The company is expanding its presence in both channels – physical stores and online – and expects e-commerce to contribute 20% of its total sales in the next two to three years
New Delhi: With inflation cooling off, leading shoemaker Bata is bolstering the premium price points with fresh portfolios while it increases spending on advertising and promotions to connect with young digital-savvy consumers, according to company Managing Director and CEO Gunjan Shah.
The company, as part of its sales strategy, is expanding its presence in both channels – physical stores and online – and expects e-commerce to contribute 20% of its total sales in the next two to three years, he said.
Bata is also pushing for offline sales and expects strong growth to come from its expansion under the franchise system, where it plans to add another 125 stores in FY24 and increase its presence at multi-brand outlet (MBO) channels.
Though with the opening of offices and schools, sales of casual wear products have increased, Shah said the trend of casualization would continue in the long term and Bata is pursuing it by extending its mid-premium brands Hush Puppies and Red Label in the segment.
As part of its strategy, Bata is investing in front-end operations, stores to back-end infra, technology, design, R&D etc. Besides, Bata is bringing new collections at a rapid pace to compete with its rivals.
“This season we will bring our ever-highest newer range to consumers, taking to almost 35 to 40% of refresh. This used to be below 25% two years before,” Shah told PTI.
When asked if Bata had extended the benefits to consumers, as inflation has moderated, Shah said, there were price points “we had vacated in the past because of cost pressures but now with the easing of inflation, we are entering some of those with fresher offerings as they had worked well for us”.
At the same time, there are consumers who are looking at superior product offerings which the company continues to build, he said.
Besides, it has staved off from any further price hikes for the last 8-9 months.
“That has served us well in several areas and categories. Whatever growth which we have seen in Q1 is largely a volume-driven growth,” he said adding that should also eventually stabilise and provide value to consumers as time goes by.
When asked whether Bata would increase its spending on A&P as margins are improving, Shah replied:” Absolutely! We will do it very consciously and aggressively and we will also make sure that we are now more and more pivoting… We will pivot even more aggressively towards younger audiences through our digital-first marketing strategy.”
Bata would continue its thrust on online sales and e-commerce, a segment in which it was a late entrant. As part of its expansion plans, it is stressing both brick & mortar channels and online channels.
“We have the fastest growth from our e-commerce channels from last three years and we see no difference this year and it will keep growing,” said Shah adding “right now it is 10-12% of our turnover and in the next 2-3 years, we would like to see that to grow to 18 to 20 per cent.”
However, he also added Bata would continue its investment in stores and offline expansion.
“While we will expand our company-owned stores, we will have a significant part of expansion coming through two large revenue channels – franchise business, which has been expanding and adding stores at a rapid pace over the last six quarters and that continues and through multi-brand outlet distribution channels,” he said.
As on Jun 30, 2023, Bata had 2,100 points of sales. About 67% of its store are on CoCo (company-opened and company-operated) model and 21% through the franchise system. It had 448 stores under the franchise system. It has expanded its reach to 1,396 towns.
When asked about the rural market, Shah said that he does not see any signs of any structural problems at those places.
Terming inflation a “short-term blip”, he said consumers have seen significant inflation over the last two years and it would take some time to absorb it and soon it would be normal like earlier.
“The medium-term outlook, we are pretty optimistic about our own growth plans and for the industry also. We are pressing ahead all our levers of thrust in terms of our strategy of going ahead,” said Shah.
Bata is also scaling its presence at MBO distribution channels. It has access to 1,500 towns only through this MBO channel and the pace will continue.
“We have significant headroom to grow – both offline and online. We will see growth happening at both channels,” he said.
Over the consumption, Shah said from the last 3-4 quarters, when Covid is behind, formal offering, as well as dress occasions, have gone up significantly for Bata. It has bounced back very smartly.
However, he added:” In the longer term, it will be casualization of the market and that trend, we are pursuing. While we are benefitting from bounce back of formals as well as school etc, we do see casualization as a long-term trend,”
Bata has introduced casuals under its Hush Puppies and Red Label, which is having a good presence.
It also has plans to expand its shoe insurance scheme after having initial success.
The company had added 125 franchises last year and also a few CoCo stores and this fiscal, it will be equal in numbers, he added.
Currently, the top 30 cities contribute 40% of Bata India’s revenue, while the rest comes from tier II & III markets and below.
Over the government’s move to fix its own standard size and measurements for apparel and shoes, Shah said it is a welcome step.
“It’s a very early stage. Consultation is going on and we are actively engaged in the process…. being a leader, we will actively participate in the formulation of standards, especially leveraging our knowledge and understanding of the Indian consumer, which we have accumulated after so many decades,” he added.