Name Anubhav (0910010)

Sameer
Mohammad Suheb
Padmini Kant Mishra
Radha Rani

Metro Shoes

Market Analysis of the

recommendations for Metro

leather

footwear

industry

and

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. Mens footwear accounts for almost half of
the total market, with womens shoes constituting 40 percent and kids 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, stateof-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 mens footwear segment though the worlds 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.
Indias 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 nonleather 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 highend 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
2. Product differentiation - 2
3. Importance of economies of scale -4
4. Effect of fixed costs - 3
5. Regulatory environment - 4
6. Incumbents acquiescent - 3
7. Accessibility to distribution - 5
8. Accessibility to suppliers -4
9. Importance of IP, patents etc - 5
10. Importance of brands - 3
11. 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. The fixed costs for retail operations are relatively low and new entrants
are common. However, 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. As a consequence, it is difficult for
new entrants to increase in size considerably, and new entrants who try to enter
Indian region are facing higher retaliation than counterparts within other
countries of the region. Given the large number of low cost manufacturers
supplying the market, it is relatively easy for new players to establish the
required supply chain. What is more, new entrants can differentiate themselves
from the major players by offering professional services and advice centers. With
the exception of certain specialist types of footwear, such as sportswear and
designer products, brand recognition of footwear retailers is relatively low,

further facilitating the entrance of new players. The fast market growth may
encourage new entrants to some extent. Overall, the threat of new entrants with
respect to the Indian footwear retail market is strong.
Threat of Substitutes 0.67
Low cost switching - 1
Cheap alternative - 0
Beneficial alternative -1
As footwear is a basic necessity, the threat of substitutes to the market is very
limited. With the exceptions of very poor areas in non-developed countries
where the lack of players pushes people towards personal production of
footwear, there are no other substitutes to footwear market. However, there is a
significant degree of substitution between segments of the market. For example,
sportswear is often a substitute for other more traditional footwear types.
Overall, the threat of substitutes is low.
Industry Rivalry 3.4
1. Number of players - 4
2. Competitor size - 3
3. Low switching cost - 5
4. Product differentiation - 3
5. Importance of fixed costs - 3
6. Economies of scale (ease of expansion) -3
7. Exit barriers -2
8. Diversity - 5
9. Similarity of players -3
10. Storage costs - 3
Although footwear retailing is highly fragmented, the market is dominated by
large retail groups, between whom there is a high degree of rivalry. However,
fixed costs for retail operations are not prohibitively high and, therefore, smaller
companies easily co-exist within the market. Furthermore, this allows relatively
easy expansion and output capacity, which enhances rivalry. There is a high
degree of diversity between retailers in terms of types and designs, with
dedicated shoe retailers competing with apparel retailers and large supermarket
chains. This means that in order to be successful brand building has to be central.

The healthy market growth in India might reduce the degree of rivalry to some
level. Overall, rivalry between footwear retailers is assessed as moderate to high.

Competitor Analysis - Key players Bata, Liberty, Action, Lakhani, Khadim &
Woodland
2008
Bata

2007

Sales

867

770

707

7.1%

5.7%

6.2%

1.9%

258

238

221

195

6.4%

8.0%

11.2%

7.6%

Sales

na

89

96

93

Margins

na

6.5%

6.7%

4.4%

152

44

120

101

3.0%

4.4%

3.0%

Na

na

150

132

67

na

3.3%

3.3%

3.3%

Sales
Margins

Action

2005

989

Margins

Liberty

2006

Lakhani Sales
Margins

Khadim Sales
Margins
Rs crores; Before Tax margins

Metro
Shoes

Bata

Liberty

Khadim
s

Woodlands

No of Exclusive
Retail Outlets
No of Cities

66 (in 2007)

