adds to the competition. In fact, the growth chart of these retailers is incredibly robust. But yes, organisation is key to survival for the footwear trade.
IR: How has the current economic scenario affected the footwear industry in India?
SL: Economic slowdown has affected every industry. However, I believe it is a sentiment driven situation in India. India has a healthy consumption of its own which will take care of the recessionary trend that is affecting the rest of the world and we should see tremendous improvement by the third quarter of 2009. Our only job currently should be to focus on making the people come out of their confines and shop. Apart than the global crisis, terrorism has also turned people off from the purchasing mode and since there is no festivity around people refuse to come out and shop. Typically this should have been a boom time for footwear sales on account of festivities but the difference is apparent. These times will go and things will be better very soon and will pick up as soon as the sentiment picks up.
IR: What according to you is the solution?
SL: I think a huge PR exercise is required to break this impending sense of gloom and to prove that the Indian economy is relatively un-affected both in terms of impact and duration of the economic slowdown. Also, I would advocate a very proactive approach in building positives by the fourth estate. We should also focus on creating festivities in the market place in terms of events and promotions. This should be a time where ‘acting local’ at the market place should be of tremendous value and we should see some likely and some unlikely alliances in the short term to address the challenges facing us.
IR: How effective are CRM activities during these tough times?
SL: CRM has paid us well in the pastas this helps us establish a direct consumer touch point and in our case 90 per cent of people who buy from us come back to us, thanks to our CRM exercise. CRM could be just what the doctor ordered for these times!