Bata India sees demand at the belly of the market bouncing back after the GST reduction on products up to Rs 2,500 from the earlier 12% to 5%. MD & CEO Gunjan Shah tells Viveat Susan Pinto that he sees a structural demand correction in the near term due to the GST cuts. The footwear retailer, which has over 1,970 stores, has also put in place a three-pronged strategy to drive growth. Excerpts:
While Bata’s Q2 earnings were impacted by GST-related disruption, what has been the scenario post September 22? How much of a rebound are you seeing in sales?
We have seen a noticeable uptick in sales after September 22. Demand at lower price points, which was sluggish over the last two years, has been gaining traction with the GST cuts. We were also quick to pass on the GST benefits to consumers across 80% of our product portfolio, which is priced under Rs 2,500. Almost 40% of this portfolio is priced under Rs 1,000. So, the GST cuts have made footwear even more affordable at lower price points. The shift from unorganised to organised footwear will also accelerate with the GST reforms.
You’ve charted a turnaround plan for Bata. What is it about?
The transformation plan is predicated on three pillars — fresh products, store revamps and supply chain push. Product refresh is based on consumer behaviour and insights. For instance, we see office sneakers as an evolving space and a big focus area. Casual footwear is another big area of focus. And the third piece is about hybrid collections. Store revamps are led by zero-based merchandising, where we are aiming to keep our inventory pipeline tight. We have already revamped 250 stores and aim to complete 400 by the December quarter of FY26 and 800 by mid-FY27. On supply chain, we are looking to make it more agile, so that we can respond faster to consumer needs.
Your operating margins contracted in Q2 (to 18% from 20.8% earlier), reflecting pressure from higher costs. How do you plan to arrest this decline?
A tight supply chain should help reduce wastage and address consumer needs more sharply. We are also increasing our focus on adding more franchise-based stores versus company-owned-and-company-operated outlets. From less than 100 stores earlier, we are close to 700 stores that are franchise-based now. In the next couple of years, we see this number touching 1,000 stores. These initiatives should help control costs as we go ahead.
Tier 2 and 3 markets have become important for you in the last few years. What is the percentage of sales from these markets?
Urban metros give us about 60-70% of our business, while about 30-40% of our business comes from tier 2 and 3 markets. As India urbanises, we see these growing faster in the coming years. They are also not as saturated as urban markets are where competitive intensity is higher. So, growth prospects are higher in smaller markets.
E-commerce has emerged as an important channel for Bata. What is the contribution to sales from online?
E-commerce has been our fastest-growing channel for the last five years. Its contribution to sales is in low double-digits, around 10-12%. In the next three-five years, we see this number at 20% in terms of contribution to sales. Apart from being present on various e-commerce platforms, we have recently launched our Bata mobile app. The aim is to improve convenience for our consumers and make available our full range at the click of a button.