1300

375

264

230

31

All

22

All major cities

Model
Distribution

Exclusive +
Multi-Brand
Outlets
in
malls

Exclusive +
Multi-Brand
Outlets
in
malls

All
major
cities
Exclusive +
Multi-Brand
Outlets
in
malls

Exclusive
+
Multi-Brand
Outlets
in
malls

Sales Volumes
Network Alliance

na
None

Foreign
alliance

Florsheim

989 Cr
Reliance
Retail
Bata Global
(Hush
Puppies),
Reebok

Exclusive +
MultiBrand
Outlets in
malls
200+
None
None

None

of

brand

240Cr
Pantaloon
retail
None

330cr
None

Horizontal
Diversification

None

Product Range

Formal
Casual

and

Plan
to
launch
Apparel
Formal,
casual and
sports

None

Lifestyle +
jewellery

Apparels

Formal,
casual
and
sports

Formal and
casual

Mainly
outdoor
casual

and

BATA (Market Leader):

1300 retail outlets all over the country;
Serves 1 million customers per day;
Employs more than 40,000 people;
Operates 4,600 retail stores Worldwide;
Manages a retail presence in over 50 countries;
Runs 40 production facilities across 26 countries;
Key Elements of Batas 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.

Batas new stores are based on the international format of Bata Stores and

have a minimum area of 3000 sq. ft

It unveiled a 10,000 sq ft Mega Store at Vadodara (in the western Indian state
of Gujarat). This store was spread across 4 floors and displayed a range of 800

designs.
By 2010 Bata aims to open 200 new stores and explore institutional markets

such as hospitals, hotels, and defense establishments.

Network Alliance: In January 2008, Bata and Reliance Retail announced a tieup 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.

It also launched its new Spring Summer Collection in its stores, offering
several new trendy designs targeted at the young customers, under its famous

brands such as Marie Clair, North Star, Power and Weinbrenner.

Diversification: Bata intends to launch clothing products.

LIBERTY: (Market Challenger)

375 exclusive Retail Stores and over 6000 multi-brand outlets.

2008 winter collection for men from Liberty Shoes.

Spring-Summer Collection 2009 enters with a favorable response in the

market.
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. The program, aptly
called Fit Reh India, invites people of all age groups to
participate in a host of fitness and sporting activities including
jogging between 5.30 a.m. and 9.30 a.m. For this purpose 70
different parks have been identified as Joggers Parks in 10 cities
around the country. They include Delhi, Mumbai, Ahmedabad,
Lucknow, Pune, Baroda, Kanpur, Nagpur, Banglore and Ludhiana.
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.
The fitness enthusiasts have also been visiting the Liberty Shoes
stalls at the program sites showing keen interest in the Libertys
range of trendy sports shoes further strengthening the brands
association with a sporty health conscious image that appeals to
the young as well as the young at heart.
Innovation: AC shoes - as the name suggests, are shoes that
keep the feet cool and comfortable even in the most trying
conditions. 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. This unique innovation ensures that the feet
never sweat, 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. It is available in multiple designs and colors.

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 1,500 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 companys annual turnover

Production capacity of 12000 shoes per day

Targeting a yearly growth of 35%

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. Though data for quantitative
comparison was not available, the brands image and message
has been received well in the market.
Diversification Woodland has embarked on horizontal
diversification and sells casual apparels in its stores in the same
brand. The details of its revenue or bottom-line growth were not
available, but the strategy of increasing wallet share from its
existing customers seemed to have worked well, forcing Bata to
announce similar plans.

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.
It also strengthened the organized retailing in footwear. The affluent customers in India
today will have a wider choice in buying stylish and comfortable shoes. However the
leading foreign brands have entered the market through sales & distribution tie-up with
local players in the leather segment. This is in stark contrast to the trend in the
sportswear segment where Nike, Adidas & Reebok have significant presence on their
own.

Customer Analysis
We have conducted a paper based survey to collect primary information about
customer behavior and preferences. Our response set consists of 100 usable
responses. The sample was the various programs in IIMB. Hence this sample
cannot be representative of the population. However, it could be fairly accurate in
representing the young to middle-aged male consumers of medium to high
income category.
Footwear purchase has been assumed to be a high customer involvement because
of intimate nature of the product, and its affect on customer in case of bad

quality. This has implications for brand commitment from consumers and also on
the purchase decision making process.
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, (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),
high
product
involvement/weak
brand
commitment
(HPAA/B),
low
product
involvement/strong
brand
commitment
(LP/SB),
low
product
involvement/weak brand commitment (LP/WB). Given the classification model
proved to be successful with their college student sample (n=615), it was further
postulated the four groups would display different consumption attitudes or
behavior for a specific clothing product category.

