21632509 metro final report

8/10/2019 21632509 Metro Final Report

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Name Anubhav (0910010) SameerMohammad SuhebPadmini Kant Mishra

Radha Rani

Metro Shoes Market Analysis of the leather footwear industry andrecommendations for Metro

Context & Industry Analysis

The Indian footwear market is es timated to be ov er Rs15,000 crore in value t ermsand has g rown at the rate of 8.8% over the last couple of years. In terms of units,it is est imated at 1532 million units. Mens footwear accou nts for al most half ofthe total market, with womens shoes constituting 40 percent and kids footwearmaking up for the remainder. The market i s su bstantially brand-driven, as i sevident from the fact that branded footwear c onstitutes m ore t han 42 percent ofthe total m arket si ze. About 37. 8 percent o f Footwear retail i s the organizedsegment, which qualies i t as t he sec ond most organized retail category in India,

next only to Watches.

One-fourths o f the total footwear sal es h appen through organized retail outlets,and this m akes i t the sec ond most organized retail segment in the cou ntry, nextonly to watches. Credit goes t o players l ike Bata and Liberty for h aving set the

ball rolling.

In terms of volume, the m arket size o f the footwear i ndustry i n the t op 20 cities i nthe country is estimated to be 10 crore p airs per ann um. For the cou ntry as a

whole, the an nual domestic con sumption of footwear i s ap proximately 1.1 b illionpairs per an num, as per go vernment s tatistics. With a population base of 1 billion, this translat

annum.

India is the second largest footwear m anufacturer in the world, next on ly toChina. Nearly 58 percent of the industry, which is by and large labour intensive


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and concentrated in the sm all and cottage industry sectors, remains u nbranded.However, as p art of its effort to play a lead role in the global trade, the Indianleather i ndustry is n ow focusing on key deliverables o f innovative design, state-of-the-art production technology and unfailing d elivery sch edules.

Globally, the trend towards sourcing to countries with low-cost p roductioncontinues. Overall, the Far East continues to be the key area for footwearsourcing, but Eastern Europe (Romania and Bulgaria) has become moreimportant as cl oser proximity helps European retailers t o move faster. India andVietnam are al so co nsidered important for s ourcing. India i s es pecially strong inthe mens footwear segment though the worlds major production is in ladies

footwear. This n ot only limits t he scop e for f ootwear ex ports, but also points t o ahuge potential in the domestic market. Proper branding and promotion cangreatly increase t he d omestic demand in ladies footwear.

Indias footwear exports have shown a growth of 35.2 percent over 20 02-03registering a cu mulative export of US$ 608.7 m illion in both the Leather and non-leather s egments t aken together. The leather s egment accounts for 89 percent offootwear exports.

Nature o f Indian Footwear Retail Porter 5 Forces A nalysis

The footwear r etail industry has been analyzed in the Porter f ramework takingend-users as b uyers an d footwear m akers as sup pliers. Each of the forces h as

been rated on its underlying drivescore f or t he F s i s a si mple av erage o f its u nderlying drivers.

1 = w eak driver .5 = strong driver

Buyer Power 2.5

Drivers of Buyer Power1. Buyer Size - 12. Oligopsony threat - 13. Low switching costs 54. Tendency to switch - 45. Product differentiation - 2


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domestic manufacturers lack the ability to compete effectively within themainstream footwear market. Many suppliers have gained power within themarket through differentiating their offerings. Th ey have achieved this byproducing specialist footwear f or s pecic ap plications an d by producing high-

end designer products as well as robust marketing and promotional efforts. Withthe exception of very popular br and name manufacturers, it is difficult for amanufacturer t o establish itself in retail and therefore f orward integration is rar e.However this is mitigated by the fact t hat retailers very rarely integrate

backward. Overall, supplier power with respect to the amoderate .

