Chennai: When Crocs Inc., the high-end casual footwear US company, entered India in mid-2007, it didn’t expect the waters to be rough.
Crocs India Pvt. Ltd, its Indian arm, achieved just half of its expected sales at 280,000 pairs in 2008 and opened only seven instead of the planned 14 exclusive retail stores in the country, largely due to the tight credit situation following the economic downturn.
In April, the company decided to overhaul its distribution model in India, getting rid of distributors and selling directly to shops to ensure supply and display of its footwear on special racks, though that meant a 10% increase in costs.
Brand value? A Crocs store at Select CityWalk mall in New Delhi. In 2008, Crocs’ distributor problems apart, copycat versions priced at half or even a quarter of the original invaded the market. Harikrishna Katragadda / Mint
In most Asian countries, the Crocs brand would see rapid growth in just three months, according to Murali Desingh, managing director of Crocs India. “In India, frankly, it didn’t happen…the consumer is price conscious,” Desingh said. In India, Crocs footwear, made of a patented rubber-like material called Croslite, has ranges for men, women and children and is available for Rs1,000-2,000.
Thailand, Malaysia and Singapore together have a population that is less than that of India. But quarterly sales of Crocs in these countries is $30 million (Rs146 crore), 30 times the quarterly sales in India.
While the lacklustre economic climate hurt demand for Crocs’ high-end footwear in India, another reason for this dismal performance was the inadequate service levels of distributors. Desingh said the three nationwide dealers didn’t replenish stock or ensure good displays in shoe shops and other retail outlets.
“Regular distributors don’t have the service orientation,” said Purnendu Kumar, associate vice-president at Technopak Advisors Pvt. Ltd, a retail consultancy. “They are still in that supply-driven distribution mode and not yet inclined towards demand-led delivery.”
In 2008, Crocs’ distributor problems aside, copycat versions priced at half or even a quarter of the original invaded the market and were stocked by footwear stores.
“At one point I had just three pairs of (women’s Croc) shoes hanging on the rack,” said Sunil Kumar, a manager at a Chennai-based outlet of Metro Shoes, a footwear retailer.
In addition to changing its distribution model, Crocs is clubbing an extra 15% to the existing 20% margin for retailers, adding in the share that went to distributors
Metro Shoes’ Kumar has received the latest batch of stock, but several other Chennai footwear retailers Mint spoke to are still waiting for their supplies to arrive.
Despite the possibility of the business covering its fixed and variable costs by October, a surge in sales will probably happen when prices go down. For that, the manufacturing set-up has to be in India. But a factory will be viable only when sales touch the 400,000-pairs-a-year mark.
Crocs India’s Desingh expects to achieve 300,000 pairs in the coming months, and hopes that by next year the stage will be set for a factory.