Name – Anubhav (0910010) Sameer Mohammad Suheb Padmini Kant Mishra Radha Rani

Metro Shoes –
Market Analysis of the leather footwear industry and recommendations for Metro

Context & Industry Analysis The Indian footwear market is estimated to be over Rs15,000 crore in value terms and has grown at the rate of 8.8% over the last couple of years. In terms of units, it is estimated at 1532 million units. Men’s footwear accounts for almost half of the total market, with women’s shoes constituting 40 percent and kidsʹ footwear making up for the remainder. The market is substantially brand-driven, as is evident from the fact that branded footwear constitutes more than 42 percent of the total market size. About 37.8 percent of Footwear retail is the organized segment, which qualifies it as the second most organized retail category in India, next only to Watches. One-fourths of the total footwear sales happen through organized retail outlets, and this makes it the second most organized retail segment in the country, next only to watches. Credit goes to players like Bata and Liberty for having set the ball rolling. In terms of volume, the market size of the footwear industry in the top 20 cities in the country is estimated to be 10 crore pairs per annum. For the country as a whole, the annual domestic consumption of footwear is approximately 1.1 billion pairs per annum, as per government statistics. With a population base of 1 billion, this translates to a per capita consumption of 1.1 pairs per person per annum. India is the second largest footwear manufacturer in the world, next only to China. Nearly 58 percent of the industry, which is by and large labour intensive and concentrated in the small and cottage industry sectors, remains unbranded. However, as part of its effort to play a lead role in the global trade, the Indian leather industry is now focusing on key deliverables of innovative design, state-of-the-art production technology and unfailing delivery schedules.

Globally, the trend towards sourcing to countries with low-cost production continues. Overall, the Far East continues to be the key area for footwear sourcing, but Eastern Europe (Romania and Bulgaria) has become more important as closer proximity helps European retailers to move faster. India and Vietnam are also considered important for sourcing. India is especially strong in the menʹs footwear segment though the worldʹs major production is in ladies footwear. This not only limits the scope for footwear exports, but also points to a huge potential in the domestic market. Proper branding and promotion can greatly increase the domestic demand in ladies footwear. Indiaʹs footwear exports have shown a growth of 35.2 percent over 2002-03 registering a cumulative export of US$ 608.7 million in both the Leather and non-leather segments taken together. The leather segment accounts for 89 percent of footwear exports. Nature of Indian Footwear Retail – Porter 5 Forces Analysis The footwear retail industry has been analyzed in the Porter framework taking end-users as buyers and footwear makers as suppliers. Each of the forces has been rated on its underlying drivers which are weighted on a 1-5 scale. The final score for the Fs is a simple average of its underlying drivers. 1 = weak driver …. 5 = strong driver Buyer Power – 2.5 Drivers of Buyer Power 1. Buyer Size - 1 2. Oligopsony threat - 1 3. Low switching costs – 5 4. Tendency to switch - 4 5. Product differentiation - 2 6. Price Sensitivity - 2 7. Financial muscle - 4 8. Backward Integration - 0 9. Buyer Independence - 5 10. Product dispensability - 1 The high volume of cheaper products from China, and increasing disposable income allow the Indian population to purchase branded fashion footwear from domestic and overseas markets. In addition to well-known and highly valued brands, there are more and more small

companies producing hundreds of thousands pairs of shoes. The fight for the customer is fierce which enhances buyer power. However, the necessity, and therefore high sales volumes, of footwear reduces the buyer power of individual consumers considerably. As a consequence of fashions and the variety of different functional footwear categories, there is a great deal of differentiation within the footwear market, which, despite increasing choice for consumers, often limits the availability of suitable products and therefore reduces buyer power even further. The switching costs are negligible, and often confined to personal taste and preferences. The fact that buyers are considered as end-users ruled out the possibility of players forward integration, increasing buyer power which is mitigated by very slight chance of buyers integrating backwards (unless buyer decides to enter the industry as buyer). Overall, buyer power with respect to the Indian footwear market is moderate. Supplier Power – 3.22 1. 2. 3. 4. 5. 6. 7. 8. 9. Supplier size - 3 Switching costs - 3 Oligopoly threat - 2 Player Independence - 4 Player dispensability - 2 Substitutability - 5 Importance of quality/cost - 4 Input differentiation - 4 Forward integration -2

Suppliers to the footwear retail market are defined as footwear manufacturers. Much of the footwear sold within Indian markets is sourced from manufacturers in low-cost domestic, manufacturing locations, especially China, and therefore domestic manufacturers lack the ability to compete effectively within the mainstream footwear market. Many suppliers have gained power within the market through differentiating their offerings. They have achieved this by producing specialist footwear for specific applications and by producing high-end designer products as well as robust marketing and promotional efforts. With the exception of very popular brand name manufacturers, it is difficult for a manufacturer to establish itself in retail and therefore forward integration is rare. However this is mitigated by the fact that retailers very rarely integrate backward. Overall, supplier power with respect to the footwear market is moderate. Threat of New Entrants – 3.91 1. Low cost switching - 5

