The makeshift store, which Bata calls it as the ‘store on wheels’, is something which the retailer has come out with in the last month as it wears a new look to deal with pandemic blues. It was a weekend in July and Mohit Bhalla was driving through his Vasant Kunj locality in Delhi when he suddenly noticed a makeshift store of the top footwear retailer Bata. He carried on, but his intrigue could not stop him from walking into the store later in the day. Bhalla was impressed by the experience Bata brought to his doorstep, and he wished the show had run beyond the weekend.
“What was striking was at a time when people are fearful of going out, they have brought similar experience at a doorstep; this looked innovative at the outset,” recalls Bhalla, a fan of the Bata brand, who is accustomed to wearing Hush Puppies (premium formal brand marketed exclusively in India by Bata) to his ITO office (New Delhi) in the pre-covid times. The makeshift store, he adds, though not comparable with a normal retail store, had a good mix of articles for both men and women. “I could see flip flops, sports shoes, and remember there was visible buying activity at more or less any point in time.” The makeshift store, which Bata calls it as the ‘store on wheels’, is something which the retailer has come out with in the last month as it wears a new look to deal with pandemic blues. But this is not the only change the footwear brand is wearing!
“If you try one pair, and for some reason you don’t like then we keep that shoe for 72 hours separately, sanitize it completely. We only sell that article after 72 hours. We take care of our customers,” Bata India finance chief Ram Kumar Gupta, tells ETCFO. Among other steps to tackle the virus, the CFO emphasises the company is sanitising its stores every day before their close, and ensuring staffers maintain social distancing with the customers.
BUT DEMAND SLACKS
Ram Kumar Gupta, CFO, BataThe steps taken so far by Bata have fallen short to draw customers at their stores. Demand has simply refused to come back as the fear hasn’t gone away. The CFO shares that despite more than 80 per cent of the stores opening across the country (this would translate to more than 1,100 stores; Bata has around 1,400 stores), the demand largely remains sluggish.
“Only 30-40 per cent of the pre-covid19 demand would be back as of now. It is not picking up,” Bata CFO Ram Kumar Gupta says. Below are the trends, he adds, that the company is observing and accordingly taking steps to adjust for them.
1. Demand for open footwear revived; bathroom sleepers, flip flops, sports shoes gaining traction
2. Demand for Formal footwear not revived; this is since schools remain shut and offices continue to work from home in most cases wherever possible
3. Pre-covid expected premiumisation trend to cross 35 per cent, now it will hover around 30 per cent
4. Bata is producing shoes only in line with demand; Sees no issues on the supply side
5. Digital getting more traction, but focus still largely remains on retail; This is since in absolute numbers Digital constitutes very less (Ecommerce sales for Bata constitute about 5 per cent of the top line as compared to 85 per cent retail channel. Rest 10 per cent is wholesale business)
A store manager at a Bata store in Central Delhi echoes the same sentiment. “Sales are picking up every month but the business is nowhere comparable with the pre-covid level. It would be about only 25 per cent in my store. Today, people are scared to go out, certainly there is fear among them,” the manager says, citing anonymity, as he is not authorised to speak to the media.
MANAGING FINANCE KITTY
Like every retailer managing finances for Bata would mainly mean managing expenses since it can’t do much on the revenue side as demand is not in its hands. This implies having a look at each of the cost lines, a tad more closely that is. So, the plan is:
1. Negotiating with landlords and mall owners: Rental expenses for Bata constitute about 12 per cent of its top line (the company clocked around Rs 2,900 crore in the financial year 2019-20). Rentals are a major shell out for Bata at a time when the revenue is low. The CFO shares, already 50 per cent of the landlords have agreed for either reduction for the lockdown period or some more waiver for the coming few months till the time demand significantly picks up. Going forward Bata is expecting 75-80 per cent owners will accept its request.
2. No tinkering with employee costs for now: Employee costs for Bata constitute much less than the rentals; the quantum is about 4 per cent of the top line. But in absolute numbers, Bata employs more than 10,000 employees in its 1,400 plus stores. The CFO indicates as of now the company has not taken any drastic steps, saying when the demand would come back in the forthcoming festive season, it wouldn’t make much sense to lay off any employees.
3. Putting a pause on advertising & promotional spends: A&P costs for Bata, like the employee expenses, constitute 4-5 per cent of the top line; and when the demand is low, the retailer isn’t going full steam on such spends. The CFO says that wherever possible the company is controlling discretionary costs saying when the top line is coming under pressure, the focus would be naturally on minimising damage in the bottom line.
Even as Bata is reviewing cost lines to save on money, the company has still ample liquidity up its sleeve, something which is not a challenge, the CFO indicates. As of March 31 end, the footwear firm had Rs 960 crore as cash, shows its annual report for the financial year 2019-20.
“We have sufficient cash, and can manage finances for the next 10 months to a year,” says the CFO. The company has also put on hold its expansion plans for the next six months, he adds. Typically Bata would add 60-65 retail stores every year.
PATH AHEAD: FESTIVE CHEER OR NOT?
Bata expects another quarter of pain from the top line perspective; the CFO believes the demand to only make a substantial return by September-October, the time when the festive season kicks off.
ETCFO puts Bata CFO Ram Kumar Gupta in customer’s shoes to gauge his demand.
Q: What is the last non-essential item you bought?
CFO: To be very frank, very rarely hardly 10-15 per cent which normally I was buying pre-covid. If pre-covid I was buying 10 items, I would have bought only 1/1.5 items.
Q: Any non-essential item you remember you bought?
CFO: I bought one shirt, that’s all (he chuckles), which I was about to give someone as a gift but I could not, and now there is no choice but I myself have to wear that only.
Q: Have you been ordering food online?
CFO: Me? (He confirms). No.
Q: Now that the restaurants have opened, have you visited any of them?
CFO: Last three months, I have not visited any restaurant.
Q: Would you feel comfortable dining out?
Q: Would you feel comfortable buying a shirt offline?
CFO: In the next three months, I am thinking not to go out unless it is a must.
Q: So, if cinema halls open tomorrow, you would not go out?
Q: If you yourself are so reluctant to shop out, then how are you expecting other customers to go out and buy items/articles next three months?
CFO: As I said, I would not go out unless it is a must. This means if I don’t have a shoe, I have no choice but to go, try and buy a shoe. During the festive season, one would typically see a rush; in Kolkata, there is a heavy sale during the Puja time; in the forthcoming festive season we expect the same, there are still about a couple of months to go before the festive season kicks off; we expect the Covid impact to be definitely less.
When customer Bhalla is asked if he would buy a pair of Bata shoes in the festive season, he says he isn’t sure; for him Bata is the first choice as far as formal shoes are concerned for him, not otherwise. “Maybe I will buy a new pair of casual shoes since the existing ones are wearing out, but I will not look at Bata for that.”
Another big fan of the Bata brand is the HDFC outgoing CEO Aditya Puri. Earlier this month, Puri said he wears Bata shoes “very proudly”, sending a cake to the Bata CEO Sandeep Kataria while praising him for “transformation of the brand” in the recent years. Maybe Bata would have to fall upon customers like Puris, if not Bhallas in the festive season so as to get back on an even keel.