International -- Asian Business: INDIA
THE CHEAPER SHOE FITS IN INDIA (int'l edition)
Indians prefer Bata's footgear to Nike's and Reebok's
They're emblems of American culture, they're cool, and they're expensive. They're sports shoes from Nike Inc. and Reebok International Ltd.--the running shoes, basketball shoes, and cross-trainers coveted by adolescents from New York to Tokyo. They are best-sellers worldwide.
Well, not exactly. In India recently, a few things have happened to prove that marketing American icons is not always a slam dunk. Reebok, in India since 1995, has been slashing prices to move the product. And Nike has actually teamed up with the local rival, footwear maker Bata India, a Calcutta company that's 51% owned by Canada's Bata. Bata has been in India so long--67 years--that Indians think it's a local brand.
So while Nike and Reebok struggle, consumers are snapping up Bata India's offerings. In early April, the company reported its earnings quadrupled in 1997, to $4.3 million on sales of $172 million. Since late 1996, when Reebok and Nike first set foot in India, Bata India's stock has gone from 1 1/4 to almost 4.
Thus can the triumphant progress of U.S. fashion icons be slowed by rivals that know the territory. Of the estimated 120 million pairs of brand-name shoes sold in India annually, 56 million are Batas. Of the 7 million pairs of sports shoes sold in India, 2.5 million are Bata's. The key is a combination of low prices, ranging from $1 to $25.50 a pair, and availability. "India is a volume game, and Bata has it," says Mohan Swamy, footwear analyst with ABN-Amro India.
In contrast, some of the foreign brands have not been making a good showing. Nimish Grover is a young investment banker in Bombay. Some months ago, he bought a pair of $70 Nike cross-trainers for casual wear. Six months later, the soles separated from the uppers. "I haven't bought a foreign brand of sneakers in India since," he says.PRICE-CONSCIOUS. The foreign sneaker makers bet on the aspirations of India's 100 million-strong middle class. Instead, they found consumers who prefer to watch sports instead of play them, know little about American basketball stars, and don't equate low price with low quality. "The Indian consumer is more price-conscious and not as brand-conscious as his counterpart in Japan," says Ranjit Shastri, a partner at management consultants PSi Inc. in New Delhi.
This has been a hard lesson, especially for Reebok, which has lost an estimated $15 million in India. In 1997, poor sales forced Reebok to slash prices by 25% to 30% off full price, shortly after a month-long 50%-off sale had concluded. The foreign brands' share of the sports shoe market is only 14%, compared with Bata's 36%. Reebok declined to comment.
Bata is such a power that Nike has started to retail its shoes out of Bata's 1,500-store network. "The Bata connection will help the company penetrate smaller urban markets like Jaipur and Agra," says Nike India chief G.K. Nayar. Bata is happy to let Nike chase the high end. If anything, it wants to appeal even more to the masses, where the real profits in India come from.By Manjeet Kripalani in Calcutta