there exists in this market a number of large established retail groups that wield significant economies of scale through bulk purchasing and pooling certain back office operations. Threat of Substitutes – 0. it is difficult for new entrants to increase in size considerably. further facilitating the entrance of new players. For example. there are no other substitutes to footwear market.4 6. With the exceptions of very poor areas in nondeveloped countries where the lack of players pushes people towards personal production of footwear. Accessibility to distribution . Importance of economies of scale -4 4. patents etc . Overall. The fixed costs for retail operations are relatively low and new entrants are common. such as sportswear and designer products. Given the large number of low cost manufacturers supplying the market. Effect of fixed costs .67 • Low cost switching . The fast market growth may encourage new entrants to some extent. the threat of substitutes is low. Product differentiation . Overall. Regulatory environment . As a consequence. Incumbents acquiescent .0 • Beneficial alternative -1 As footwear is a basic necessity. the threat of new entrants with respect to the Indian footwear retail market is strong.2 3.5 10.3 7. Importance of IP. .3 5. brand recognition of footwear retailers is relatively low. However. However.3 11.1 • Cheap alternative . Importance of brands . sportswear is often a substitute for other more traditional footwear types. the threat of substitutes to the market is very limited. Accessibility to suppliers -4 9. With the exception of certain specialist types of footwear. Market growth -5 Entry into the Indian footwear market is defined as starting up a new company or by diversifying an existing company's operations or importing the goods into the country.2. there is a significant degree of substitution between segments of the market. What is more. and new entrants who try to enter Indian region are facing higher retaliation than counterparts within other countries of the region. new entrants can differentiate themselves from the major players by offering professional services and advice centers. it is relatively easy for new players to establish the required supply chain.5 8.

Overall. Economies of scale (ease of expansion) -3 7. rivalry between footwear retailers is assessed as moderate to high.2% 221 11.Industry Rivalry – 3. There is a high degree of diversity between retailers in terms of types and designs.5 9. Low switching cost . Number of players . with dedicated shoe retailers competing with apparel retailers and large supermarket chains.4% na na 152 3.3 3.0% 89 6. Product differentiation . therefore. which enhances rivalry.3 5. However. Diversity .4 1.4% 2006 770 6. the market is dominated by large retail groups. Exit barriers -2 8.4 2.3 6.0% 2005 707 1.1% 258 6.5% 44 4.0% 2007 867 5. This means that in order to be successful brand building has to be central.2% 96 6. Competitor Analysis . between whom there is a high degree of rivalry.4% 101 Na .6% 93 4. this allows relatively easy expansion and output capacity.9% 195 7. fixed costs for retail operations are not prohibitively high and. Furthermore.7% 238 8. Competitor size . smaller companies easily co-exist within the market.Key players – Bata. The healthy market growth in India might reduce the degree of rivalry to some level. Action. Liberty. Storage costs . Lakhani. Similarity of players -3 10. Khadim & Woodland 2008 Bata Liberty Action Lakha ni Sales Margin s Sales Margin s Sales Margin s Sales Margin s 989 7.7% 120 3.3 Although footwear retailing is highly fragmented.5 4. Importance of fixed costs .

. • • • • • Serves 1 million customers per day. casual and sports Liberty 375 All major cities Exclusive + Multi-Brand Outlets in malls 240Cr Pantaloon retail None Khadim ’s 264 22 Exclusive + MultiBrand Outlets in malls 200+ None None Woodland s 230 All major cities Exclusive + Multi-Brand Outlets in malls 330cr None None Exclusive + Multi-Brand Outlets in malls na None Florsheim Sales Volumes Network Alliance Foreign brand alliance Horizontal Diversification Product Range None Formal and Casual None Formal. Runs 40 production facilities across 26 countries.3% Rs crores.600 retail stores Worldwide.3% 132 3.3% 67 3.Khadi m Sales Margin s na na 150 3.000 people. Reebok Plan to launch Apparel Formal. casual and sports Lifestyle + jewellery Formal and casual Apparels Mainly outdoor casual and BATA (Market Leader): • 1300 retail outlets all over the country. Manages a retail presence in over 50 countries. Operates 4. Key Elements of Bata’s Retail strategy: • In 2006 Bata decide to create its presence in the shopping malls on one hand and explored the franchisee model on the other hand. Before Tax margins Metro Shoes No of Exclusive Retail Outlets No of Cities Model of Distribution 66 2007) 31 (in Bata 1300 All Exclusive + Multi-Brand Outlets in malls 989 Cr Reliance Retail Bata Global (Hush Puppies). Employs more than 40.