Brand Commitment

Product Involvement

Strong

Weak

High

Low

interest in market & personal sources of

information;
importance on functional and nonfunctional product attributes
interest in market & personal sources of
information
Price Sensitive; low fashion orientation; low
brand consciousness; low focus on nonfunctional attributes

less engagement in large

decision making data
habitual buyers; low
functional attributes
less engagement in large
decision making data
apathetic buyers

amounts of
processing;
focus on
amounts of
processing;

Though our survey was not equipped to segregate the low involvement
customers from high involvement, the involvement of spouses in footwear
purchase was prevalent in over 80% of the cases. This suggests that the general
nature of footwear purchase is complex and involves significant to high
involvement.
The survey also attempts to capture characteristics of media consumption
behavior of the consumers. This we believe would provide cues on what
communication platforms would be optimal to reach this group of consumers.
Finally, a comparative brand study of Metro Shoes with other leading brands was
also done to assess the current performance of Metro.

Footwear Consumption Patterns

No & Type of Products owned
Findings

% 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, 58% of them had heard about
Metro, and 23% had bought Metro.
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.
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.
Metro has positioned itself as a high end product; hence it has enjoyed better patronage
from customers who own multiple pair of shoes. However the brand-connect with
customers is significantly weak compared to competitors.

Brand Commitment

No of respondents who responded in affirmative to whether they switch brands

88%
No of respondents who confirmed that they dont 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%. This leads us to believe that in the footwear market
customer involvement and brand commitment have low or negative correlation.
This also might reflect a broad failure of marketing strategies of the incumbents.

Purchase frequency

In a question on frequency of purchase, 95% respondents had a purchase

frequency of over a year or more. In yet another related question, 47%
respondents answered having bought a shoe a year ago or more.

Purchase cycle

In a question of when do people consider footwear purchase; wearing of old shoe

had a 78% response.

Purchase Influencers/decision makers

With an average age of over 27yrs for our respondents, 48% of them purchase
their footwear with their spouses. This has very important implications in
designing communications strategy for any shoe maker. While our survey
covered only male population, it is expected that purchase frequency of women
could be higher for footwear. A shoe maker could strive to increase purchase
frequency for males by targeting the spouses and probably have innovative joint
incentives/promotions.

Aspiration Brand

In a question asking their most coveted brand of shoes, with options listing the
global prestige brands like Gucci, Louis Vuitton etc, respondents showed
overwhelming trend of not being aware of these brands. 93% of respondents

were not aware of the top 5 brands mentioned in the questionnaire. This further
gives cue, that while customers might have expectations on quality and style in a
shoe, the affinity to a brand is minimal. We believe that a majority of our
respondents would be aware of luxury brands in apparel, sunglasses or
automobiles, though we did not test this hypothesis in our survey.
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.
Attributes used to gauge feelings

Extrinsic
o Price

Below Rs1000
12%

Rs1000-2000
48%

Rs2000-3000
32%

Rs3000-4000
5%

Rs4000-5000
1%

o Access
46% correspondents expressed that accessibility to a store was an important
element in their purchase decision.
o Brand
78% correspondents paid attention to the brand while purchasing their shoes. For
the ones for whom brand was very important variable in purchase decision, Bata
and Woodlands were the favorite brands, both faring equally well. The other
brands had far less or insignificant share.

