Reebok sprints ahead

There's this little parable Reebok staffers love re-telling. Two shoe salesman were sent to a desert island. One sent back a cable to his office: "No one wears shoes here. No scope for business."

The other also a shot off a cable to his office. Only, his read: "No one wears shoes here. Huge business opportunity." The way Reebok tells it, the island is India and Reebok is salesman No. 2.

In the Indian market, though, Reebok is No. 1 "" the only country in the world where it's ahead of arch rivals Nike and Adidas.

With a 43 per cent share of the Rs 400-500 crore market (on retail price), competitors and analysts acknowledge it as the leader in premium sports footwear and apparel. (Market share figures are estimates since official statistics are not available.)

"In its market segment, Reebok is the clear winner," says Harminder Sahni, principal and associate director at retail consultancy KSA Technopak. "It's always been a couple of steps ahead of the competition."

Competitors grudgingly concede this. "They've been here longer," says one of them.

While that may be true, it is also a fact that Reebok India has been outperforming itself consistently. The company has been posting profits since 1999, four years after it set up shop in the country.

Last year, turnover was Rs 170 crore, an increase of 26 per cent over the previous year. Reebok hopes to end this year at over Rs 250 crore, a growth of 47 per cent. It's also turning in the highest growth figures among all Reebok subsidiaries. Last year, it won the subsidiary of the year award.

In May, the company opened its first women's store outside the US at a Gurgaon mall. Clearly, Reebok India's importance in the Boston-based parent's gameplan is increasing. "It's a dream come true," says Reebok India Managing Director Subhinder Singh Prem.

Ek Reebok de do
Turning the dream to reality took a lot of hard work "" and some tough decisions. When Reebok started selling in India, shoes were either the formal, dress variety or the PU (a form of rubber) "sports" shoes.

It would have been easy for Reebok to take the fashion route "" after all, the brand was well-known in India and, the sports connection aside, was associated with style and glamour.

Still, Reebok stuck to the sports and fitness platform, but that proved a tougher assignment. A study by Reebok in the mid-1990s showed that an abysmal 10 per cent of those interviewed engaged in any kind of physical activity. The first task, therefore, was education.

Education not just for the consumer, but the sales staff as well. In 1995, the company set up 17 exclusive showrooms, Sports Infinity, in the major cities.

Each wall was devoted to shoes for a different sport "" tennis, golf, cricket, soccer, cross-training. Reebok launched with 60 different styles. Prem "" who's been with Reebok since before it started operations in India "" recalls customers who walked into the store, saying, "Ek Reebok de do," adding "Imported hai na?" (The shoes were either assembled from imported components, or manufactured locally.)

"It would have been so easy for the sales staff to tell them: 'That looks good on you, buy it'," he says. Instead, the company trained store assistants, teaching them the finer points of various sports and how they affected the feet: basketball players land on their feet again and again; running entails repetitive motion; shoes for squash and tennis shoes should have non-slip soles...

Treadmills were set up in some stores and customers encouraged to try them out. Cameras recorded the movement of the feet and customers were shown how no two people land the same way on their feet. And different pressure points mean different shoes, for different people and for different sports.

Advertising also focused on the features and benefits of its products. The campaigns at the time went on the lines of "What's a good running shoe?"

Of course, Reebok had the usual celebrity endorsements as well "" sports icons such as Mohammad Azharuddin, Navjot Sidhu and Anil Kumble ensured high visibility and brand recall, but it went beyond the big guys, sponsoring local cricket leagues as well.

The initial splurge on marketing was huge "" close to Rs 7 crore, which is almost half its first year's turnover of Rs 17 crore (At present, Reebok spends 8 to 11 per cent of turnover on advertising).

That's a lot more than Reebok generally spends on a new market but then, the India strategy is unique in other ways as well. Typically, Reebok enters a new market by tying up with the large sports chains there. In the US, that would mean sneaker retailers like Foot Locker and Athlete's Foot.

India, though, had no such set-up (and still doesn't). Which is why Reebok established its stand-alone stores. "We could have gone ahead with chains like Bata, but consumers needed to interact directly with the brand," points out Prem.

Even the celebrity endorsements took on a local flavour: instead of sticking with its international stars, Reebok roped in cricketers for some high-decibel campaigns. It had understood that to communicate with Indians, cricket is the ideal medium.

And to reach out to the customer directly, in 1996 it started "City Sports" "" basketball, cricket and soccer matches at the local, colony level in the metros, providing the equipment and kit. The aim: get people to experience the product and at the same time, get them more involved in physical activity. "It was immensely popular," says Prem.