This store was spread across 4 floors and displayed a range of 800 designs.000 sq ft Mega Store at Vadodara (in the western Indian state of Gujarat). Power and Weinbrenner. hotels. • • By 2010 Bata aims to open 200 new stores and explore institutional markets such as hospitals. Bata and Reliance Retail announced a tie-up that would enable Reliance to retail its labels through the 1200 Bata stores in the country. Bata on its part would be provided with exclusive space in all reliance stores which were being rolled out in the country. 2008 winter collection for men from Liberty Shoes. North Star. invites people of all age groups to participate in a host of fitness and sporting activities including . • It also launched its new Spring Summer Collection in its stores. LIBERTY: (Market Challenger) • • • 375 exclusive Retail Stores and over 6000 multi-brand outlets. under its famous brands such as Marie Clair. and defense establishments. Spring-Summer Collection 2009 enters with a favorable response in the market. Network Alliance: In January 2008. The range included very stylish shoes in the Fortune range and the most popular amongst the new products on display were the stylish and colorful Gliders range priced at just Rs99 onwards. • Promotional activity: Liberty Shoes has become part of a major initiative to promote fitness culture in the country with the theme being “One needs to be healthy to be happy. ft It unveiled a 10.” The program.• Bata’s new stores are based on the international format of Bata Stores and have a minimum area of 3000 sq. aptly called “Fit Reh India”. offering several new trendy designs targeted at the young customers. • • Diversification: Bata intends to launch clothing products.

Lucknow.as the name suggests. This unique innovation ensures that the feet never sweat. Pune. Mumbai. Ahmedabad. are shoes that keep the feet cool and comfortable even in the most trying conditions.m. The fitness enthusiasts have also been visiting the Liberty Shoes stalls at the program sites showing keen interest in the Liberty’s range of trendy sports shoes further strengthening the brand’s association with a sporty health conscious image that appeals to the young as well as the young at heart. Thanks to an innovative ventilation system in the footwear's PU sole that allows free passage of air in and out of the shoes at every step. For this purpose 70 different parks have been identified as Jogger’s Parks in 10 cities around the country. Channelizing opinion leaders .Running for over a month now the program has not only drawn a tremendous response from the early morning regulars but it has also motivated others to adopt the fitness regime. Innovation: AC shoes . WOODLAND (Market Follower) • 230 exclusive Retail Stores with each stories on an average of 1500 square feet • • • Plan to start large format stores of around 1.jogging between 5. Kanpur.30 a. It is available in multiple designs and colors. Nagpur.500 square feet in size Plans to open 50 more exclusive stores in next two years 1600 dealer base and plan to increase it by 20% in next two years • Started in casual footwear category but now has ventured into apparel and formal footwear category • Apparel business now contributes to 35% of the company’s annual turnover • • Production capacity of 12000 shoes per day Targeting a yearly growth of 35% . and 9. Banglore and Ludhiana. is also the reason why these are also known as "Shoes that breathe." Designed for 24x7 wear they are also extremely stylish in looks with leather uppers and special fabric lining which also help ensure that the feet get the right amount of extra cushioning.30 a.m. They include Delhi. Baroda.

This is in stark contrast to the trend in the sportswear segment where Nike. it could be fairly accurate in representing the young to middle-aged male consumers of medium to high income category. and its affect on customer in case of bad quality. Hence this sample cannot be representative of the population. Our response set consists of 100 usable responses. Adidas & Reebok have significant presence on their own.Brand Positioning – Woodland has created a niche for itself for casual and stylish shoes catering to the segment which is style conscious at affordable prices. The details of its revenue or bottom-line growth were not available. The affluent customers in India today will have a wider choice in buying stylish and comfortable shoes. forcing Bata to announce similar plans. the brand’s image and message has been received well in the market. However. It also strengthened the organized retailing in footwear. Diversification – Woodland has embarked on horizontal diversification and sells casual apparels in its stores in the same brand. but the strategy of increasing wallet share from its existing customers seemed to have worked well. Footwear purchase has been assumed to be a high customer involvement because of intimate nature of the product. This has implications for brand commitment from consumers and also on the purchase decision making process. However the leading foreign brands have entered the market through sales & distribution tie-up with local players in the leather segment. The sample was the various programs in IIMB. Though data for quantitative comparison was not available. Competition from International Players: Competition in the domestic shoe market changed with the permission for 51 per cent Foreign Direct Investment (FDI) in single-brand outlet in early 2006 that allowed foreign footwear brands to enter India. Customer Analysis We have conducted a paper based survey to collect primary information about customer behavior and preferences. .

amounts of decision making data g importance on functional and non. The survey also attempts to capture characteristics of media consumption behavior of the consumers. (b) product involvement and brand commitment will differentiate a product category market into four distinct consumer groups: high product involvement/strong brand commitment (HP/SB). low product involvement/strong brand commitment (LP/SB). Product Involvement Brand Commitment High Low Stron interest in market & personal sources less engagement in large of information. This suggests that the general nature of footwear purchase is complex and involves significant to high involvement. low product involvement/weak brand commitment (LP/WB). it was further postulated the four groups would display different consumption attitudes or behavior for a specific clothing product category. Given the classification model proved to be successful with their college student sample (n=615). Footwear Consumption Patterns • No & Type of Products owned Findings – . a comparative brand study of Metro Shoes with other leading brands was also done to assess the current performance of Metro.Warrington and Shim in their research paper in 2000 hypothesized that (a) product involvement and brand commitment may not be highly correlated and if so. the involvement of spouses in footwear purchase was prevalent in over 80% of the cases. high product involvement/weak brand commitment (HPAA/B). low fashion orientation.processing. habitual buyers. low brand consciousness. apathetic buyers Weak Though our survey was not equipped to segregate the low involvement customers from high involvement. Finally. This we believe would provide cues on what communication platforms would be optimal to reach this group of consumers. low focus on non-functional attributes focus on functional attributes less engagement in large amounts of decision making data processing. low functional product attributes interest in market & personal sources of information Price Sensitive.