Intrinsic
o Style

72% correspondents expressed that style was important or very important in

shoe purchase decision. Another 14% placed style as being somewhat important
in their decision. 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, higher heels had very low preference. This will have
implication in designing production batch runs to optimize cost for the right
product mix. This also has distinct implications for sole production, design and
R&D. In the following section, respondents placed heavy emphasis on comfort
and durability, for which the sole again is the key element in footwear.
o Comfort
As expected, shoe being a high involvement product because of nature of use,
88% customers mentioned comfort being somewhat important to very important.
While elements of comfort were not probed in the survey, quality of sole is a key
element in determining comfort in footwear. Firms like Bata and Dr Scholls, have
designed marketing campaigns around their superior soles to differentiate
themselves. Dr Scholls is able to command almost 100% premium in the market
for its superior soles and comfort factor.
o Durability
Durability also garnered 88% responses of somewhat to highly important. This
has implications for the limit on increasing footwear purchase frequency by shoe
makers. People demand durability and they go to purchase when their old shoe
wears out.
An innovative marketer would have to show value/savings on its product over a
horizon of 2-3 years, and should strive to adopt a value based pricing.
Personal Characteristics

Average age 27.27 yrs

Internet access daily

Favored Newspaper Times of India (82%); 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, internet and English dailies seem to have heavy penetration
with Times of India enjoying overwhelming patronage. As expected news
channels, also have high penetration with a substantial patronage enjoyed by
wild life, history and discovery channels. While media strategy may be build
keeping the above trends in mind, it should be noted, that spouses who are
important influencers in the purchase process may not be exhibiting the same
characteristics in terms of patronage of media vehicles.
Customer Value Analysis

The average price for the product category in which Metro is taken as Rs
1500. 80% customers response for average price was in the 1000-2000 and
2000-3000 price range.

Variable Cost estimates from the last 5 yrs P&L statements of the listed
firms (Bata & Liberty), Fixed costs are 35% of the sales. The net profits are
9% of sales.
Variable Cost = Sales Fixed Cost Operating Profit = 56%
Contribution margin = Sales Variable Cost = 44%.

Cost of Capital - Based on average cost of capital of Bata & Liberty, Metros
cost of capital is assumed to be between 17-20%. We have assumed a rate
of 18%.

Retention Rate we came across significant customer complaints on

www.mouthsut.com. For lack of customer defection data, we have
assumed the average defection rate to be 30%, giving a margin multiple of
0.28.

Purchase Frequency for Metro is assumed to be 2 years. Therefore 18%

annual cost of capital becomes approximately 39% for a 2 yr period. The

cash flow from sales to a single customer is assumed to be occurring every 2 yrs
because of the purchase frequency.

Retention Rate

Discount Rate
30%
32%

34%

39%

40%
0.27
0.40
0.56
0.75
1.00

30%
40%
50%
60%

0.30
0.44
0.63
0.86

0.29
0.43
0.61
0.83

0.29
0.43
0.60
0.81

0.28
0.40
0.56
0.76

70%

1.17

1.13

1.09

1.01

If an average price increase of 5% is assumed over every purchase, then effective

discount rate becomes i g, making it 34%
CLV of a customer = m* r/(1+i-g-r) = 44%* 0.29 = 13%
At an average price of purchase of Rs 1500, the CLV is approximately Rs 190
While this is on the lower side, we have been conservative in assigning a
purchase frequency of 2 years, a very low retention rate of 30% and a very high
proportion of variable costs for lack of data. We have also assumed no increment
in price of the shoe. The CLV above can be taken as a base case to compare
customer acquisition cost.
Customer Acquisition CostThe average Selling/Admin costs (as a ratio of sales) for Bata for the past 3 yrs are
16%. Its average turnover growth for the same period is 16%.
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, 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.