Threat of New Entrants 3.91

1. Low cost switching - 52. Product differentiation - 23. Importance of economies of scale -44. Effect of xed costs - 35. Regulatory environment - 46. Incumbents acquiescent - 37. Accessibility to distribution - 58. Accessibility to su ppliers -49. Importance of IP, patents et c - 510.Importance of brands - 311.Market growth -5

Entry into the Indian footwear market is dened as starting u p a new company or by diversifying an existing company's

country. The xed costs f or r etail operations are rel atively low and new entrantsare com mon. However, there exi sts in this m arket a n umber of large establishedretail groups t hat wield signicant economies o f scale t hrough bulk purchasingand pooling certain back office operations. As a consequence, it is d ifficult fornew entrants t o increase i n size considerably, and new entrants w ho try to enter

Indian region are facing higher retaliation than counterparts within othercountries of the region. Given the large number of low cost manufacturerssupplying the market, i t i s relatively easy for new players to establish therequired supply chain. What is m ore, new entrants can differentiate themselvesfrom the m ajor players by offering professional services an d advice cen ters. Withthe exception of certain specialist types o f footwear, such as sp ortswear a nddesigner products, brand recognition of footwear retailers is relatively low,


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The healthy market growth in India m ight reduce the degree of rivalry to somelevel. Overall, rivalry b etween footwear r etailers is assess ed as m oderate t o high .

Competitor A nalysis - Key players B ata, Liberty, Action, Lakhani, Khadim &Woodland

2008 2007 2006 2005Bata Sales 989 867 770 707 Margins 7.1% 5.7% 6.2% 1.9%Liberty Sales 258 238 221 195

Margins 6.4% 8.0% 11.2% 7.6%Action Sales na 89 96 93 Margins na 6.5% 6.7% 4.4%Lakhani Sales 152 44 120 101 Margins 3.0% 4.4% 3.0% NaKhadim Sales na 150 132 67 Margins na 3.3% 3.3% 3.3%

Rs cr ores; Before Tax m argins

MetroShoes

Bata Liberty Khadims

Woodlands

No of ExclusiveRetail Outlets

66 (in 2007) 1300 375 264 230

No of Cities 31 All All majorcities

22 All major cities

Model ofDistribution

Exclusive +Multi-BrandOutlets in

malls


malls


malls

Exclusive +Multi-Brand

Outlets inmalls


malls

Sales Volumes na 989 Cr 240Cr 200+ 330crNetwork Alliance None Reliance

RetailPantaloonretail

None None

Foreign brandalliance

Florsheim Bata Global(HushPuppies),Reebok

None None None


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HorizontalDiversication

None Plan tolaunchApparel

None Lifestyle + jewellery

Apparels

Product Range Formal andCasual

Formal,casual and

sports

Formal,casual and

sports

Formal andcasual

Mainlyoutdoor and

casual

BATA (Market Leader): 1300 retail outlets al l over t he co untry; Serves 1 m illion customers per day ; Employs more than 40,000 p eople ; Operates 4,600 retail stores W orldwide ; Manages a ret ail presence i n over 50 co untries ; Runs 40 production facilities across 2 6 co untries ;

Key Elements of Batas Retail strategy: In 2006 Bata d ecide to create its p resence in the sho pping malls on one hand

and explored the franchisee m odel on the other hand. Batas n ew stores are b ased on the international format of Bata Stores an d

have a minimum area of 3000 sq. ft It unveiled a 10 ,000 sq f t Mega Store at Vadodara ( in the w estern Indian state

of Gujarat). This s tore w as s pread across 4 oors and displayed a r ange of 800designs.

By 2010 Bata aims to open 200 new stores an d explore i nstitutional marketssuch as h ospitals, hotels, and defense est ablishments.

Network Alliance : In January 2 008, Bata an d Reliance Retail announced a t ie-up that would enable Reliance t o retail its labels t hrough the 12 00 Bata st oresin the cou ntry. Bata on its p art would be p rovided with exclusive space i n allreliance st ores w hich were b eing rolled out in the co untry.

It al so launched its new Spring Summer C ollection in its stores, offeringseveral new trendy designs targeted at the yo ung customers, under its famous

brands such as Marie Clair, North Star, Power Weib Diversication: Bata i ntends t o launch clothing products.

