Will the Shoe fit?

Anupam Bansal

Liberty Shoes is counting on company-owned showrooms to reach a different customer group.

There is a market for acid yellow, wedge-heeled sandals. A tiny market, admittedly, but it exists. And Liberty Shoes makes wedges in yellow "" and hot pink and lime green.

But not many people know that, in spite of the footwear major's 300-odd franchise showrooms and presence in another 4,000 shoe stores across the country.

Most of the franchises and distributors prefer sticking to the safe blacks and browns. They may sound "" and look "" dull, but they fly off the shelves. Stocking orange stilletoes for a customer who may or may not exist is, to them, simply a waste of space.

That's not what Liberty thinks. Over the past five years or so, the Haryana-based company has been making a conscious attempt to upgrade its image from a value-for-money, but unstylish, footwear manufacturer to one that's at the cutting edge of fashion.

But thinking out of the box is a little tough when you're within the box. So, two years ago, Liberty Shoes set up a subsidiary company, Liberty Retail Revolutions Limited (LRRL), that would take on the retail challenges the company wanted to face.

The idea is not to do away with franchises. Instead, LRRL will set up Liberty Revolutions showrooms that will complement, rather than cannibalise, the franchise network. Already, eight showrooms and six shops-in-shops have come up across the country under the LRRL banner, with similar numbers to be added by September this year.

"The idea behind Revolutions was communicating our changed image to customers," says Anupam Bansal, director, retailing, Liberty Shoes, who describes LRRL as his "special baby".

Easy option? Not quite
Although Liberty isn't giving its franchises the boot, the "baby" is proof of an important lesson in retail marketing: franchises aren't always the "easy" option.

Essentially a manufacturing company "" it makes over 6 million pairs of shoes every year "" Liberty moved into organised domestic retail in 1983. 
 

QUICKBITE FOOTPRINTS
1944	Pal Boot House beginsin Karnal, Haryana
1946	Begins manufacturing: four pairs of shoes a day
1954	Pal Boot House is renamed Liberty Footwear Company
1964	Sets up semi-mechanised manufacturing unit
1968	Switches to 100 per cent export-oriented production
1983	Re-enters domestic market, while continuing export business
1993	Liberty Shoes Limited, the group's public company, begins operations
2004	Liberty Retail Revolution Limited incorporated

It operated only through franchises (at their peak, there were more than 350 Liberty Exclusive Showrooms) and about 80 distributors across India.

To be fair, the franchises have certainly helped Liberty rake in the money. Revenue increased from Rs 82.5 crore in 2000-01 to Rs 199.63 crore in 2003-04, the year LRRL was set up. (Income in 2004-05 dropped slightly to Rs 194.8 crore, but the company recorded a 19 per cent increase in net profits.) Compare this with Liberty's closest competitor, Bata India.

Sales at India's biggest footwear company slipped from Rs 760 crore in 2001 to Rs 711.4 crore in 2003. (Remember that while India is the second largest manufacturer of footwear in the world "" after China"" close to 85 per cent of it is unorganised.)

But ironically, it is the franchises' profitability that sometimes acts as a stumbling block to Liberty's ambitions. The company has found that its and its franchises' ambitions don't always dovetail. So, while Liberty is now seeking to go beyond revenue maximisation, the franchises tend to stick to stock combinations that have proved fast movers.

Those styles may sell, but they also label Liberty safe and predictable "" boring. "In the past four or five years, we've invested heavily in product development. But often, franchises are nervous about taking on new products," points out Bansal.

"Independent retailers and dealers can kill the brand with their we-know-all attitude," says Harminder Sahni, principal analyst at retail consultancy KSA Technopak.

Liberty introduces more than 1,500 new styles every year, but most franchises pick up just 500 or 600; another 500 find regional buyers. But more than a third never gets beyond the sample stage since franchises dismiss it as "MTV style, not for real people."

It doesn't help that franchisees generally don't believe in investing in the upkeep of their showrooms. And run-down, badly kept showrooms don't go with the image Liberty wants to project.

Best foot forward
What is that image? As comfort, price and durability became hygiene factors in the organised footwear industry (about Rs 1,600 crore; there are no official figures), Liberty realised it had to move to another platform.