This leads us to believe that in the footwear market customer involvement and brand . However the brand-connect with customers is significantly weak compared to competitors. and 23% had bought Metro. Metro has positioned itself as a high end product. 58% of them had heard about Metro. Favorite brands of this group of customers – Bata – 17% Woodlands – 25% Florsheim – 14% Hush Puppies – 39% Metro was placed at the bottom (single digits) as favorite brand by both sets of customers. hence it has enjoyed better patronage from customers who own multiple pair of shoes. Favorite brands for this group of customers – Bata – 21% Woodlands – 45% Florsheim – 11% Hush Puppies – 22% o 2 pairs of formal shoes– 36%  Of which having casual shoes • 1 pair – 33% • 2 pairs – 39% • 0 pairs – 17% Of the group which owns 2 pairs of formal shoes. all of them had heard about Metro. and 36% had bought from Metro. • Brand Commitment No of respondents who responded in affirmative to whether they switch brands – 88% No of respondents who confirmed that they don’t care about brand if they find a shoe of their liking – 66% For the subsection of respondents who owned more than 2 pairs of shoes lack of brand commitment was 89%.• % of people having formal/office shoes o 1 pair – 53%  Of which having casual shoes • 1 pair – 56% • 2 pairs – 21% • 0 pairs – 20% Of the group which owns 1 pair of formal shoes.

This has very important implications in designing communications strategy for any shoe maker. This further gives cue. it is expected that purchase frequency of women could be higher for footwear. 48% of them purchase their footwear with their spouses. We believe that a majority of our respondents would be aware of luxury brands in apparel. Attributes used to gauge feelings – • Extrinsic o Price . with options listing the global prestige brands like Gucci. 95% respondents had a purchase frequency of over a year or more. that while customers might have expectations on quality and style in a shoe. • Purchase Influencers/decision makers With an average age of over 27yrs for our respondents. In yet another related question. While our survey covered only male population. 93% of respondents were not aware of the top 5 brands mentioned in the questionnaire. A shoe maker could strive to increase purchase frequency for males by targeting the spouses and probably have innovative joint incentives/promotions. • Purchase cycle In a question of when do people consider footwear purchase. the affinity to a brand is minimal. wearing of old shoe had a 78% response. sunglasses or automobiles. respondents showed overwhelming trend of not being aware of these brands.commitment have low or negative correlation. This also might reflect a broad failure of marketing strategies of the incumbents. though we did not test this hypothesis in our survey. • Aspiration Brand – In a question asking their most coveted brand of shoes. Louis Vuitton etc. Footwear characteristics – An attempt was made to capture important product attributes that play an important role to determine feelings as a motivation toward product attributes. 47% respondents answered having bought a shoe a year ago or more. • Purchase frequency In a question on frequency of purchase.

o Comfort . design and R&D. for which the sole again is the key element in footwear. The favorite brands for this group is as follows Bata – 21% Woodlands – 42% Metro – 6% Florsheim – 13% Hush Puppies – 32% o Style    Flavors Lace vs no laces– 54% Broad vs Narrow Toe – 53% High vs Low Heel – 14% Implications for Product Mix – While the shoe maker would need to display an assortment in lace/no lace and broad/narrow toe category.Below Rs1000 12% Rs10002000 48% o Access Rs20003000 32% Rs30004000 5% Rs40005000 1% 46% correspondents expressed that accessibility to a store was an important element in their purchase decision. The other brands had far less or insignificant share. For the ones for whom brand was very important variable in purchase decision. In the following section. This also has distinct implications for sole production. This will have implication in designing production batch runs to optimize cost for the right product mix. higher heels had very low preference. Bata and Woodlands were the favorite brands. o Brand 78% correspondents paid attention to the brand while purchasing their shoes. • Intrinsic o Style 72% correspondents expressed that style was important or very important in shoe purchase decision. respondents placed heavy emphasis on comfort and durability. both faring equally well. Another 14% placed style as being somewhat important in their decision.