LIBERTY: (Market Challenger)

375 excl usive Retail Stores an d over 6000 m ulti-brand outlets. 2008 winter collection for men from Liberty Shoes.


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Spring-Summer Collection 2009 enters with a favorable response in themarket.

The range included very stylish shoes in the Fortune range and the mostpopular am ongst the new products on display were the stylish and colorful

Gliders r ange priced at just Rs99 o nwards.

Promotional activity : Liberty Shoes has become part of a majorinitiative to promote tness culture in the country with the themebeing One needs to be healthy to be happy. he program! aptlycalled "it #eh $ndia! invites people of all age groups toparticipate in a host of tness and sporting activities including

jogging between %.&' a.m. and (.&' a.m. "or this purpose )'di*erent par+s have been identi ed as ,ogger-s ar+s in /' citiesaround the country. hey include 0elhi! 1umbai! 2hmedabad!Luc+now! une! 3aroda! 4anpur! 5agpur! 3anglore and Ludhiana.

Channelizing opinion leaders - Running for over a month nowthe program has not only drawn a tremendous response from theearly morning regulars but it has also motivated others to adopt the tness regime.

The tness enthusiasts have also been visiting the Liberty Shoesstalls at the program sites showing keen interest in the Libertysrange of trendy sports shoes further strengthening the brandsassociation with a sporty health conscious image that appeals tothe young as well as the young at heart.

Innovation: AC shoes 6 as the name suggests! are shoes that+eep the feet cool and comfortable even in the most tryingconditions. han+s to an innovative ventilation system in thefootwear7s 8 sole that allows free passage of air in and out of theshoes at every step. his uni9ue innovation ensures that the feetnever sweat! is also the reason why these are also +nown asShoes that breathe. 0esigned for ;


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Production capacity of 12000 sho es per day Targeting a y early growth of 35%

Brand Positioning > ?oodland has created a niche for itself forcasual and stylish shoes catering to the segment which is styleconscious at a*ordable prices. hough data for 9uantitativecomparison was not available! the brand-s image and messagehas been received well in the mar+et.

Diversifcation > ?oodland has embar+ed on hori@ontaldiversi cation and sells casual apparels in its stores in the samebrand. he details of its revenue or bottom6line growth were notavailable! but the strategy of increasing wallet share from itse=isting customers seemed to have wor+ed well! forcing 3ata toannounce similar plans.

Competition from International Players:

Competition in the d omestic shoe market changed with the p ermission for 51 p er centForeign Direct Investment (FDI) in single-brand outlet in early 2006 that allowed foreignfootwear brand s t o enter I ndia.It also strengthened the o rganized retailing in footwear. The affluent customers i n Indiatoday will have a wider c hoice in buying stylish and comfortable shoes. However t heleading foreign brands h ave entered the m arket t hrough sales & distribution tie-up with

local p layers in the leather seg ment. This is in stark contrast t o the trend in thesportswear segment where Nike, Adidas & Reebok have signicant presence on theirown.

Customer Analysis

We have conducted a paper based survey to collect primary information aboutcustomer behavior and preferences. Our response set consists of 100 usable

responses. The sample was the various programs in IIMB. Hence this samplecannot be rep resentative of the p opulation. However, it could be f airly accurate i nrepresenting the young to middle-aged male consumers of m edium to highincome cat egory.

Footwear purchase has been ass umed to be a hi gh customer involvement becauseof intimate nature of the product, and its affect on customer in case of bad


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Footwear Consumption Patterns No & Type of Products owned

Findings

% of people having formal/office shoes

o 1 p air 53%Of which having casual shoes

1 p air 56% 2 p airs 21% 0 p airs 20%

Of the group which owns 1 p air of formal shoes, 58% of them had heard aboutMetro, and 23% had bought Metro.Favorite b rands for this grou p of customers Bata 2 1%Woodlands 45%Florsheim 11%Hush Puppies 22%

o 2 p airs of formal shoes 36%

Of which having casual shoes 1 p air 33% 2 p airs 39% 0 p airs 17%

Of the group which owns 2 pairs of formal shoes, all of them had heard aboutMetro, and 36% had bought from Metro.Favorite b rands of this group of customers Bata 1 7%Woodlands 25%Florsheim 14%Hush Puppies 39%

Metro was placed at the bottom Metro has positioned itself from customers who own multiple pair of shoes. However

customers is signicantly weak c ompared t o com petitors.


