Age: 42 years
Designation: CEO and MD, Pavers England
The Perspective: Retailers chase scale in the hope that profitability will come once adequate scale has been achieved. This is a false hope.
We entered India in 2008 and, like all foreign brands, we wanted to have a large presence here. Our market surveys showed us that the franchisee model doesn’t work and we initially tied up with departmental stores like Lifestyle, Shoppers Stop and Reliance Footprint as well as multi-brand outlets. In addition to this, we opened our own stores as well.
Building a brand is a painstaking process and it was twice as hard for us in India where our brand was unknown. It is also a slow process. And while we chased customers between 2008 and 2012, we could see that the business wasn’t growing the way we wanted it to. It certainly wasn’t profitable and while most brands in India today are willing to sacrifice profitability for growth, we were not comfortable with this. There were also problems with our positioning, but I will come to that later.
First let me explain why working with some departmental stores didn’t work. They give a small two-metre space in their shoe retailing area and expect you to compete. If a rival brand drops prices, you need to do the same. During the end-of-season sale, they expect you to give heavy discounts and the brand takes the cut. The retailer margin stays the same. How is this a win-win relationship? As a result, we decided to get out of departmental stores. Reliance Footprint is the only store we continue to serve. (Disclaimer: Reliance Footprint is part of Reliance Industries, which owns Network 18, the publishers of Forbes India.)
During this period, while sales were growing rapidly, we were constantly trying to chase the mass market. We launched a women’s range with prices starting at Rs 799. While this led to volumes, profits proved elusive. These years also saw, what I call, the ‘sale culture’ coming into malls. By that I mean a situation where brands are on sale every three-four months. While this may be good for the customer, it kills our profitability. And once a customer realises a brand is on sale regularly, he will wait for the next round and not buy full-priced products.
So four years after entering India, we had a loss-making brand with a positioning that we didn’t want. (Pavers England invested Rs 115 crore in India.) We decided to completely reorient our strategy and this required turning the ship around. We decided we could not be all things for all people and that we weren’t a mass-market brand. It needed a product change and a culture change within the organisation. We also decided not to chase the ecommerce bandwagon. We sell only on Amazon.in. They buy the products from us outright and run only very selected discounts.
We decided that we were retailers and our sole focus had to be on the customer experience. Our customer is looking for well-trained, knowledgeable staff who will sell him a product that he genuinely needs. And, most importantly, he is willing to pay a premium price. We call this the “prestige premium” segment and it required us to change the products we stocked. Our women’s footwear is now four times as expensive and prices start at Rs 2,499. The average men’s shoe retails at Rs 5,500. Stuart Paver, our joint venture partner, is responsible for selecting every product that goes into our stores. At 55, he still works till 2 am with buyers in Guangzhou (China) selecting designs.
We rewrote the policy that defines the pillars of our organisation: Customer, employee and shareholder—in that order. Once that is clear, the path ahead becomes easier. We said that we wanted customers who would transcend generations. If you become a customer once, you are a customer for life. So now, every Pavers England shoe comes with a lifetime free service guarantee. Any customer can walk into our store and get the repaired shoe back within 21 days.
Building a Winning Culture
(This story appears in the 12 December, 2014 issue of Forbes India. To visit our Archives, click here.)