Matrix Footwear India

by R Chandrasekhar
He loved India. The sights, the sounds, the smells...It was leather country too. And he, Robert
Stevens, the CEO of the Indian subsidiary of the American footwear transnational, Matrix,
was a true-blue leather man. In fact, it always reminded him of his last stint in Italy, another
country that had left a colourful impression on him. Of course, the contrast could not be
starker: while India was a super-economy market for Matrix, Italy had been super-premium.
Which was why he was determined to go up-market- a tack that his colleagues were
scandalised by...
For Robert Stevens, the 47-year-old CEO of Matrix Footwear India (Matrix), the best thing
about being based in Delhi's Connaught Circus was the half-a-kilometre walk from the car-
park to the office. Some of the CEOs who continued to operate out of the Capital's fading
commercial centre always alighted in front of their offices, instructing their drivers to then
head for the car-park, but not Stevens. Not that he enjoyed walking; certainly not in the
summers when the temperatures, even at 10 in the morning, which was usually when Stevens
arrived at work, touched 40ºC.
This stroll had nothing to do with fitness either. It was work: an opportunity for Stevens to
study the footwear-habits of his fellow-pedestrians. Every time he saw a branded foot,
Stevens would mumble to himself: ''Woodland, Lee Cooper, pass, Matrix, Matrix, pass, Lee
Cooper, pass, Woodland, Red Tape, Windsor, Matrix, Hush Puppies, Matrix pass, pass,
Matrix, Florsheim!'' And with Matrix enjoying a 15 per cent share in a market dominated by
the unorganised sector, Stevens would, generally, enter the office on a high note. ''Score 27
(or whatever) for Matrix today, Anna,'' he would tell his Executive Assistant, Anna Hegg,
who had moved with him from Matrix's Italian operations 8 years earlier. ''All's well with the
world.''
The summer of 1998 changed that. To Stevens' trained eye, it seemed as if, with each passing
day, he saw more engineer boots, more shoes with side-walk soles, more chunky shoes, and
less of Matrix's once-ubiquitous 6-hole lace-ups. It was obvious; the market was passing
Matrix by. And so it was that, finally, one July morning, Stevens huffed his way into office:
''Score 8 for Matrix today, Anna, and schedule a meeting next Monday with the heads of
marketing and finance. And get SB from Works to fly in too.''
Monday. Stevens, who had insisted on driving right up to the office for the past week, entered
the conference-room to find Uday Menon, Vice-President (Marketing), Pankaj Mishra,
Director (Finance), and Sunil Bhatnagar, Executive Vice-President (Operations), in the midst
of an animated discussion on the possible reason for the summons. Stevens greeted them
effusively-although they reported to him, he considered them more his peers than
subordinates-but still held back from mentioning the reason behind the hurriedly-called
meeting.
''I'm a great believer in history,'' he told his astonished audience. ''So, I want you to switch off
your phones, and pretend we're back in 1989. I did not move to India till 2 years after, and
you, Uday, joined us only in 1992, but Pankaj and SB were here. SB, you've been with
Matrix the longest. What was our position in 1989?''
Bhatnagar, a 57-year-old Matrix-lifer with a shock of white hair, was only too pleased to
reminisce: ''Then, as now, we were the market-leaders, with a share of 17 per cent. Our
franchise was built around Value-For-Money (V-F-M). Our only objective was to cater to the
economy segment of the market. At that time, this segment was all there was to the market,

1
actually. Our low-value, high-volumes strategy helped us build tremendous brand equity with
our primary audience: the growing Indian middle-class...''
''I remember,'' interrupted Menon, who, at 36, was the youngest in the group, ''shopping in the
neighbourhood Matrix store as a child. The entire family would visit the store; it was more of
an evening-outing than a shopping-trip. The sales-people were friendly, and the service was
unhurried. Quality and affordability were taken as constants...''
''Then we went and did something stupid, didn't we?'' asked Stevens.
''We did,'' admitted Mishra, 52, who, in a well-cut grey business suit, looked nondescript as
only CFOs can. ''But there was a method to our madness. And faultless logic behind our folly.
A rapid increase in the number of yuppies in the late 1980s made it possible for companies to
move from utility marketing, which stressed the functionality of products, to lifestyle
marketing, where products like footwear could be sold as fashion-accessories. However, a
review of our portfolio revealed that although we had a range of products for people
belonging to various age-groups, we had nothing distinctive to offer the youth. As a company
too, Matrix seemed to have a fuddy-duddy image, crying to be reworked into a trendy one.
The obvious solution to both seemed to be to enter the premium segment of the market...''
''Sound reasoning,'' interjected Stevens, ''and, if I had been there, I might well have made the
same decision. So, we launched several sharply-focused, premium brands. But things didn't
work out quite the way we thought they would, did they?''
Bhatnagar nodded ruefully: ''No, they didn't. But the real reason for the downslide was
Matrix's change in focus. Suddenly, volumes no longer mattered; value was the new mantra.
We went overboard: barely 3 months after we launched our premium footwear, we were
selling a range of fashion-accessories that had nothing to do with footwear. A Matrix retail
outlet became a mini-departmental store, where footwear jostled for space with ready-to-wear
garments, sports goods, leather accessories, like belts and executive bags, and other
accessories. As a result, you could pick up a pair of Matrix canvas keds for Rs 90-or you
could pick up a Matrix blazer for Rs 1,800...''
''This proliferation of offerings created dissonance in the mind of the typical middle-class
consumer,'' concluded Menon. ''She felt betrayed, and turned away. And that was the
beginning of the rot.''
''You're right,'' agreed Mishra, ''but there was more to it than mere customer preference. At
the low end, our competitors rushed in to fill in the perceptual position vacated by Matrix. At
the premium end, new entrants sprung up to take advantage of the market that we had
created. They were nimble and focused, and, unlike us, had no historical baggage...''
''And,'' continued Menon, ''Matrix did not have the marketing expertise to tackle the premium
segment. Despite a range of exciting products, our target-audience perceived Matrix as a
janata brand. At the retail level too, we failed to get things right. While the ambience in all
our stores cried economy, the product-range was skewed towards premium. That turned away
both our traditional customers as well as the new ones we hoped to lure. We also seem to
have been indiscriminate in choosing the fashion-accessories we could extend the brand to.
Moving from low-priced to premium footwear is one thing; moving from low-priced
footwear to fashion-accessories is another altogether.''
''I went over the entire chapter when I took over in 1991,'' pointed out Stevens. ''Four things
seemed to have gone wrong with our decision to go premium. One, a company that was used
to mass-marketing simply did not have the requisite skills to build premium brands. Nor

