Homegrown footwear maker Metro Brands aims for Bata’s shoes

The ₹800 crore footwear major is now all set to take off on its next phase of growth. It hopes to raise ₹250 crore through an IPO which it says would be used to fuel its expansion across the length and breadth of the country, especially in tier 2-3 India. Metro currently has 586 stores, across four formats (Metro, Mochi, Walkway and Crocs). The ambition is to set up 213 additional stores in the next two-and-half years and give Bata a run for its money.

“People in tier 2-3 India want aspirational products which are affordable,” says Nissan Joseph, CEO, Metro Brands. This was the idea behind the launch of the company’s value format, Walkway in 2009. While the flagship Metro brand is positioned as a family footwear store, Mochi is meant for the millennial consumer. The company also has exclusive licenses for global brands such as Crocs and more recently FitFlop—for which it has set up exclusive brand stores.

Over 70% of Metro Brands revenue comes from its private brands and the plan is to strengthen that portfolio. Some of its recent in-store launches such as Metro Nature Pro, Metro Merino Wool and Mochi Australian Wool are sustainable brands. While Metro Nature Pro is made from recycled PET bottles, the latter is made out of wool and doesn’t contain leather.

Farah Malik, MD, Metro Brands, however, takes pride in the company’s ability to localize. “In the North-East we have used kids' mould to make adult shoes as the average sizes are small. In the south we make designs with fewer heels, while in Punjab, it is a riot of colours,” she explains. The CEO, Joseph, claims that one of the reasons why the company has been able to localise is due to its strategy of having company-owned stores as opposed to the franchise model.

Malik proudly talks about a host of other business strategies that she has learnt from her grandfather that has enabled her to take her footwear business national—one of them being the revenue share rental model. “The tenant and the landlord sharing revenue are common today, but Metro has always had revenue share deals. It’s like a partnership. Today, the concept of minimum guarantee has come in, but despite that around 20-25% of our stores are on a pure revenue share basis.”

Digital Strategy

The pandemic crippled Metro Brands as much as it did to the footwear industry at large. The company’s revenue dipped from ₹1,285 crore in FY20 to ₹800 crore in FY21. The PAT (profit after tax) margins shrunk from 12.5% in FY20 to 8.1% in FY21. To keep the show on, the company shut down its non-performing stores as well as let go of its staff in those stores. It also embarked upon a stringent cost conservation strategy. “We renegotiated rental deals as well as delayed payments to vendors to ensure we had enough tide over. We even cut employee salaries,” says Malik.

However, the biggest cost on its balance sheet was inventory. “We had high levels of inventory as it was a change of season and we had planned a host of new collections. The challenge was how do we get to the customer as she couldn’t get to us. So, whether it was through omnichannel, e-commerce, home visits or by setting up pop-up stores, we tried to leverage inventory across all channels,” says Malik.

The pandemic gave a huge boost to the company’s digital strategy. From a mere 1.7% in FY19, online in FY21 contributed 7.3% to the company’s overall revenue. “We have the highest number of Instagram followers among key footwear retailers in India,” claims Joseph.

Apart from considerably sprucing up its own websites, Metro has also been curating exclusive collections for e-commerce marketplaces such as Myntra. “We will significantly invest in digital commerce initiatives as customers are becoming increasingly digitally savvy. The aspiration is to be the largest footwear and accessory company in India. We have a lot of opportunities ahead of us and we have strengths in operations,” points out Joseph.

Performance linked incentives (PLI) or variable pay form an important part of employee compensation in most new-age organisations. The idea behind PLI is to ensure employees have their skin in the business and thereby stay committed.

For the 65-year-old homegrown footwear major, the concept of variables has been a way of life since its inception. Ever since the second-generation entrepreneur, Rafique Malik, took over his father’s small shoe shop in Mumbai’s trading district—Grant Road (and eventually went on to set up the first Metro store in Colaba in 1955)—he has maintained that unless his employees have a sense of ownership, they wouldn’t be able to deliver their best. “My father inherited this philosophy from my grandfather. We have kept alive the sense of ownership ever since and have ensured that the majority of our employees’ salary is variable,” says Malik.

She says the variable pay policy has helped to contain attrition to less than 2%, across its operation in 134 cities. “Even during the pandemic, when we were unable to pay the variable component (as there was no business) our employees remained with us. All our front-end store managers have a deep sense of ownership and that has helped the brand.”