An innovative marketer would have to show value/savings on its product over a horizon of 2-3 years. While media strategy may be build keeping the above trends in mind. Customer Value Analysis • The average price for the product category in which Metro is taken as Rs 1500. it should be noted. and should strive to adopt a value based pricing. quality of sole is a key element in determining comfort in footwear. As expected news channels. Hindu (21%) Television viewing patterns – o Sports Channels – 54% o News Channels – 76% o Bollywood Channels – 33% o Discovery/Animal Life related – 45% For our respondents. Firms like Bata and Dr Scholl’s. 80% customers’ response for average price was in the 1000-2000 and 2000-3000 price range. internet and English dailies seem to have heavy penetration with Times of India enjoying overwhelming patronage. also have high penetration with a substantial patronage enjoyed by wild life. have designed marketing campaigns around their superior soles to differentiate themselves. o Durability Durability also garnered 88% responses of somewhat to highly important. 88% customers mentioned comfort being somewhat important to very important. history and discovery channels. People demand durability and they go to purchase when their old shoe wears out. . Dr Scholl’s is able to command almost 100% premium in the market for its superior soles and comfort factor. that spouses who are important influencers in the purchase process may not be exhibiting the same characteristics in terms of patronage of media vehicles.As expected. shoe being a high involvement product because of nature of use. While elements of comfort were not probed in the survey.27 yrs Internet access – daily Favored Newspaper – Times of India (82%). Personal Characteristics • • • • Average age – 27. This has implications for the limit on increasing footwear purchase frequency by shoe makers.

com.01 40% 0.44 0. Customer Acquisition Cost- . We have assumed a rate of 18%. The cash flow from sales to a single customer is assumed to be occurring every 2 yrs because of the purchase frequency. we have assumed the average defection rate to be 30%.75 1. For lack of customer defection data. a very low retention rate of 30% and a very high proportion of variable costs for lack of data.40 0. giving a margin multiple of 0. Therefore 18% annual cost of capital becomes approximately 39% for a 2 yr period. Fixed costs are 35% of the sales. The net profits are 9% of sales. the CLV is approximately Rs 190 While this is on the lower side. Cost of Capital .60 0.Based on average cost of capital of Bata & Liberty. making it 34% CLV of a customer = m* r/(1+i-g-r) = 44%* 0.29 0.• Variable Cost estimates – from the last 5 yrs P&L statements of the listed firms (Bata & Liberty).29 0.29 = 13% At an average price of purchase of Rs 1500.28.00 Retention Rate 30% 40% 50% 60% 70% 0.09 If an average price increase of 5% is assumed over every purchase.28 0.17 0.83 1. then effective discount rate becomes i – g. We have also assumed no increment in price of the shoe.27 0.56 0.61 0.43 0.81 1.mouthsut.56 0.13 0.40 0.76 1.30 0.86 1. Purchase Frequency – for Metro is assumed to be 2 years.63 0. Metro’s cost of capital is assumed to be between 1720%. Retention Rate – we came across significant customer complaints on www. we have been conservative in assigning a purchase frequency of 2 years. The CLV above can be taken as a base case to compare customer acquisition cost.43 0. Variable Cost = Sales – Fixed Cost – Operating Profit = 56% Contribution margin = Sales – Variable Cost = 44%. Discount Rate 30% 32% • • • 34% 39% 0.

and being largely present in tier I cities. Company Analysis – Metro Shoes The focus has been to do a comparative analysis of Metro with the dominant players in the industry. it has presence in all the segments.The average Selling/Admin costs (as a ratio of sales) for Bata for the past 3 yrs are 16%. Metro does not have any presence in the kid’s range. it is not considered the best value provider. da Vinci • Casual – GenX • Low Cost . Price – Though Metro has presence in all the price segments. Product – Men’s range. Metro has present in the men’s segment in all the price ranges. Assumption – • Bata spends 25% of its selling expenses on customer acquisition and remaining on retention • 30% of sales growth is from new customers (approximating for 30% defection rate of existing customers) Net customer acquisition cost per customer = (25%*16%)/(30%*16%) = 83% For an average price of Rs1500. it amounts to Rs1250 Note – while the absolute nos indicating customer acquisition cost being more than customer value.through tie-up with Florsheim and through its own products. Metro has historically enjoyed much higher brand equity in the women segment. its unhappy customers .Mochi In the women’s range too. Its average turnover growth for the same period is 16%. the relative nos rather than absolute nos should be considered for a comparison of split of focus between customer acquisition and increasing wallet share from existing customers. Metro has been facing quality problems in the market. Brands – • Formal – Florsheim. on which Bata scores very high customer equity. Metro.

However. we could asses the relative strength of the players. However it has a long way to go to match Bata or even a relatively younger company like Khadim’s. Then it became an annual affair. Their footwear lasts only 6 months…. especially when he enters the shoe market once in 1. Promotion Metro has launched a plethora of brands.5 years.” “Metro used to have a sale very rarely. They also sell brands of other outfits in their stores.com... a practice followed by other retailers. it is simple.8%. .have been quite vocal.you may get cheated.” “Buy some basic models . Now it is twice a year.mouthshut. In case you are wondering why. which appear to be quite daunting for a consumer to comprehend. Metro being much smaller in size could be seeing logistics expense of over 3%.” The above are comments from the last 3 months. which one sees on search for Metro – from “We recently purchased a sandle and the quality of the product was so bad that within just 2 days the leather started coming out. Recently got a series of shocks…. We took it to the shop who claims to say it was a manufacturing defect and. We believe that this cannot be completely accounted from by differences in yield per floor area of shops and economies of scale in logistics do play an important factor. in and outbound logistics costs for Liberty shoes in the past 3 years have been 2.do not expect anything of comfort and high quality . Below are the excerpts www. Place – Metro has a decent coverage of tier I towns nearing 70 dedicated outlets. Due to lack of data availability on margins availed by dedicated franchisees of different retailers.6% of sales whereas for Bata the average has been 1. Channel Margins & Logistics costs – 46% of our survey respondents laid emphasis on accessibility in their purchase decisions making distribution strength a key factor of success.

