Bata India shifts gears to rural market

After having aggressively focused on urban and lifestyle led products over the years, Bata India is now going rural.

Bata India plans to roll out a franchisee model for expanding footprints in tier III and tier IV cities. Also, it will launch new product labels aimed at rural markets, priced below Rs 1,000, said Rajeev Gopalakrishnan, managing director and chief executive officer, Bata India, on the sidelines of the 83rd annual general meeting of the company here on Thursday.

Notably, in the face of competition faced from the unorganized sector and international footwear industry, Bata India has changed its strategy to open 100 plus stores every year, said Uday Khanna, chairman, Bata India, addressing the AGM.

"We were opening around 100 stores every year, but going forward, we will open close to 50-60 stores every year," said Gopalakrishnan.

Over the last few years, Bata has been launching several high end brands, as it has been trying to mark a presence in the premium market. It has opened several large format stores in high end malls. However, high rentals and intense competition in the footwear market have been posing a challenge to growth. As a part of new strategy, the company will now roll out around 300 stores in rural areas under the franchisee model.

"'There is a lot of demand in the rural areas. We will have to cater to a separate product line to cater to this kind of market, which we have to some extent. However, to certain extent we will have to develop the products. We are targeting a price point of anywhere between Rs 200 to Rs 1,000 said Gopalakrishnan.

"All these years we had company-owned stores. Now, we are looking at the franchisee model. We tested and piloted the model. We have already opened 30 such stores, and they are pretty successful. Now we are looking to roll out the franchisee programme. Our intention is to have nearly 200 to 300 stores in the next two to three years," he added.

This apart, Bata India will invest close to Rs 300 crore over the next three years to modernize its manufacturing facilities and strengthen its retail network.

As a part of its plant modernization plan, Bata India plans to upgrade its factory at Batanagar, which currently produces about 10 million pairs of shoes every year.

"Manufacturing is our key focus. In particular, we are looking to modernize the Batanagar factory. We should be investing close to Rs 25 crore in its modernization over one or one and half year's time. Every year, over the next three years, we should be spending around Rs 80-100 crore in modernization, manufacturing, store upgradation and other things," said Gopalakrishnan.

Notably, Bata India is facing challenge in the online space, as it has shied away from offering discounts in the digital space. At present, around 1.5 per cent of Bata India's revenue comes from the online sales. Going forward, the company is looking at a share of around 5 per cent from e-commerce space. Also, instead of offering discounts, Bata India will focus on exclusive product lines for online space to increase revenue from the segment, said Gopalakrishnan.

Commenting on the impact of GST on Bata India, Khanna said, the company might have to reorganize its distribution network under the GST regime. He further said, while the rates of GST are yet to be finalized, a rate of around 18 per cent should entail a neutral to positive impact on the company.