You must be mad,” thundered 82-year-old Catherine Paver when her son Stuart broached the idea of selling shoes in India in 2007. “Why can’t you concentrate on what we know works?,” she asked.
Catherine was referring to the £100 million shoe retail business she had built since 1971. With a £200 bank loan, she had begun by throwing shoe parties and then moved to selling them in huge warehouses before setting up 160 retail stores in the UK and Ireland. Forty years on, the business, Pavers Shoes, was growing at 25 percent, far in excess of market growth, and she couldn’t see any reason for them to take a risk half way across the world.
On the other hand Stuart, it seemed, wanted to throw it all away. After all, theirs was a small business that gave the family about £10 million in profit every year. All of that money is ploughed back into the business.
A Maze Called India
It’s not that her fears were not well founded. In 2002, Stuart’s brother Ian, who handles buying for the company, impressed with the enthusiasm of Indian suppliers, started sourcing materials for Pavers Shoes from India. The suppliers would say ‘yes’ to every order for insoles, toe caps and mid-soles, but would rarely deliver on time and in the desired quantity. After three frustrating years, the company stopped doing business with them, with Ian vowed never to come back.
But Stuart, acutely aware that the company had missed out on the China opportunity, didn’t want to give India a miss. So, on a whim, he winged his way here and decided to see things for himself. While strolling down Linking Road in Mumbai, he saw how disorganised shoe retailing was. Retailers would often do stock checks once a season and had no clear record of what was selling.
Stuart realised that in this market Pavers does not have to be perfect to succeed. “All we had to be was better than the others,” he says. “The market was at a place that would give us enough time to understand and learn from our mistakes.”
Four years on, the company has 12 exclusive franchisee stores and 65 points of sale in India. Pavers plans to add another 20 franchisee stores this year. Revenue from sales has been doubling every year, and now stands at Rs. 38.5 crore. If things go according to plan, Pavers India says it should close the decade with a billion dollars (Rs. 4,500 crore) in sales. That figure — Rs. 4,500 crore — is what analysts say India’s entire footwear market is approximately worth right now. Of that, the organised shoe market is 20 percent.
One company, Bata India, accounts for a third of all shoes sold in India. Last year, its sales stood at Rs. 1,277 crore. It also had the country’s largest network of 1,250 retail stores spread across 400 cities. India’s second largest listed footwear company Mirza International, the makers of Red Tape shoes, had revenues of Rs. 472 crore last year.
Growing Step by Step
Pavers has grown in excess of 100 percent every year in India, with the market for premium shoes growing at 40 percent. By contrast, Bata, which sells mainly mass market shoes, saw sales rise 15 percent. Pavers’ growth rates indicate that it is beginning to attract the Indian consumer.
In 2007, Stuart knew India could allow the company to grow a lot quicker. But he needed to test his hypothesis. That’s when he turned to Belle International, which had been set up in 1991 in Guangzhou, China. In 20 years, Belle has built a network of 12,000 stores and makes 50 million pairs of shoes every year. Pavers represents Belle’s Staccato brand in the UK. Stuart Paver knew if anyone could help him understand scale and high growth rates, it would be the head of Belle.
He brought Belle Senior Vice President Hu Bing to India for a market visit and to help set up operations and strategy. After a week, his message was unequivocal: “The Indian market is where the Chinese market was 15 years ago. Start operations in India and then ride the consumption wave.”
Thereafter things moved swiftly. Stuart reckons Clarks Shoes, Pavers’ main UK competitor, was 20 times as large as Pavers 10 years ago. Now they’d managed to narrow the gap to 10 times. If Pavers was to surpass the company in Catherine Paver’s lifetime, they had to get to India. Moreover, he reasoned that even if the India bet went wrong, an initial investment of £5 million wouldn’t kill the company. (Pavers, which has entered India in partnership with the USD500 million Foresight Group, has committed a total investment of £60 million, according to Utsav Seth, managing director, Pavers India.) So far, the company has invested USD 27 million.
(This story appears in the 12 August, 2011 issue of Forbes India. To visit our Archives, click here.)