Reliance Retail plans foray into footwear

The domestic footwear manufacturing industry is expected to witness a paradigm shift in the next few years. The Reliance Group is planning major footwear sourcing from footwear exporters for its retail business. Reliance Retail is targeting business worth Rs 3,000 crore in footwear by 2010-11, when the domestic footwear industry is estimated to touch Rs 25,000 crore from the present Rs 15,000 crore.Of the targetted Rs 3,000-crore turnover, Reliance Retail expects Rs 1,700 crore to come from supermarkets and hypermarkets, Rs 1,250 crore from specialty stores and Rs 50 crore from its Reliance Fresh chain.

Reliance Retail, which opened its first hypermarket spread over 1,65,000 sq ft in Ahmedabad, expects footwear to comprise 3 per cent of its sales over the next 4-5 years. The retail arm of the Reliance Group is targeting a turnover of Rs 1,00,000 crore for its retail business by 2010, according to G Sankar, chief executive (footwear), Reliance Retail.

Reliance Retail is expected to source 50 million pairs of footwear annually over the next 4-5 years.

"As the retail industry evolves, the major challenge will be to put in place the right kind of merchandising and sourcing. We have already started talking to some of the footwear exporters," said Sankar.

In the past, footwear manufacturers were not interested in low-volume domestic markets. But in our overall scheme of things, about 40 per cent of our requirements may come from brands, and we would require about 60 million pairs from other players. Initially, the order sizes may be small, but in due course, we will place orders for large volumes," said Sankar, adding that, the company would be interested in forging supply pacts with footwear manufacturers having robust capacities, scale and fashion design capabilities.

K Elangovan, executive director, Council for Leather Exports, said Reliance's sourcing plan would bring in economies of scale into footwear manufacturing and trigger investments in capacity expansion. Reliance Retail have shortlisted 30 exporters for footwear sourcing. Eight companies have shown interest in supplying footwear to the hypermarkets.

and a few companies have also showed willingness to establish separate production lines to cater to both hypermarket and specialty stores.

In terms of positioning, Reliance hypermarkets will offer private footwear labels in the sub-Rs 999 price category, while supermarkets will offer them in the sub-Rs 299 category. On an average, footwear is expected to occupy about 4 per cent of the trading area inside Reliance hypermarkets. Private labels will comprise 90 per cent of the hypermarket offerings, while brands will constitute the remaining 10 per cent, said Sankar.

The specialty stores will be one-stop shops stocking national and international brands, as well as private labels. These stores will offer a 75:25 mix of brands.

While footwear retail will place thrust on a young and growing consumer base, Reliance is planning a slew of initiatives to drive growth. It is looking at promoting footwear for different occasions, match-ups with clothing styles, and injecting variety into the footwear market via imports, besides attractive pricepoints and promotions.

The company has laid plans to open more hypermarkets over the next few months in the north, and 100 specialty stores in about 50 locations in the next few years, spanning metros and tier-2 cities. The average size of the specialty stores, which will sell footwear in the mid to upper-mid price segments, will range from 5,000-9,000 sq ft.

India's footwear production capacity is estimated at 2 billion pairs, of which 100 million pairs are exported annually. The export value of footwear is over $1.1 billion "" about 1.6 per cent of world leather trade. The Rs 15,000-crore domestic footwear market is growing at 11-12 per cent annually, with the organised segment accounting for Rs 3,500 crore. About 70 per cent of the Indian footwear manufacturing industry falls under the unorganised sector.