Given the way the Indian consumer has evolved since the mid-1990s, and given its own international exposure thanks to the export business, Liberty adopting fashion and style as its buzzwords seemed the obvious step.

Trouble was, "Liberty was not considered fresh or fashionable. It's a 50-year-old brand and youngsters thought of it the way they think of 50-year-old people: old, tired," says Bansal.

To overcome that, Liberty sought ties with the the fashion industry. For the past three years it has been a co-sponsor of the Lakme India Fashion Week and has been supporting well-known designers such as Sabyasachi Mukherjee, Rina Dhaka and Rohit Bal.

Liberty is also sponsoring designer Ashish Soni's collection for the New York Fashion Week in September; in October, it will launch Collection F, based on the designs Liberty will create for Soni's show.

Meanwhile, elaborate advertising campaigns "" including television commercials "" have been communicating Liberty's changed avatar to a wider audience.

A step in another direction
But the biggest step has been setting up LRRL, in which Liberty Shoes has a 51 per cent stake. The Revolution stores are consciously different from the existing Liberty Exclusive Showrooms.

The decor has an almost futuristic feel, with curved, chrome-plated display panels and glass shelves. On display are the latest styles "" from ankle boots to strappy slingbacks. "The consumer has changed "" he wants atmosphere and ambience now," points out Bansal.

And Liberty is ensuring that he gets it. Unlike the franchises, all Revolutions stores are equipped with plasma screens, show lighting and professional-quality music systems; the specially-designed arched walkways inside the store convert into impromptu catwalks where new collections are launched every six months, complete with celebrity guests and top models.

The Revolutions stores keep lower inventories: under 800 SKUs per store, compared to the 1,000 SKUs at the bigger franchises. But the core line (which stays unchanged for up to two years) accounts for just 30 per cent; 70 per cent is the fashion line, which is refreshed twice a year. In contrast, the franchises update just 10 to 20 per cent of their collections every six months.

All of which underlines the fact that Revolutions is seeking a completely different target customer. Where the franchises were seen as catering to the middle-class, popular segment, Revolutions aims a little higher.

It's still not an expensive brand (Rs 700-3,000), but the profile is a little more upscale. KSA's Sahni thinks this is a sound strategy. "Independent operators may not fully understand the potential provided by new retail spaces. So it makes sense for a company to go it alone."

The locations of the Revolution stores drives the point home. In Mumbai, for instance, Revolutions is located at the posh Crossroads II and InOrbit malls; the exclusive showrooms are in far-flung areas like Thane, Goregaon and Navi Mumbai.

Even the shops-in-shops are with the better retail chains such as Pantaloon Retail's Central, Pyramids and, from September, Westside. Talks are also on with Shoppers' Stop, says a Liberty Shoes executive.

Where's the money?
Still, it will be a while before LRRL sees some return on its investment. Conventional wisdom says company-owned showrooms prove to be cheaper than franchises.

That's not quite true in the case of LRRL; at least, not yet. The company has already invested Rs 7.5 crore in its 14 outlets in the past one year, and will be pumping in another Rs 10 crore this year.

Location is one reason for spiralling costs. While franchises operate out of middle-level locations, LRRL is targeting the malls. That means high rentals, which tend to throw all cost structures out of gear.

"I was targeting break even in year three. But it will be at least four or five years now," admits Bansal. That's not the case, though, with the shops-in-shops. Operating costs in shops-in-shops are roughly half the showrooms'; besides, they're shared with the store. Bansal claims that all six shops-in-shops that were started last year have already broken even.

The footsoldiers
Meanwhile, it's not as if the franchise showrooms have been forgotten. In fact, they're flourishing: Liberty will set up another 50 exclusive showrooms this year. "They are our bread and butter, after all," points out Bansal.

But this time, the company is hoping that with the Revolutions experience behind it, it will be able to upscale the franchises as well. The image rub-off aside, Liberty is already providing incentive finance schemes to all existing franchises to redesign and update their showrooms; close to Rs 5 crore has been set aside for that.

But perhaps the biggest change will come now Liberty has walked a mile in the franchisees' shoes.

"Earlier, they could dismiss our recommendations as manufacturer's hardsell. But now we are retailers too," says Bansal. "Now, when we say a style will sell, we know what we're talking about."