Company Analysis Metro Shoes

The focus has been to do a comparative analysis of Metro with the dominant
players in the industry.
Product
Mens range- through tie-up with Florsheim and through its own products,
Metro has present in the mens segment in all the price ranges.
Brands
Formal Florsheim; Metro; da Vinci
Casual GenX
Low Cost - Mochi
In the womens range too, it has presence in all the segments. Metro has
historically enjoyed much higher brand equity in the women segment.
Metro does not have any presence in the kids range.
Price
Though Metro has presence in all the price segments, it is not considered the best
value provider, on which Bata scores very high customer equity. Metro has been
facing quality problems in the market, and being largely present in tier I cities, its
unhappy customers have been quite vocal. Below are the excerpts from
www.mouthshut.com, which one sees on search for Metro

We recently purchased a sandle and the quality of the product

was so bad that within just 2 days the leather started coming out.
We took it to the shop who claims to say it was a manufacturing
defect and...
Buy some basic models - do not expect anything of comfort and
high quality - you may get cheated. Recently got a series of
shocks.
Metro used to have a sale very rarely. Then it became an annual
affair. Now it is twice a year. In case you are wondering why, it is
simple. Their footwear lasts only 6 months.

The above are comments from the last 3 months.

Place
Metro has a decent coverage of tier I towns nearing 70 dedicated outlets.
However it has a long way to go to match Bata or even a relatively younger
company like Khadims.
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. Due to lack of data
availability on margins availed by dedicated franchisees of different retailers, we
could asses the relative strength of the players. However, in and outbound
logistics costs for Liberty shoes in the past 3 years have been 2.6% of sales
whereas for Bata the average has been 1.8%. 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. Metro being much
smaller in size could be seeing logistics expense of over 3%.
Promotion Metro has launched a plethora of brands, which appear to be quite daunting for a
consumer to comprehend, especially when he enters the shoe market once in 1.5
years. They also sell brands of other outfits in their stores, a practice followed by
other retailers.

In House Brands
1. Metro
2. Gannuchi
3. Da Vincci
4. Mochi

3rd Party Brands

1. Florsheim
2. Richard Brinsley
3. Red Tape
4. Crocs

5. Franco Leone
6. Homme
A similar list exists for women brands. 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.
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. We could not measure the effect of this
strategy on the market.
TV Ad Campaign Happy feet make Happy Feel
While our survey did not address response to Metros lone TV commercial which
was launched in 2006 (and has been off-air for quite some time); we did a dipstick study on consumers ability to recall the campaign, right outside Metros
flagship store at their corporate headquarters in Mumbai. Over 80% of shoppers
from the 35 respondents (random mix of men & women) failed to recall the ads.
The break up of customer response is below

Loyal 5.7%
Unaided 8.6%
Aided 34.3%
Switcher - 42.9%

Promotional Spends in the Market

Advertiser
Action
Relaxo
Khadims
Liberty
Paragon
Bata India
Caron
Lakhani

FY 07
Print
TV
0.22
20.72
0.63
3.82
0.76
7.97
1.37
6.43
0.17
2.98
0.47
0.03
0.37
0.20
0.79
0.00

Total
20.94
4.46
8.73
7.80
3.15
0.50
0.57
0.79

FY 08
Print
TV
0.72
11.85
2.44
3.99
1.61
4.39
4.01
2.45
0.30
4.45
0.77
0.21
0.08
0.86
0.74
0.00

Total
12.57
6.43
6.00
6.45
4.75
0.98
0.94
0.74

FY 09
Print
TV
0.30
11.62
5.56
9.51
2.70
0.00
2.90
0.00
0.16
8.19
0.72
2.04
0.07
2.47
0.25
0.00

Total
11.92
15.08
2.70
2.90
8.35
2.76
2.54
0.25

Citi Walk

0.66

0.00

0.66

0.22

0.00

0.22

0.31

0.00

0.31

Metro

0.00

0.89

0.89

0.01

0.00

0.01

0.00

0.00

0.00

Figures in Rs crores; Source Tam/AdEx

Metro is an insignificant spender. If we include global sportswear giants like

Nike, Adidas & Reebok, the ad-budgets requirement for Metro to gain any
credible noise space in the market would be humongous.
There is a dominance of TV in this category. Footwear having traits of consumer
durables and also fashion lifestyle category, both TV and print can be effectively
deployed for promotions. Radio, if used intelligently can also be a powerful
medium. We have addressed Metros possible media strategy in later sections.
Out Doors & Internet
Details on ad spend in outdoor and internet was not available. On a search on the
internet we could not find any advertisement on internet for Metro. Its website
www.metroshoes.net is also under construction! All the other players have
sophisticated homepages.
Summary of Comparative analysis
Metro appears to be in a weak position on all comparative metrics. It has an
upper edge only in the womens range.
Problem Areas