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Brand Commitment

No of respondents w ho responded in affirmative to w hether they switch brands

88%No of respondents who conrmed that they dont care about brand if they nd ashoe o f their l iking 66%

For the subsection of respondents w ho owned more than 2 pairs of shoes lack of brand commitment was 89%. This leads us to believe

customer involvement and brand commitment have low or negat ive correlation.This al so m ight reect a b road failure o f marketing strategies of the i ncumbents.

Purchase f requency

In a question on frequency of purchase, 95% respondents had a purchasefrequency of over a year or more. In yet another related question, 47%respondents answered h aving bought a shoe a ye ar ago or more.

Purchase cycl e

In a q uestion of when do people con sider footwear purchase; wearing of old shoehad a 78% response.

Purchase Inuencers/decision makers

With an average age of over 27yrs for ou r respondents, 48% of them purchasetheir footwear with their spouses. This has very important i mplications indesigning communications strategy for any shoe maker. While our surveycovered only male p opulation, it is exp ected that purchase f requency of w omencould be higher for footwear. A shoe maker cou ld strive to increase purchasefrequency for m ales by targeting the sp ouses an d probably have i nnovative joint

incentives/promotions.

Aspiration Brand

In a question asking their m ost coveted brand of shoes, with options l isting theglobal prestige brands like Gucci, Louis Vuitton etc, respondents showedoverwhelming trend of not bei ng aware of these brands. 93% of respondents


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were not aware of the top 5 brands m entioned in the questionnaire. This furthergives cu e, that while cu stomers m ight have ex pectations on quality and style in ashoe, the affinity to a brand is minimal. We believe that a majority of ourrespondents would be aware of luxury brands in apparel, sunglasses or

automobiles, though we d id not test this hypothesis in our survey.

Footwear characteristics

An attempt w as made to capture important p roduct at tributes that p lay animportant role to determine feelings as a m otivation toward product attributes.Attributes u sed to gauge feelings

Extrinsico Price

Below Rs1000 Rs1000-2000 Rs2000-3000 Rs3000-4000 Rs4000-500012% 48% 32% 5% 1%

o Access

46% correspondents expressed that ac cessibility to a store was an importantelement in their p urchase d ecision.

o Brand

78% correspondents p aid attention to the b rand while p urchasing their shoes. Forthe ones for w hom brand was ver y important variable in purchase d ecision, Bataand Woodlands were the favorite brands, both faring equally well. The other

brands had far less or insin

Intrinsico Style

72% correspondents expressed that s tyle was important or very important inshoe purchase d ecision. Another 14% placed style as bei ng somewhat importantin their d ecision. The f avorite b rands f or t his g roup is as f ollows -Bata 2 1%Woodlands 42%Metro 6%


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Florsheim 13%Hush Puppies 32%

o Style Flavors

Lace vs n o laces 54%Broad vs Narrow Toe 53%High vs Low Heel 14%

Implications for P roduct Mix

While the shoe maker w ould need to display an assortment in lace/no lace and broad/narrow toe category, higher heels

implication in designing production batch runs to optimize cost for t he right

product mix. This al so has d istinct implications for s ole production, design andR&D. In the following section, respondents p laced heavy emphasis on comfortand durability, for which the sol e ag ain is t he k ey element in footwear.

o Comfort

As exp ected, shoe being a high involvement prod uct because of nat ure of use ,88% customers mentioned com fort being somewhat important to very important.While el ements of comfort were n ot probed in the su rvey, quality of sole i s a k eyelement in determining comfort in footwear. Firms l ike Bata an d Dr Scholls, havedesigned marketing campaigns around their superior soles to differentiatethemselves. Dr Scholls is able to command almost 100% premium in the marketfor i ts su perior s oles an d comfort factor.

o Durability

Durability also garnered 88% responses of somewhat to highly important. Thishas i mplications for the limit on increasing footwear p urchase f requency b y shoemakers. People demand durability and they go to purchase when their old shoewears out.An innovative marketer would have to sho w value/savings on its product over ahorizon of 2-3 years, and should strive to adopt a v alue b ased pricing.