The power of price-offs
It wasn't enough, though. Reebok's cheapest shoe at the time was about Rs 1,390, compared to the Rs 600 average in the market for sports shoes.

And the upmarket showrooms with English-speaking assistants shouted "posh" in a market that was perhaps not yet ready to scale up. Prem recalls a Haryanvi villager walking into a Reebok showroom and asking the price of a pair of sneakers. On being told Rs 2,000, his wife dragged him away, saying "Itne mein to bhains aa jayegi (You can buy a buffalo for that much)."

As a first step, in March 1996, Reebok introduced its first under-Rs 1,000 offering: a made-in-India jogging shoe that retailed at Rs 990. "We decided to cut margins. The thinking was that even if there's a loss, we must get shoes into households," says Prem.

The sub-1,000 shoe didn't hurt, but what really helped Reebok breach the barrier was its first sale later that year. Prem says the discount sale was just a way to shed excess inventory, but at the time, speculation was rife that the company was throwing in the towel.

The sale netted Rs 3 crore in just 20 days in December 1996. And when Reebok launched its new collection in January, it claims to have sold more shoes than before. That's because the price-off had introduced a whole new user group to Reebok.

"Once potential customers lost their inhibitions, walk-ins also increased," says Himanshu Bhardwaj, Reebok general manager, marketing. Year two turnover jumped more than 250 per cent to Rs 60 crore.

Making the shoe fit
As Reebok moved from education mode to consolidation, its communication, too, changed. Campaigns now focused on building emotional bonds with customers.

An advertisement featuring hockey hero Dhanraj Pillai had a Guru Dutt song as the background score and showed the historic Olympic match when India won a medal. "We realised that we couldn't just repeat international formulas. We had to adapt," says Prem.

Tailor-made ad campaigns were just the beginning. Reebok also customised its product portfolio to the demands of the Indian market. For instance, given the climatic conditions, the company stocks "" and sells "" more sandals in India than anywhere else in the world.

"Reebok in India has consciously followed the Indian ethos "" it has paid attention to what Indians buy, and what prices Indians like," says Sahni of KSA Technopak.

Then, the New Challenge range of sneakers and sandals was designed specifically for the Indian market (and wallets). And given the popularity of the sport in India, Reebok increased its focus on cricket gear. Cricket shoes are now developed in and exported from India.

Of course, not all adaptations were as successful. Early last year, Reebok turned its attention to the increase in the number of women who are physically active. Research showed that most women exercise in either salwar-suits or trackpants and their husbands' T-shirts.

It was a market waiting to be tapped and Reebok launched the first sports salwar-kameez, in a knit fabric. It bombed. The learning was clear: adaptation does not necessarily mean Indianisation.

Customised campaigns, too, had their own pitfalls. In 1999, a TV commercial with Azharuddin and Pakistan's Wasim Akram didn't go on air because the Kargil war broke out.

Changing times
Reebok and its competitors were pulling out the stops when it came to growing the market for their products. One important decision the company took was to extend the reach of its distribution.

Apart from exclusive franchise showrooms, it took the multi-brand outlet route in smaller towns. At present, says Bhardwaj, the company is present in more than 2,500 outlets across India, including 105 exclusive showrooms.

While smaller towns were getting acquainted with Reebok's lower-end ranges, the urban Indian consumer was becoming more sophisticated in his wants.

In 1997, Reebok brought in the "most technically-advanced" shoe of the time "" the DMX range. It was also the most expensive shoe "" Rs 5,000 a pair. Reebok imported just 3,000 pairs of DMX shoes and the communication for the range "" "Book your pair today" "" played up the "exclusive" angle.

Prem says the DMX shoes were sold out in eight days. "Even the multi-brand showrooms that generally displayed our lower-end shoes asked for DMX," he adds. Reebok still sells 3,000 DMX pairs every month.

DMX was only the beginning. Reebok has been consistently bringing in ever more expensive models in India. Timing has also become critical. In 1995-96, Reebok by its own admission was slow in bringing the latest styles to India: typically shoes that were a season or two old would find their way to the Indian market.

Now, some ranges are introduced in India before the US. Of course, that's also because of logisitics: from southeast Asia, it's quicker to ship to India (three days) than the US (20 days).

Still, it's clear that Reebok is catering to an increasingly demanding and astute consumer. Six months ago, it launched the Diamond collection "" shoes priced at Rs 20,000 a pair.

Unlike DMX's 3,000 pairs and print campaigns, the Diamond collection was launched at an exclusive party at one of Delhi's newest restaurants, complete with the page three crowd. "The rules of the game have changed," points out Prem.