Low product quality vs price

While the 3rd party, Florsheim range, has a good brand awareness and
commitment from customers who own over 3+ pairs of shoes, Metros
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
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 womens
range. It has a higher brand awareness and patronage from women. However,
due to constraints we could not conduct a comprehensive survey to assess its
strengths from women respondents.
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

Market Opportunity & Marketing Strategy

Market
1532 mn units

Branded
(@ 42%)
643 mn units

Men
(@ 50%)
322

Women
(@ 40%)
257

Unbranded
(@ 58%)
889 mn units

Kids
(@ 10%)
64

Age 20-30 (@24% from survey)

No of
Shoes
owned- 4+

Age 30-40
Age 40-50

No of
Shoes
owned- 4+

Age 20-30
Age 30-40
Age 40-50

Focus Group Men & Women owning more than 4 pairs of shoes (belonging
to High Involvement & Low Brand Commitment), in SEC A, B, 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 represents the entire branded market
Customer Value to Acquisition cost ratio will remain comparable in SEC
A, B & C segments
Higher no of shoe ownership is a proxy of high involvement. 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. 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, Metro having a better traction
with women would require less new customer acquisition
Women group would also be target for purchase for their spouses

Overall Growth Strategy

Short Term objectives
1. Make a good homepage!!!!
2. Reach turnover of 100 crores (based on no of stores, we assess Metros
current turnover to be between 60 to 70 crores)
3. Double the no of styles launched every year
Medium Term Objectives
1. 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. Increase the no of own/franchisee stores to 100 (currently at 66)
3. Reduce the brand clutter
4. Reduce no of sales/discount offers focus on inducing purchase for style
rather than discount sales or any other factor
5. Invest in R&D in design
Market Harvesting Strategy
Current
Products

New
Products

Current
Markets

New Markets

Market
Penetration
(focus on
women)

Market
Development
(focus on men &
women)

1. Market Penetration with focus on women

2. 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.
Rationale for the above strategy

Metro cannot compete on distribution with market leaders

Bata and Liberty already have alliance with Reliance and Pantaloon Retail

Metro has a low brand recall & commitment. New customer acquisition
will be function of low brand commitment in consumers for other brands,
rather than Metros ability to attract and retain customers

Metro has no production facility of its own. Given its existing structure, 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. Compared to that launching a new style entails lower costs.
By focusing in this fashion, 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, Metro has to focus on competing on
variable costs advantages and avoid situations which will demand fixed
costs commitments. At the generic strategy level Metro cannot follow low
cost strategy with outsourced production. 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. It should
invest in developing strengths around style prediction and style imitation of
market leaders. Its focus should be to outsmart the bigger players on style.
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, its cycle extends over a year compared to 3 cycles in a year
for fashion industry. 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.

Reduce time to bring a competitors successful style in the market:

Because of consumers adherence to the product on shelf than brand, Metros

ability to imitate a successful style at low cost can provide returns.
Example of shortening purchase cycle Titan
Titans 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.
Example of successful leadership in Style Sport Obermeyer
A US firm in ice skiing accessories, with annual cycles of fashion, Obermeyer has
outsourced its production to Asia, and has invested heavily in design and style
prediction. Through continuous style innovations, it has kept its low cost
imitators guessing, 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, compared to a ROI based pricing.
Imitator Style launch Going Rate Pricing
Metro should develop ability to imitate and launch competitors styles at a
cheaper price. Competing on its variable costs strengths and lower market share,
lower prices would hurt the larger players more. For its target market of low
brand commitment consumers, price differential would be an important element
in attracting consumers.
Customer Relationship StrategyInternet based Interactive Communication
Product review website like www.mouthshut.com has scores of review
comments by consumers on Metro and all the other players. Metro should
develop a comprehensive web-site with blogging capabilities, so that it can have
a dialogue with its consumers directly rather than be criticized on other websites
and lose precious time to respond. It should also encourage design competition
and product reviews on its website and enable e-commerce facilities. Key
features of its proposed website
1. Customer blogging and product reviews
2. Key management blogging about new products and activities at Metro
eg- Robert Lutz, Vice Chairman at General Motors used to write a blog
along
with
other
very
senior
GM
executives
at