Person al Characteristics

Average age 27. 27 yrs


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cash ow from sales t o a single cu stomer i s as sumed to be occ urring every 2 yrsbecause of the p urchase f requency.

Discount Rate 30% 32% 34% 39% 40%

R e t e n t i o n R a t e

30% 0.30 0.29 0.29 0.28 0.2740% 0.44 0.43 0.43 0.40 0.4050% 0.63 0.61 0.60 0.56 0.5660% 0.86 0.83 0.81 0.76 0.7570% 1.17 1.13 1.09 1.01 1.00

If an average p rice i ncrease of 5% is as sumed over e very purchase, then effectivediscount rate b ecomes i g , making it 34%

CLV of a c ustomer = m* r/(1+i-g-r) = 44%* 0.29 = 13%At an average p rice of purchase of Rs 1500, the CLV is ap proximately Rs 190

While this is on the lower side, we have been conservative in assigning apurchase f requency of 2 year s, a very low retention rate o f 30% and a very highproportion of variable cost s for lack o f data. We h ave al so assumed no incrementin price of the shoe. The CLV above can be taken as a b ase case to comparecustomer acq uisition cost.

Customer Acquisition Cost-

The av erage S elling/Admin costs ( as a rat io of sales) for Bata f or t he p ast 3 y rs are16%. Its average t urnover growth for t he sam e p eriod is 16% .Assumption

Bata spends 25% of its selling expenses on customer acqu isition andremaining on retention

30% of sales growth is from new customers (approximating for 30%defection rate o f existing customers)

Net customer acquisition cost per customer = (25%*16%)/(30%*16%) = 83%For an average p rice of Rs1500, it amounts to Rs1250

Note while the absolute nos i ndicating customer acqu isition cost bei ng more thancustomer v alue, the relative nos rather than absolute nos should be considered for acomparison of s plit of f ocus between customer acqu isition and increasing wallet s hare

from existing customers.


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Company Analysis Metro Shoes

The focus has been to do a comparative analysis of Metro with the dominant

players in the i ndustry.

Product

Mens range- through tie-up with Florsheim and through its own products,Metro h as p resent in the m ens segment in all the p rice r anges.

Brands Formal Florsheim; Metro; da Vinci Casual GenX Low Cost - Mochi

In the womens range too, it has presence in all the segments. Metro hashistorically enjoyed much h igher brand equity in the women segment.

Metro d oes not have an y presence in the ki ds range.

Price Though Metro has p resence i n all the p rice s egments, it is no t considered the b estvalue p rovider, on which Bata sc ores ver y high customer e quity. Metro has beenfacing quality problems i n the m arket, and being largely present in tier I cities, itsunhappy customers have been quite vocal. Below are the excerpts fromwww.mouthshut.com , which o ne sees on search for M etro

?e recently purchased a sandle and the 9uality of the productwas so bad that within just ; days the leather started coming out.?e too+ it to the shop who claims to say it was a manufacturingdefect and...

3uy some basic models 6 do not e=pect anything of comfort andhigh 9uality 6 you may get cheated. #ecently got a series of shoc+sA.

1etro used to have a sale very rarely. hen it became an annuala*air. 5ow it is twice a year. $n case you are wondering why! it issimple. heir footwear lasts only B monthsA.
http://www.mouthshut.com/http://www.mouthshut.com/


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The above are comments from the last 3 months.

Place

Metro has a decent coverage of tier I t owns nearing 70 dedicated outlets.However it has a l ong way to go to match Bata or even a relatively youngercompany like Khadims.