2. The break up of customer response is below • • • • Loyal – 5. Franco Leone 6. We could not measure the effect of this strategy on the market. Florsheim 2.• In 1. we did a dip-stick study on consumer’s ability to recall the campaign.42. right outside Metro’s flagship store at their corporate headquarters in Mumbai.6% Aided – 34. This puts a strain both on the small communications budget of Metro and also increases brand clutter in an environment where customer anyway shows little brand loyalty. Homme A similar list exists for women brands. House Brands Metro Gannuchi Da Vincci Mochi • 3rd Party Brands 1. 4. TV Ad Campaign – ‘Happy feet make Happy Feel’ While our survey did not address response to Metro’s lone TV commercial which was launched in 2006 (and has been off-air for quite some time). 3. Crocs 5.9% Promotional Spends in the Market – FY 07 Advertis er Print TV Total FY 08 Print TV Total FY 09 Print TV Total .7% Unaided – 8. Over 80% of shoppers from the 35 respondents (random mix of men & women) failed to recall the ads.3% Switcher . Richard Brinsley 3. Red Tape 4. Tie – Ups with High End designers – Metro has tied – up with designers like Manish Malhotra and some others to sell their designs and signature products.

00 0.16 0.43 6.37 0.37 0.metroshoes.45 4.46 8.20 0.98 0. has a good brand awareness and commitment from customers who own over 3+ pairs of shoes.Action Relaxo Khadims Liberty Paragon Bata India Caron Lakhani Citi Walk Metro 0.04 2.51 0.66 0.00 Figures in Rs crores. On a search on the internet we could not find any advertisement on internet for Metro.57 6.00 0.08 2.99 4.00 20.45 0.00 11. We have addressed Metro’s possible media strategy in later sections.00 0.79 0.45 4.01 0.01 0.25 0.30 5.44 1.00 8.79 0.22 0.98 0.63 0. Problem Areas – • Low product quality vs price – While the 3rd party.62 9.43 2.90 0.47 0.00 0.01 11.77 0.74 0.82 7.21 0.97 6.22 0. Florsheim range.35 2.19 2.00 0. Metro’s own brands fair poorly Product range – lacks presence in o Sports segment o Kids segment o Clothing Distribution reach – lack of network alliance with any retail major • • .92 15.70 2.25 0.47 0.80 3.75 0.89 20.00 12.72 2. Summary of Comparative analysis – Metro appears to be in a weak position on all comparative metrics.73 7.31 0.72 0.57 0.66 0.03 0.50 0.net is also under construction! All the other players have sophisticated homepages.90 8. Footwear having traits of consumer durables and also fashion lifestyle category.70 2.94 0.74 0.00 6. both TV and print can be effectively deployed for promotions.76 2. If we include global sportswear giants like Nike. It has an upper edge only in the women’s range. the ad-budgets requirement for Metro to gain any credible noise space in the market would be humongous. Source – Tam/AdEx Metro is an insignificant spender. Its website www.31 0.56 2. There is a dominance of TV in this category.54 0.07 0. if used intelligently can also be a powerful medium.30 0.94 4.00 0.39 2.76 1.00 11.15 0. Radio.61 4.22 0.86 0. Out Doors & Internet – Details on ad spend in outdoor and internet was not available.08 0.00 0.89 0. Adidas & Reebok.85 3.17 0.72 3.

due to constraints we could not conduct a comprehensive survey to assess its strength’s from women respondents. However. We expect the following key behavioral patterns that differentiate women customers in their purchase – Women vs Men • • • • • • Higher purchase frequency Shorter purchase cycle – women do not wait till their shoe wears out for a new purchase like men Higher product involvement More receptive to style Comparatively less conscious of durability Significant involvement in decision making for the opposite sex .• • • • Low brand awareness Low brand commitment from customers who are aware Innovation – Metro is not known for breakthrough products or being the style initiator in an industry where predicting new styles is the key to success Communication – no homepage or visible internet presence Relative Strength The only area in which Metro enjoys a comparative advantage is in the women’s range. It has a higher brand awareness and patronage from women.

Market Opportunity & Marketing Strategy Market 1532 mn units Branded (@ 42%) 643 mn units Unbranded (@ 58%) 889 mn units Men (@ 50%) 322 No of Shoes owned4+ Women (@ 40%) 257 Kids (@ 10%) Age – 20-30 (@24% from 64 survey) Age – 3040 Age – 4050 No of Shoes owned4+ Age – 2030 Age – 3040 .

