It is said that one man's loss is another man's gain. Events unfolding in the footwear industry suggest that Bata can gain from the trouble brewing in Adidas which has recently announced its plan to slash one-third of Reebok stores in India after ‘irregularities’ were reported at the India unit.
Reebok grew at breakneck speed by increasing its franchised store from a meager 100 stores in 2003 to 900 stores by 2012 in India. Adidas model for growth is what seemsto be the reason for its downfall. Adidas employed a 'minimum guarantee' model for growth, where the firm pays a guaranteed amount to the franchisee irrespective of financial performance. This led to mushrooming of franchise stores with lethargy resulting in poor performance. Rising rentals and other costs added to the woes of the franchisees. Adidas will now be doing away with this 'minimum guarantee' model. Reebok showrooms also, have a disadvantage of not being centrally located and not well connected as compared to Bata.
Bata now has the option of bringing these franchisee's under their fold or it can gain market share as there is one less competitor in its area of operation.
While, Adidas plans to close the shutters to more than 300 stores, Bata on the other hand maintains a very aggressive expansion policy. The company has opened 67 new stores in March 2012 quarter, the highest ever quarterly store addition. Bata has been able to expand its base in the metros and also amplified the penetration in metros and mini metros. Bata has reported a 41% growth in net profit and a 31% growth in sales in the first quarter of 2012.
Click here to read more:- Adidas to slash Reebok store base in India