Bata chief sees tough walk, says China a pain in the leg

Cheap imports and unexpected competition from apparel retailers are roughing up the terrain for Bata, India’s largest footwear retailer.

Going ahead, “there will be significant challenges which the company will have to face with the entry of multinationals. There will be stiff competition from manufacturers in China, Indonesia, Thailand, Vietnam and Brazil because their products are more competitive,” said P M Sinha, chairman of Bata, in the company’s annual report to shareholders.

“The opportunities in India have drawn foreign brands and they are slowly penetrating the market. It is expected that India will soon emerge as a shoe manufacturing hub for international brands and for exports,” Sinha said.

Import of cheap footwear from China, which controls 17% of international leather trade compared with India’s 3%, remains the main challenge for Bata.

While the company, through its 1,200 exclusive stores in 400 cities across India, has a significant share of the mass-market footwear, it is witnessing multinational brands are taking away clients in the premium segment.

“There will also be threats from developing countries which may resort to restriction on imports from countries which are more competitive to protect their local industry,” Sinha said. “Bata will meet these challenges by diversifying and opening big format stores in Tier II and Tier III cities and take the best available space in shopping malls and busy street corners to aggressively market its products at competitive prices.”

“However, the main focus will be to provide ‘value for money’ and high quality trendy shoes for men, women and children,” the chairman said.

Bata continues to focus on improving its collections by introducing new product range regularly and outsourcing some parts to get better margins.  “The cash flows from higher margins are used to expand our business primarily through large format stores,” Sinha said.