Pratap, Hindu BusinessLine
Delhi, 27 June 2014
Pandit Jawahar Lal Nehru was a champion of the co-operative movement
is well-known. But a little-known fact is that he extended the
concept of co-operatives to not only banking, farming and sugar,
but shoes as well. When one such shoe co-operative pioneered by
him in Karnal (Haryana) fell on bad times in 1954, two brothers
bailed it out. DP and PD Gupta retained the employees and converted
the co-operative into a company. As giving customers the freedom
to choose was a priority in the newly Independent country, the
company was suitably named Liberty Shoes.
In the half-a-century that followed, the company thrived with
its range of innovative products and soon became an aspirational
brand. But when global winds of change swept the country, like
most brands of its generation, Liberty began to feel the pressure.
Archaic processes and a limited retail presence pushed it to the
fringes of the industry by 2004. The brand is today frantically
trying to make a comeback. But the question is: Can a 60-year-old
company stay relevant in a market that now boasts the likes of
international giants Nike and Reebok at one end and home-grown
successes such as Relaxo and Metro Shoes on the other?
The CEO of Liberty Group, Adesh Gupta says the company has reoriented
its approach to production, supply chain management and retail
strategy. We are no longer pushing our products to distributors
and customers. The daily production is now interlinked with our
previous days sale as well as customer feedback. That means,
producing what is in demand rather than creating an inventory
that could return to us after six months, he explains.
And that, says Gupta, has been the companys best-ever move
in a decade. Its earlier strategy was successful but not sustainable,
he concedes. Retailers were not armed with tools to give
us continuous feedback. We had legacy issues, he says.
Gupta, who took over as Liberty Shoes CEO in 2004, then met dealers
once in six months, only to find out that most of the designs
which he thought would sell had no takers. That meant piled-up
stocks for the distributors and retailers, clogging the supply
But he was in for even bigger trouble. In September 2005, Liberty
Shoes signed a 49:51 joint venture with the then Kishore Biyani-owned
Pantaloon Retail (now an Aditya Birla Group company). On paper,
they were to open 45 stores in three years and target a turnover
of Rs. 350 crore. In anticipation, Liberty increased capacity
through new plants two in Himachal Pradesh and one in Uttarakhand.
We added 60 per cent new capacity. But the joint venture
never took off.
They (Pantaloon) promised us business worth hundreds of
crores on paper. But it never came to us because they were sourcing
from cheaper local brands in Agra despite their commitment to
us. They would always ask us to supply at ridiculously low prices,
usually half the MRP, says Gupta. (An email to the Future
Group went unanswered.)
Liberty, already battling an outdated supply chain and rising
capital expenditure, was now saddled with extra capacity. The
final blow came in the form of souring industrial relations. In
2006, we had a huge strike, which we resolved in a day. A second
one happened within a week and a third within a month, Gupta
recounts, laying the blame on politics. We were victims
of a political climate that disturbed the system, he says.
On one hand, the company went on capacity and retail overdrive
and on the other, it was hit by a strike. The result was that
its takeoff crashed. Till 2008, it somehow maintained its topline,
but the expenditure rose sharply and profitability vanished.
Treading a new path
Gupta decided to seek professional help. He recalls meeting consultants
who wanted crores in return for coffee-table books that promised
to tell him how to bail out the business. Finally, he approached
the Vector Consulting Group, which is known for its Theory of
Constraints. They led us to work on the pull model, which
means we just replenish the sold stock and there is no inventory.
The reaction time is cut from six months to one day, he
Liberty took four years to build this supply chain and system.
Till 2012, we were clearing dead stocks of our own stores
and retailers through promotions or discounts. Now, if I sell
100 pairs in a day, I produce only 100 the next day. We are not
working on a forecast model, we produce according to demand.
While the back-end measures are in place, the company will have
to double its efforts to increase customers and sales. There
has been a fundamental shift in the Indian market, as well as
marketing strategy in the last decade. Young Indians are far more
aspirational than they were 20 years ago, and that is a challenge
for all brands of the previous generation, says Arvind Singhal,
chairman and managing director of the consulting firm Technopak.
Their communication and product strategy have to be in sync
with social media, print and digital platforms.
Brand strategy specialist Harish Bijoor concurs: Social
media is becoming so dominant and relevant that being there is
a hygiene factor.
The comeback Czech
Much like Liberty, yet another footwear brand is trying to create
a buzz in the market to win back its customer base. Czech brand
Bata has been in India for 84 years and is now working doubly
hard to reinvent itself at all levels products, retail
reach and media campaigns. Last quarter, Bata spent Rs. 3 crore
(0.6 per cent of revenue) on its 360-degree integrated marketing
campaign Where Life Meets Style.
Bata needs to reinvent its lifestyle positioning
(it) has dominated on the basis of its products and prices. But
the price-and-product-generation has moved on, making way for
a stylised generation, which is price-resilient. Bata cannot forever
remain a bastion of lifestyle pricing, says Bijoor.
Agreeing that pricing is no longer the dominant factor it
once was, Devangshu Dutta, chief executive at consultancy firm
Third Eyesight, says, Today there is a lot more competition,
with international brands deepening their engagement with the
Indian market. Even consumers are willing to spend on higher-priced
products as long as it gives them an edge whether in terms
of looks or comfort.
After suffering losses in the early 2000s, Bata began setting
its house in order. Since 2005, it has been downing the shutters
of small outlets and opening new large-format stores. It has remodelled
stores and shut down bleeding properties. And in a major break
from the past, it has extended its working hours, and stays open
But its masterstroke was the voluntary retirement scheme that
nearly halved its staff strength from 9,631 in 2005 to 5,162 in
2012. Employees also had the option to move to K stores
a format that lets employees turn into franchisees, with a 7-8
per cent commission on sales.
Bata in particular has been a comeback story in the last
few years. They have updated the quality of retail ambience; the
stores now look contemporary and the product range has expanded,
The results are showing. The companys net profit for the
January-March 2014 quarter was Rs. 39.4 crore, with sales at Rs.
495.12 crore. In contrast, Liberty faces a long road ahead. While
it is back to making profits (Rs. 4.27 crore) alongside rising
sales (Rs.142.05 crore), these are modest in comparison with Bata
during the same period. During FY14, its net profit was Rs. 13.21
crore, a third of what Bata made in just three months. And to
think that at one time, around 2000, Liberty was considered the
only real competition and threat to Bata.
For the young
Gupta is all too aware of the challenges. Liberty has 450 franchisee
cash-and-carry stores and 100 company-owned outlets. We
opened 100 stores in each of the last two years. We want to add
50-100 stores each year, half of them franchisees and the rest
company-owned, he says.
With Rs. 1 crore as the average annual sales per store, Gupta
is keen to hit the Rs. 1,000-crore target in the next couple of
years. Side by side, the company has launched its online store
and tied up with e-commerce players such as Flipkart and Jabong.
And its focus is the youth. Says Gupta, Liberty will never
be a luxury brand. Well be a youthful, fashion-centric brand
with affordability as a key criterion.
(Published in The