Metro having a better traction with women would require less new customer acquisition . in SEC A. C Assumptions – • A broader survey on the lines of the one conducted can be conducted across gender and geography to estimate the market size (which is 24% for the average age of 27 years) • SEC A. B & C segments • Higher no of shoe ownership is a proxy of high involvement.Age – 4050 Focus Group – Men & Women owning more than 4 pairs of shoes (belonging to High Involvement & Low Brand Commitment). We are assuming this because respondents’ focus on the extrinsic/intrinsic attributes in the survey did not show any significant change with no of shoes owned • High brand switch tendency (as shown in our survey) is indicative of low brand commitment Characteristics of focus group – males • • • • High possibility of habitual buying High possibility of brand switching  helps Metro attract new customers Relatively less focus on brand attributes  helps Metro attract new customers Style is an equally important attribute as comfort and durability for this group.C represents the entire branded market • Customer Value to Acquisition cost ratio will remain comparable in SEC A.B. B. Launching styles that are successful in the market has been found to be a strategy involving low cost with better returns in the Indian market Characteristics of focus group – females • Apart from the above qualities of males.

Reach turnover of 100 crores (based on no of stores. Market Development with focus on men & women with low brand commitment Overall Metro should embark on selective specialization with focus on style as the centre of product attribute. Invest in R&D in design Market Harvesting Strategy – Current Products Market Penetration (focus on women) Market Development (focus on men & women) New Products Current Markets - New Markets - 1. Make a good homepage!!!! 2. Market Penetration with focus on women 2. Rationale for the above strategy – • Metro cannot compete on distribution with market leaders . we assess Metro’s current turnover to be between 60 to 70 crores) 3.• Women group would also be target for purchase for their spouses Overall Growth Strategy Short Term objectives – 1. Double the no of styles launched every year Medium Term Objectives – 1. Increase the no of own/franchisee stores to 100 (currently at 66) 3. Reduce no of sales/discount offers – focus on inducing purchase for style rather than discount sales or any other factor 5. Strive to attain a bottom-line margin of over 5% with a top-line YoY growth of double the industry growth  with a focused split of growth between same stores sales and new stores sales 2. Reduce the brand clutter 4.

Compared to that launching a new style entails lower costs. New customer acquisition will be function of low brand commitment in consumers for other brands. its cycle extends over a year compared to 3 cycles in a year for fashion industry. Metro has to focus on competing on variable costs advantages and avoid situations which will demand fixed costs commitments. Metro having low Fixed Costs can launch new styles relatively cheaper compared to the large players which have their own production facilities where new styles would involve time and dedicating fixed costs. Metro negates the size and capital advantage that the dominant players have With the larger players vertically integrated and well entrenched with distribution networks in the market. By focusing in this fashion. Its focus should be to outsmart the bigger players on style. • Reduce time to bring a competitor’s successful style in the market: . Given its existing structure.• • Bata and Liberty already have alliance with Reliance and Pantaloon Retail Metro has a low brand recall & commitment. It has to focus on selective differentiation build around ‘style’ as its strength • • Dealing with Competition – Market Follower & Market Challenger Metro should follow a mix of market follower & challenger strategy. rather than Metro’s ability to attract and retain customers Metro has no production facility of its own. it is most suited to fight on style & design which changes every season than comfort or durability which would require fixed investments in better technologies. Key elements of Competitive Strategy – • Strive to shorten the lifecycle of a new style: Though the footwear industry also has similar cycles of styles like the fashion and apparel industry. At the generic strategy level Metro cannot follow low cost strategy with outsourced production. It should invest in developing strengths around style prediction and style imitation of market leaders.

compared to a ROI based pricing. it has kept its low cost imitators guessing. Metro should develop a comprehensive web-site with blogging capabilities. Example of shortening purchase cycle – Titan Titan’s ‘fastrack’ has significantly reduced watch purchase cycle in an era of cell phones where style rather durability or utility is the key driver of purchase.Because of consumer’s adherence to the product on shelf than brand. with annual cycles of fashion. Example of successful leadership in Style – Sport Obermeyer A US firm in ice skiing accessories. and providing itself time horizon to undertake market skimming at the time of launch of new season every year. Pricing Strategy – New Style launch – Cost+ pricing Since Metro would have low fixed investments. it should price its products based on its costs with a target mark-up. so that it can have a dialogue with its consumers directly rather than be criticized on other websites and lose precious time to respond. Metro’s ability to imitate a successful style at low cost can provide returns. It . and has invested heavily in design and style prediction. price differential would be an important element in attracting consumers.mouthshut. For its target market of low brand commitment consumers. Through continuous style innovations. lower prices would hurt the larger players more. Competing on its variable costs strengths and lower market share.com has scores of review comments by consumers on Metro and all the other players. Customer Relationship StrategyInternet based Interactive Communication – Product review website like www. Imitator Style launch – Going Rate Pricing Metro should develop ability to imitate and launch competitors’ styles at a cheaper price. Obermeyer has outsourced its production to Asia.