http://fastlane.gmblogs.com
3. 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. Sharing product details on website, creating
design competitions and engaging customer will increase its chances of
success.
Managing the Moments of Truth

Sales executives at footwear retail stores are 2 nd in customer interaction disaster

only to Banking call centre executives. Over the years, players in most other retail
formats apparel, durable goods etc have been able to show improvement in
their sales executives. Metro should lay extra emphasis on its sales management
process.
Metro has invested in deploying SAP recently to integrate data from its various
stores. It needs to develop significant capabilities in data mining and studying
current trends of its own customers and of competitors. Given the fact that the
effort is in shortening purchase cycle, knowing customer details is crucial. The
challenge however is in implementing a successful CRM information system by
training employees.
Internal CommunicationTo implement a successful external and interactive communication strategy, a
firm first needs to develop a robust and consistent internal communication
environment. Metro has to take strong organizational level activation including
its franchisees and suppliers for an effective customer engagement strategy.
Branding Strategy
Metro should avoid any advertising war that can lead to any competition on fixed
costs deployment. Its focus on advertising should be events/launch based rather
than long-term corporate brand building advertising.
Assumption Fundamental traits of consumers:
1. Focus on shoe rather important than brand
2. Comfort and Durability are a must. Given that, style rather than brand
will decide what will be bought
3. People buy when their shoe wear out
Out of these 3 fundamental traits, we are attempting to challenge the last trait of
the customer. Challenging the other 2 would involve fixed costs commitment,
which can, given relative smaller size of Metro, cause substantial survival risks to
the company.
Brand Map Template

Brand Substantiators Points of Parity Comfort, durability

Brand Differentiators Points of Difference Style, Design
Brand Benefits
o Functional Value in style & design; 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, just cool
o Doesnt 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. Encourage
gift
vouchers
for
special
occasions
like
birthdays/Diwali/New Year/Christmas etc.
b. Address communication to women for both men & women shoes.
c. Devise promotional pricing for women & men package purchase.
Mass Media Strategy
Increase spending from current negligible levels
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), which Metro may
reimburse benefits
o More focused spend delivery, 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. Metros 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
1. Reach turnover of 100 crores
Short term steps
1. Re-evaluate the efficacy of its existing brand portfolio

2.
3.
4.
5.
6.

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. Target a double digit profit margin
2. Establish Metro as an aspirational or luxury brand
3. Establish tie-ups with celebrity international designers (example- from
Italy)
Medium term Steps
1. Become a member of the luxury marketing council, an umbrella for
marketers of luxury goods
2. Consider rebranding and redesign of its brand portfolios
Long-term Steps
1. Evaluate viability of diversification into a leather fashion house with
products like hand bags, jackets, belts
2. Or else evaluate tie-ups with leather accessories houses like Hi-Design
3. Develop capabilities in the fashion, fashion-show industry

Risks
1. While Metro has been traditionally in the higher price segment, it has
launched Mochi as a lower price range. Moving up into the premium
segment after covering lower range might be confusing to consumers and
might not be accepted
2. While there is a thriving eco-system of high end apparel
makers/designers in India, a similar eco-system for leather products is not
yet developed. High end leather footwear eco-system is underdeveloped
and there might be considerable people constraints in developing
capabilities in high end design and style

Reference:

A thesis in Clothing, Textiles, and Merchandising Leslie Everson

Zaichowsky Measuring the involvement construct
Zaichowsky Conceptualizing involvement
Warrengton & Shim Empirical investigation of the relationship between
product involvement & brand commitment