Channel Margins & Logistics costs

46% of ou r s urvey respondents laid emphasis on accessibility in their p urchasedecisions m aking distribution strength a k ey factor of success. Due t o lack of dataavailability on margins av ailed by dedicated franchisees o f different retailers, we

could asses the relative strength of the players. However, in and outboundlogistics cost s for Liberty shoes in the past 3 years h ave been 2.6% of sal eswhereas for Bata the average has been 1.8%. We believe that this cann ot becompletely accounted from by differences i n yield per o or ar ea o f shops an deconomies of s cale in logistics d o play an important factor. Metro being muchsmaller in size co uld be seei ng logistics expense of over 3%.

Promotion -

Metro has launched a p lethora of brands, which ap pear to be qu ite d aunting for aconsumer to comprehend, especially when he ent ers the shoe m arket once in 1.5years. They also sell brands o f other o utts i n their s tores, a p ractice f ollowed byother retai lers.

In House Brands1. Metro2.Gannuchi3. Da Vincci

4.Mochi 3rd Part y Brands

1. Florsheim2. Richard Brinsley3. Red Tape4. Crocs


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Citi Walk 0.66 0.00 0.66 0.22 0.00 0.22 0.31 0.00 0.31Metro 0.00 0.89 0.89 0.01 0.00 0.01 0.00 0.00 0.00

Figures i n Rs cr ores; Source Tam/AdEx

Metro is a n insignicant s pender. If w e include global sportswear g iants l ikeNike, Adidas & Reebok, the ad-budgets requirement for Metro to gain anycredible no ise space in the market would be humongous.

There is a d ominance of TV in this category. Footwear having traits of consumerdurables an d also fashion lifestyle category, both TV and print can be effectivelydeployed for promotions. Radio, i f u sed intelligently can also be a powerfulmedium. We h ave ad dressed Metros po ssible m edia st rategy in later sections.

Out Doors & Internet

Details on ad spend in outdoor and internet was no t available. On a sear ch on theinternet we cou ld not nd any advertisement on internet for Metro. Its websitewww.metroshoes.net is also under con struction! All the other p layers havesophisticated homepages.

Summary of Comparative analysis

Metro appears to be in a weak position on all comparative metrics. It has an

upper edge on ly in the womens range.

Problem Areas

Low product quality vs price While the 3 rd party, Florsheim range, has a good brand awareness andcommitment from customers who own over 3+ pairs of s hoes, Metrosown brands fair poorly

Product range lacks p resence i no

Sports segmento Kids segmento Clothing

Distribution reach lack of network alliance w ith any retail major Low brand awareness Low brand commitment from customers who are aware
http://www.metroshoes.net/http://www.metroshoes.net/


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Innovation Metro is no t known for br eakthrough products or bei ng thestyle initiator i n an industry where predicting new styles i s t he key tosuccess

Communication no homepage or visible internet presence

Relative Strength

The on ly area in which Metro enjoys a com parative ad vantage is in the womensrange. It has a higher brand awareness and patronage from women. However,due to constraints we could not conduct a comprehensive survey to assess itsstrengths from women respondents.We expect the following key behavioral pat terns that d ifferentiate womencustomers in their purchase

Women vs Men

Higher purchase frequency Shorter purchase c ycle women do not wait till their s hoe w ears ou t for a

new purchase like men Higher product involvement More recep tive t o style Comparatively less c onscious of durability Signicant involvement in decision making for the opposite sex


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Market Opportunity & Marketing Strategy

Market 1532 mn units

Branded(@ 42%)

643 mn units

Unbranded(@ 58%)

889 mn units

Men(@ 50%)322

Women(@ 40%)257

Kids(@ 10%)64


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Focus Group Men & Women owning more than 4 pairs of shoes (belongingto 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 est imate the m arket size (which i s 24% forthe average a ge of 27 y ears)

SEC A,B,C represents the ent ire br anded 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/intrinsicattributes in the survey did not show any signicant change with no ofshoes owned

High brand switch tendency (as s hown in our survey) is indicative o f low brand commitment

No ofShoesowned- 4+

Age 2 0-30 (@24% from survey)