creating design competitions and engaging customer will increase its chances of success.gmblogs. a firm first needs to develop a robust and consistent internal communication environment. It needs to develop significant capabilities in data mining and studying current trends of its own customers and of competitors. Managing the Moments of Truth – Sales executives at footwear retail stores are 2nd in customer interaction disaster only to Banking call centre executives. Given the fact that the effort is in shortening purchase cycle. Customer blogging and product reviews 2.com 3. Key management blogging about new products and activities at Metro – eg. durable goods etc have been able to show improvement in their sales executives. Sharing product details on website. knowing customer details is crucial. Its focus on advertising should be events/launch based rather than long-term corporate brand building advertising. Metro has to take strong organizational level activation including its franchisees and suppliers for an effective customer engagement strategy. Over the years. Internal CommunicationTo implement a successful external and interactive communication strategy. Assumption – Fundamental traits of consumers: .should also encourage design competition and product reviews on its website and enable e-commerce facilities. Metro should lay extra emphasis on its sales management process. Product description and intricate details of its products on website Metro has better chance of success with high involvement customers who own multiple pairs of shoes. Metro has invested in deploying SAP recently to integrate data from its various stores. players in most other retail formats – apparel. The challenge however is in implementing a successful CRM information system by training employees.Robert Lutz. Branding Strategy – Metro should avoid any advertising war that can lead to any competition on fixed costs deployment. Vice Chairman at General Motors used to write a blog along with other very senior GM executives at – http://fastlane. Key features of its proposed website – 1.

just cool o Doesn’t care which car he drives • Advertising & Promotion Cues Focus on subtle attacks on consumers’ trait to buy new shoes when old ones wear out – a. which can. Mass Media Strategy – • Increase spending from current negligible levels . Comfort and Durability are a must. we are attempting to challenge the last trait of the customer. c. cause substantial survival risks to the company. given relative smaller size of Metro. Challenging the other 2 would involve fixed costs commitment. style rather than brand will decide what will be bought 3. Design Brand Benefits – o Functional – Value in style & design. Brand Map Template – • • • Brand Substantiators – Points of Parity  Comfort. Encourage gift vouchers for special occasions like birthday’s/Diwali/New Year/Christmas etc. Devise promotional pricing for women & men package purchase. durability Brand Differentiators – Points of Difference  Style.1. People buy when their shoe wear out Out of these 3 fundamental traits. b. Given that. Address communication to women for both men & women shoes. be the first to bring the latest in style to customers o Emotional –  Source of confidence  Source of attention from the opposite sex Brand Personality – o Attractive o Handsome o Not pricy o Confident o Loses interest in things – gets bored fast – needs excitement o Not a daredevil. Focus on shoe rather important than brand 2.

more bang for the buck o Reimbursement of the spends by Metro implies franchisee and distributors spend their own capital thereby putting their skin in the game o Ease on working capital. which Metro may reimburse  benefits o More focused spend delivery. Metro’s cash spending cycle on media splash will be eased because of delayed payment cycle Risks • • • • • Risks in style prediction Rationalizing cost structure for quicker style launches and imitation easier said than done Reduction in no of brands may lead to loss in sales Assumption of changing purchase cycle of consumers may not hold true Investment in R&D in style may have a long gestation period • Alternative Strategy Focus on the high end segment – rich household (estimated population of 30 million) Short Term objectives – .Avoid TV due to heavy spillage (Metro has already stopped its TV commercials) • Deploy print and out of home for product descriptive/informative ads during launch of a new style • Deploy radio for creation of buzz around launches – sponsor radio talk shows and competitions Radio and Print because of their localized circulation/reach unlike TV which has a regional or national coverage can be cost effective for Metro because of its smaller distribution network • Encourage franchisees and regional distributors to develop their own media spending plan (with tight control on content).

Reach turnover of 100 crores Short – term steps – 1. Develop capabilities in the fashion. fashion-show industry Risks 1. Consider rebranding and redesign of its brand portfolios Long-term Steps – 1. 5. While there is a thriving eco-system of high end apparel makers/designers in India. 2. Re-evaluate the efficacy of its existing brand portfolio Roll back the no of stores – concentrate on SEC A cities Strengthen tie-ups with celebrity designers Use celebrity endorsers Make a good homepage!!!! Invest in PR Medium Term Objectives – 1. 4. an umbrella for marketers of luxury goods 2. Evaluate viability of diversification into a leather fashion house with products like hand bags. a similar eco-system for leather products is not yet developed. 3. Target a double digit profit margin 2. Become a member of the luxury marketing council.1. it has launched Mochi as a lower price range. jackets. High end leather footwear ecosystem is underdeveloped and there might be considerable people constraints in developing capabilities in high end design and style . Moving up into the premium segment after covering lower range might be confusing to consumers and might not be accepted 2. 6. Or else evaluate tie-ups with leather accessories houses like HiDesign 3. Establish tie-ups with celebrity international designers (examplefrom Italy) Medium – term Steps – 1. belts 2. Establish Metro as an aspirational or luxury brand 3. While Metro has been traditionally in the higher price segment.

Textiles.Reference: • A thesis in Clothing. and Merchandising – Leslie Everson • Zaichowsky – Measuring the involvement construct • Zaichowsky – Conceptualizing involvement • Warrengton & Shim – Empirical investigation of the relationship between product involvement & brand commitment .

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