Bata, a brand synonymous with quality and affordability in India, is facing an unexpected challenge: losing its grip on the budget-conscious consumer. Despite its extensive network of stores and strong brand recognition, Bata's market share in the sub-Rs 1,000 segment has shrunk significantly, raising questions about its future in this crucial market.
The perfect storm:
Several factors have contributed to Bata's declining dominance in the value footwear segment. CEO Gunjan Shah points to a "double blow" from the Goods and Services Tax (GST) and escalating raw material costs. The 2022 GST hike on footwear below Rs 1,000, from 5% to 12%, forced Bata to raise prices, pushing some products over the crucial Rs 1,000 threshold.
Adding to the challenge, the rise of private labels like Zudio and Westside, offering trendy footwear at competitive prices, has intensified competition. These brands have capitalized on evolving consumer preferences, particularly among younger generations, who prioritize fashion and value.
Shifting sands:
While Bata struggles in the value segment, its premium offerings are gaining traction, even in tier II and tier III cities. This indicates a shift in consumer behavior, with growing demand for higher-priced, longer-lasting footwear. This trend, fueled by increasing disposable incomes and evolving lifestyle aspirations, has prompted many companies, including Bata, to focus on premiumisation.
Challenges and opportunities:
Bata's reliance on franchise stores and e-commerce, while expanding its reach, has also impacted its margins. These channels typically operate on lower margins compared to company-owned retail stores.
However, Bata remains a formidable player in the Indian footwear market. With over 1,900 stores and annual sales of nearly 50 million pairs, the company has a strong foundation to build upon.
Charting a new course:
To regain its footing in the value segment, Bata needs to adapt to the changing market dynamics. This may involve revisiting its pricing strategy, strengthening its value proposition, and enhancing its product offerings to cater to evolving consumer preferences. The company may also need to explore innovative ways to optimize its franchise and e-commerce operations to improve profitability.
Bata's struggle in the value footwear segment highlights the challenges faced by established brands in navigating a rapidly evolving market. While the company faces headwinds, its strong brand legacy, extensive reach, and focus on premiumisation provide a solid foundation for future growth. Whether Bata can successfully adapt and reclaim its dominance in the value segment remains to be seen, but the company's response will undoubtedly shape the landscape of the Indian footwear market in the years to come.