Age 30- 40

Age 40- 50

No ofShoesowned- 4+

Age 20- 30

Age 30- 40

Age 40- 50


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Characteristics of focus g roup m ales

High possibility of habitual buying High possibility of brand switching h elps M etro attract new customers

Relatively less focus on brand attributes helps Metro attract newcustomers Style is an equally important attribute as co mfort and durability for t his

group. Launching styles t hat are su ccessful in the m arket has been foundto be a strategy involving low cost with better r eturns i n the I ndian market

Characteristics of focus gro up females

Apart from the above qualities o f m ales, Metro having a better t ractionwith women would require less new customer acquisition

Women group would also be target for pu rchase f or t heir spouses

Overall Growth Strategy

Short Term objectives 1. Make a good homepage!!!!2. Reach turnover o f 100 crores (based on no of stores, we assess Metros

current turnover to b e between 60 to 70 cr ores)3. Double t he n o of styles launched every year

Medium Term Objectives

1. Strive to attain a bottom-line margin of over 5% with a top-line YoYgrowth of double the industry growth with a focused split of grow th

between same stores sales and new stores sales2. Increase t he n o o f own/franchisee s tores t o 100 ( currently at 66)3. Reduce the brand clutter4. Reduce no of sales/discount offers f ocus on inducing purchase f or s tyle

rather t han discount sales o r any other f actor5. Invest in R&D in design

Market Harvesting Strategy

CurrentProducts

NewProducts


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Dealing with Competition M arket Follower & Market Challenger

Metro should follow a mix of m arket f ollower & challenger s trategy. It should

invest i n developing strengths around style prediction and style imitation ofmarket leaders. Its focus s hould be t o outsmart the b igger p layers on style.

Key el ements of Competitive St rategy

Strive t o shorten the l ifecycle o f a n ew style:

Though the footwear i ndustry also has si milar cycl es o f styles l ike the fashionand apparel industry, its cycl e ex tends ov er a year com pared to 3 cycl es i n a y earfor fashion industry. Metro having low Fixed Costs can launch new stylesrelatively cheaper compared to the large players which have their ownproduction facilities w here n ew styles w ould involve time an d dedicating xedcosts.

Reduce t ime t o bring a co mpetitors su ccessful style i n the m arket:

Because of consumers ad herence to the product on shelf than brand, Metrosability to imitate a successful style a t low cost can provide ret urns.

Example o f shortening purchase cycl e T itan

Titans fastrack has si gnicantly reduced watch purchase cy cle in an era of cellphones w here st yle rat her d urability or u tility is t he k ey driver of p urchase.

Example of successful leadership in Style Sp ort Obermeyer

A US rm in ice skiing accessories, with annual cycles of fashion, Obermeyer hasoutsourced its p roduction to Asia, and has i nvested heavily in design and style

prediction. Through continuous style innovations, it h as kept i ts low costimitators g uessing, and providing itself time horizon to undertake marketskimming at the time of launch of new season every year.

Pricing Strategy


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New Style launch C ost+ pricing

Since Metro would have l ow xed investments, it should price i ts products based

on its costs w ith a t arget mark-up, compared to a ROI based pricing.

Imitator St yle l aunch G oing Rate P ricing

Metro should develop ability to imitate and launch competitors styles at acheaper p rice. Competing on its vari able co sts s trengths an d lower m arket s hare,lower p rices w ould hurt t he larger p layers m ore. For i ts t arget m arket of l ow

brand commitment consumers, price differential would be an porin attracting consumers.

Customer Relationship Strategy-

Internet based Interactive C ommunication

Product review website like www.mouthshut.com has scores of reviewcomments by consumers on Metro and all the other players. Metro shoulddevelop a co mprehensive web-site w ith blogging capabilities, so t hat it can havea d ialogue w ith its consumers directly rather t han be cr iticized on other w ebsitesand lose p recious t ime to respond. It should also encourage d esign competitionand product reviews on its website and enable e-commerce facilities. Keyfeatures o f its p roposed website

1. Customer blogging and product reviews2. Key management blogging about new products and activities at Metro

eg- Robert Lutz, Vice Chairman at General Motors used to write a blogalong with other very senior GM executives at http://fastlane.gmblogs.com

3. Product description and intricate details of its products on websiteMetro has better chance of success with high involvement customers who

own multiple p airs o f shoes. Sharing product details on website, creatingdesign competitions an d engaging customer w ill increase its ch ances o fsuccess.