Source: Business Today

2
could it divorce the new brands it created from its v-f-m image. Consumers never got around
to accepting this basic contradiction. Two, the focus on premium offerings created several
operational problems. Designed for mass-production, our manufacturing processes couldn't
handle the small batch-sizes the change necessitated.''
''Three, our alliances with some footwear transnationals, which enabled us to retail top-of-
the-line international brands in our stores, never really amounted to anything. With the
premium segment accounting for a mere 10 per cent of the market, these offerings just added
to our inventory problems. And finally, our sales-people were incapable of becoming the
specialised sellers required to interact with such customers. Pankaj, this is something we all
know, but could you sum up the financial implications of our decision to change focus?''
''Certainly. Two years after we made the change, in 1991, Matrix recorded its first-ever loss
in its 43-year-long existence in India: Rs 8 crore. The next year was worse: our sales fell by
nearly 7 per cent, and our losses rose to Rs 9 crore.''
''Which was around the time I replaced Geoff as CEO,'' interjected Stevens. ''Uday, you were
hired specifically for the purpose of turning things around. What were the key things that
helped us get out of the hole we had dug ourselves into?''
''To begin with, we ended our alliances with the transnationals. We also decided to stick to
only footwear, and removed fashion-accessories from our portfolio. To strengthen our core
position, we launched, between 1992 and 1994, 200 products in the popular, or economy,
segment of the market. We replaced our incentive programme, which encouraged our
salespeople to promote the sales of high-value products, with one that looked at volumes-and
nothing else. And we segmented our 1,100-strong retail chain into 3 categories: a few
premium stores, that catered to the top end of the market; many family-stores, which sold the
popular range; and as many bazaar-stores that sold seconds at reduced prices...''
''That wasn't all,'' interrupted Bhatnagar. ''We decided to slash our production of premium
products, and this caused our raw material bill to fall by over 45 per cent. We upgraded our
logistics and computerised our inventory-management systems to ensure that the right
products were available at the right place at the right time. And we slashed our ad-budget in
half, and offered a 25 per cent discount throughout 1993 to ensure that people flocked to our
stores again.''
''Now for the future,'' concluded Stevens. ''You must all be aware of my personal efforts to
contribute to our knowledge of the market. Anna refers to it as RBWA, Research By Walking
Around. Well, over the past few months, I have seen more and more people moving towards
premium offerings in the shoes market. And I am not just talking about our contemporaries. I
am speaking about the salesperson who works in the courier company down the road, or the
front-office executive in our own organisation. All around us, people are paying more for
their footwear. And Matrix is getting nothing out of it...''
Support came from an unexpected quarter, Bhatnagar. ''I know. My son, who is 17 years old,
says the shoes we make are old-fashioned. He insists on wearing huge, chunky boots.''
''Exactly,'' exclaimed Stevens. ''For how long can we ignore the young? Although the
premium segment may account for a mere 12 per cent of the market, it is growing at the rate
of 30 per cent. And that is where the margins are.''
''Aren't we forgetting 1989?'' queried Mishra.
''No way,'' said Stevens. ''I didn't get us talking about the past to illustrate how we managed to
save the day. I believe that the market wasn't ready for us in 1989. Today, it is...''

3
''Even globally, Matrix is known for its sensible v-f-m offerings-not engineer boots,''
countered Menon.
''True,'' accepted Stevens, ''but the profile of the populations in most developed countries is
distinctly tinged with grey. Here, the population is getting younger, and we just can't afford
not be present in the premium segment.''
It was evident to Stevens that Menon and Mishra did not buy his arguments. To them, he was
forcing the company to take the same self-destructive path it had tread in 1989. And
Bhatnagar was, at best, a silent ally. Doggedly, he pushed on: ''I know what you guys will
bring up next: manufacturing and distribution. These things can be worked out. But, if we fail
to recognise that the market is moving on, no amount of manufacturing effectiveness or reach
will help us. Come on, guys. You surely aren't going to let the memories of 1989 influence
Matrix's strategy forever, are you?''

Should Matrix stay away from the premium end of the footwear market? Or should it take a
shot at it again? How can Matrix diversify into unrelated areas, like fashion-accessories,
without repeating the mistakes of the past? What changes will this entail in the company's
approach to production and distribution? How can Stevens ensure that the move will not
tinker with the company's core business of affordable footwear? Must a company like Matrix
wear the millstone of its failure around its neck forever? Or should it ignore the opportunities
held out by the young adults market, and stick to the economy segment of the footwear market
alone?