The "screenager" era
And how. Reebok's biggest customer group is defined not by age or income categories, but a style of living. Prem calls them the "screenagers" "" people who spend the bulk of their time in front of a screen, whether cinema, mobile phone, computer or TV.

These people are more aware of what's happening around them, they know their choices and if Reebok isn't on its toes, they'll use their options.

But this is one game Reebok is determined to keep winning. It's working hard at keeping the excitement level high, constantly launching new styles, new campaigns, new stores. Even when it feels the market isn't ready.

Last June, when Reebok brought in sports merchandise of the US NFL (National Football League), the running joke at the corporate office was that Indians would think NFL stood for National Fertilisers Ltd.

Convinced that customers wouldn't know the difference between Broncos and Radars (the company sponsors 38 NFL teams in the US), Reebok decided to promote the range at the point of purchase. (Incidentally, based on research that says 80 per cent of all buying decisions occur within three feet of the product, Reebok expends a lot of time and effort on in-store promotions and training of store staff.)

A Click for Kicks campaign was launched at showrooms, where people could slip on long jerseys of different teams and get photographed next to life-size cut-outs of NFL atheletes. The image would be uploaded on Reebok's website within 24 hours, from where it could be downloaded.

Company sources say close to 20,000 photographs were taken in the three-week-long promotion. An SMS contest was also launched to promote the NFL range. Reebok was clearly moving the game to the screenagers' court.

The NFL range has scored well, say company executives. Reebok ordered more pieces of the NFL training gear (T-shirts emblazoned with the team name), which cost Rs 500. Instead, it found itself running short of the replica jerseys that carry tags of Rs 1,400.

Encouraged by the response, Reebok quickly followed up with the launch of the NBA collection as well. Significantly, India was only the second country (after the US) where the NFL range was launched.

Woman power
Even more than the screenagers, Reebok is recognising the importance of women in the retail process. In the 1990s, Reebok stores typically catered more to men, with few styles for women. That's changed now, not least because research proves that globally, 70 per cent of all buying decisions are made by women.

In May, Reebok opened its first women's store at a Gurgaon mall. To appeal to women customers, attention has been paid to visual merchandising "" monochromatic interiors, neon lighting, huge posters of women athletes and walls devoted to specific apparel ranges (aerobics and active gear, beachwear, classics) and, of course, footwear.

"The testosterone level at these stores is toned down," agrees Prem, adding "but it's not about being soft." By the year-end, Reebok will open five more such stores across the country, at metros and big cities like Chandigarh.

KSA's Sahni calls the decision to open women's stores "pathbreaking". "Every company knows women should be the focus, but what have they actually done about it?" he asks.

Of course, women have been the focus of another Reebok initiative "" fitness "" for some time now. The Reebok Instructor Alliance, an offshoot of Reebok University that does research on calisthenics, has coached more than 600 people to be aerobics instructors "" more than 95 per cent of them are women. "The changing role of women is important for us," points out Prem.

Clearly, Reebok's India strategies have worked. Well enough, in fact, for the company to replicate in other markets in the region. Last month, for instance, Reebok opened a new stand-alone store in Sri Lanka "" and Indian cricketers like Rahul Dravid and Parthiv Patel were invited for the launch.

But while Reebok's strategies have brought it out ahead in the race, the role competition has played can't be ignored. Prem agrees: "It's not like only we worked. The other brands also helped, so consumers today are more knowledgeable."

The evolution of the Indian market over the past decade has been nothing short of remarkable, and all the big brands have played a role in the change. "They are all here, so that's great for all of them. They can grow the market together," says Sahni.

STEP BY STEP
(REEBOK'S INDIA ENTRY STRATEGY)

Educate: Initial efforts centred on increasing awareness among customers of the benefits of a good shoe. Simultaneously, Reebok trained sales staff on the benefits of different sneakers as well as the correct way of approaching potential customers and offering advice. Intensive below-the-line activity also helped initiate direct contact with customers.

Spend: In the first couple of years, Reebok splurged on marketing. The first year's marketing budget was close to 50 per cent of turnover. Significant investments were also made on setting up stand-alone stores.

Entice: Once awareness of the product had set in, Reebok turned its attention on driving traffic to its showrooms. This was done by tom-tomming product benefits. When that didn't work well enough, it attracted people by slashing prices.

Acclimatise: Reebok realised its "international" tag wasn't enough. It had to create an emotional bond with the market. That meant Indianised advertising and customised product ranges.

Deliver: The aim has been to give the market what it needs, and then some. Even when the market didn't seem ready for premium ranges, Reebok recognised the need to provide aspirational products. And now, it's tapped into the most important consumer group "" women.

Avoid excess: Reebok's go-local strategy backfired with its sports salwar-kameez.