The Rs 1,266 crore footwear major, Bata India Ltd, plans to ‘relocate' and upgrade 83 of its smaller stores (of less than 1,000 square feet each) into large-format ones of over 3,000 square feet each. The new larger stores will be located in the same market area. The process of relocation is expected to be over in the next 4 to 5 years.

Of the 83 smaller stores that the company has across the country, it has already relocated 33 of them last year. According to Mr Rajeev Gopalakrishnan, Managing Director, Bata India, large format stores are more profitable compared to the smaller ones, where display of a wider range of products are not possible.

“We used to have a large number of smaller format stores. However, these stores are no longer viable as you cannot showcase your collection properly. We have almost 3,000 designs of footwear and it is always not possible to display so many lines in a smaller store of 500 or 1,000 square feet. Every year, 20-30 small stores will be closed and converted into a bigger standardised format,” Mr Gopalakrishnan said on the sidelines of the East India Retail Summit (EIRS) 2012.

Clarifying that the company was not planning to close down its small format stores, Mr Gopalakrishnan said there exists a ready market for the product and its brands and it would not exit these markets.

“It's not a question of shutting down. It is a question of relocating or closing one and opening a bigger store of 3,000 square foot in the same market. So we get more customers, more employment and better money for the people also,” he said.

New Stores

According to Mr Gopalakrishnan, Bata plans to open 120 large format retails stores across the country. Another 30 Hush Puppies concept stores were also being planned in 2012. The average cost to set up a large format store is between Rs 40 to 50 lakh, he said.

The company is planning to set up its largest retail store of nearly 20,000 square feet in Mumbai and has signed on the space. At present, its largest retail store in the country is in Borivilli, Mumbai, which is spread across 10,000 square feet.

… and places volumes over margins for now

Bata will invest Rs 25 crore to upgrade its production facilities and drive volumes of footwear in 2012 and 2013 and is not focusing for now on improving margins.

The Managing Director of Bata, Mr Rajeev Gopalakrishnan, addressing the media here on Wednesday, said that an aggressive margin growth was not what the company was currently looking at. Moderate investments in increasing volumes and improvement in quality coupled with enhancing its outsourcing were part of the present corporate strategy of the company, he indicated.

“This is required to meet the increasing demand created through expanding market penetration. The investments in three production facilities in the city, at Patna and in Bangalore as well as our outsourcing plans will be sufficient to meet the emerging demand for the next couple of years,” he added. Bata's own manufacturing units produce some 23 million pairs a year.

He, however, did not detail how much Bata would spend on expanding its outsourcing network, but said a core team was in place to develop and enlarge it. In West Bengal alone Bata was spending Rs 100 crore to expand its small and medium enterprise activity, which include job work and component supplies.

Mr Gopalakrishnan said Bata's strategic direction was one of a volume game and demand segmentation by brands. A new emphasis would be on emerging in-house brands.

>abhishek.l@thehindu.co.in

>jayanta_mallick@thehindu.co.in

Related Topics