Managing the Moments of Truth
http://www.mouthshut.com/http://fastlane.gmblogs.com/http://www.mouthshut.com/http://fastlane.gmblogs.com/


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Brand Substantiators P oints of Pa rity C omfort, durability Brand Differentiators Po ints of Difference Style, Design Brand Benets

o

Functional Value in style & design; be the rst to bring the latestin style t o customerso Emotional

Source of condenceSource of attention from the o pposite sex

Brand Personality o Attract iveo Handsomeo Not pricyo

Condento Loses interest in things get s bo red fast n eeds exci temento Not a d aredevil, just coolo Doesnt care w hich car he d rives

Advertising & Promotion Cues -

Focus on subtle at tacks on consumers trait to buy new shoes w hen old ones wearout

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 sp ending from current negligible l evels Avoid TV due to heavy spillage (Metro has already stopped its TV

commercials) Deploy print and out of home for p roduct des criptive/informative ads

during launch o f a n ew style Deploy radio for cr eation of bu zz around launches sponsor r adio talk

shows and competitionsRadio and Print because of t heir localized circulation/reach unlike TV which has aregional or n ational cove rage can be cost effect ive for Metro because of i ts smallerdistribution network


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Encourage franchisees and regional d istributors to develop their ownmedia spending plan (with tight control on content), which Metro mayreimburse benets

o More focused spend delivery, more bang for t he bu cko

Reimbursement of t he spends by Metro implies franchisee anddistributors spend their o wn capital t hereby putting their sk in inthe game

o Ease on working capital. Metros cash spending cycle on mediasplash w ill be eased because of delayed payment cycle

Risks

Risks i n style p rediction Rationalizing cost structure f or quicker s tyle l aunches an d imitation easier

said than done Reduction in no of brands m ay l ead to loss i n sales Assumption of changing p urchase cycle of consumers may not hold true Investment in R&D in style m ay h ave a l ong gestation period

Alternative S trategy

Focus on the high end segment rich household (estimated population of 30million)

Short Term objectives

1. Reach turnover of 100 crores

Short t erm steps

1. Re-evaluate t he effi cacy o f its exi sting brand portfolio


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2. Roll back t he n o of stores con centrate on SEC A cities3. Strengthen tie-ups with celebrity designers4. Use ce lebrity endorsers5.Make a good homepage!!!!

6. Invest in PR

Medium Term Objectives

1. Target a d ouble d igit prot margin2. Establish Metro as an aspirational or l uxury brand3. Establish tie-ups with celebrity international d esigners (example- f rom

Italy)

Medium term Steps

1.Become a member of the luxury marketing council, an umbrella formarketers of luxury goods

2. Consider rebranding and redesign of its brand portfolios

Long-term Steps

1. Evaluate viability of d iversication into a leather fashion house withproducts l ike h and bags, jackets, belts

2. Or el se eval uate t ie-ups w ith leather acc essories h ouses l ike H i-Design3. Develop capabilities i n the f ashion, fashion-show industry

Risks

1. While Metro has been traditionally in the higher p rice segment, it haslaunched Mochi as a lower price range. Moving up into the premium

segment after covering lower range m ight be con fusing to consumers andmight not be accepted

2. While there is a thriving eco-system of high end apparelmakers/designers i n India, a similar eco- system for l eather p roducts i s n otyet developed. High end leather footwear e co-system is u nderdevelopedand there might be considerable people constraints in developingcapabilities i n high end design and style


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Reference: A thesis in Clothing, Textiles, and Merchandising Leslie Zaichowsky Measuring the i nvolvement construct

Zaichowsky C onceptualizing involvement Warrengton & Shim Empirical investigation of the r elationship between product involvement & brand commitment

21632509 metro final report

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