Dipesh Satapathy narrates the footwear sector’s plight in times of COVID-19, with inputs from Vikas Bagga.

The Indian footwear sector is facing tough times as the COVID-19 lockdown has led to little sales, cashflow issues, cancelled orders, piled up stocks, delayed product deliveries, supply chain disruption, lack of skilled manpower for a couple of months and difficulty in procuring viable credit.

Losses and Keeping it Viable

Companies are also loaded down with fixed expenses like salaries, rentals and interest on finance. The entire summer season business has gone for a toss. Moreover, footwear is not an immediate need for most and hence, its purchase will be obviously deferred by most buyers, at least till the Indian festive season starts in October.

As the footwear market is not expected to recover anytime soon, the task of keeping business operations viable is a big challenge, says Pramod Mittal, chief executive officer (CEO) of footwear and accessories brand Pelle Albero, who feels problems for the sector will persist at least till October, and may extend further if appropriate assistance from the government is not received.

“The period till September looks very flat.... One of the worst recessionary markets awaits us once the market reopens and a dramatic change in business landscape is expected,” said Deepak Bansal, founder-director of Peanuts Retail.

Strategy Works

While some like Sara Suole Pvt Ltd, which has sufficient stocks to ride the disruption, have planned a focused approach to target core and essential activities after reopening for effective use of resources, most others have either taken or are taking a slew of steps to tackle the uncertain situation.

Probable rewiring strategies will include focus on strengthening online sales, cost-cutting, no increments, no hiring, closure of non-profitable stores and scaling down. The new normal post COVID-19 will see ‘digital operations’ taking up the front seat, making an omni-channel model a necessity, feels N Mohan, executive director and CEO of Clark’s Future Footwear Pvt Ltd. Ambud Sharma, CEO of the Ligo Group, which owns and operates the luxury lifestyle brand Escaro Royal, feels strong datadriven companies will have an edge.  Adaptation of technology as a strategic advantage will be a clear requirement for survival, he said.

Bengaluru-based Lifestyle International Pvt Ltd, part of retail and hospitality conglomerate Landmark Group in Dubai, has deferred future orders, reduced open-to-buy plans to avoid excess stock and postponed store refurbishments and new openings, according to the group’s senior vice president for footwear and travel & accessories Akash Sehgal.

Agra-based Guide Footwear is planning to venture into some other category, like safety kits, to utilize unused capacity. Clark’s Future will disinfect its stores and merchandise on a regular basis to boost consumer confidence and is preparing to initiate discussions with mall partners for alternate contracts like revenue-sharing model for the remaining part of the year, says Mohan.

The Ligo Group shipped bulk shipments to its third-party warehouses to ensure sales channels are well fed when the lockdown is lifted, and general buying sentiment is restored. Most companies are charting out cost reduction strategies. “We will try to sell the stocks later at a much lower price to the same buyer or in the open market,” says Mumbai-based kids shoes brand Beanz co-founder Prem Madan.

Labour, Skills, Ops

Shortage of skilled manpower is something most footwear players anticipate after the lockdown gets over as a substantial chunk of migrant workers will in all probability shift to their native places because of the uncertainty accompanying the pandemic. Resources in this sector will always be available in abundance, but it is the cost factor that poses the real threat, says Mittal. Some like Jaipur-based footwear distributor Ajay Rathore are clear about no new hiring in the next 12 months.

Depending on COVID-19 hotspot zones marked by the government, many companies are unsure of when they will resume operations. Each week of store and mall closure amounts to 1.93 per cent of Lifestyle’s annual business loss. Clark’s Future estimates its sales to be lower than 15–20 per cent compared to last year, while Beanz foresees a loss of nearly ₹1 crore. Most companies have put a brake on expansion plans as the April-June quarter seems a gone case.

While Mittal feels industry bodies and unions will play a critical role in bargaining with the government for assistance in reviving as without that, the sector’s sustenance will be at stake, Rathore says the trade fraternity should come together and take a stand on the issue of high rentals. Sharma anticipates that about 30 per cent of industry members will be wiped out due to incoherent efforts in illogical directions.

Festive Revival?

Most players expect revival to start by October-November, when the Indian festive season starts. The revival process will commence partially by mid-May and by 90–100 per cent by the third quarter of 2020. A mute-paced revival may start in July, says Mohan. Guide Footwear’s Abhishek Ralli and Sara Suole vicepresident Vinesh Singh are both optimistic the retail business situation would return to normal around Diwali.

Government Aid or Self Help?

While most companies expect some form of government assistance, such as waivers in filing dates for income and goods and services taxes and employees provident fund contribution without interest or penalties, reduction in property tax and import duty for footwear components, and other nonstatutory relief measures like rent and employee salary, some do differ.

It is necessary to strategise without expecting government aid for a few months, according to Tergus Works founder Divej Mehta, who says a self-sustaining strategy will be the way ahead. Rathore does not expect government help either. Sharma echoes the other two. He feels only inefficient entities seek government assistance and companies expecting handouts would most likely not survive.

Although some footwear manufacturers like Guide Footwear and Weltech India Pvt Ltd (which owns the brand Happy Feet) plan to venture into production of masks and other personal protection equipment (PPE), Sharma feels many companies will see PPE production as a stop-gap measure to keep their cash flow from crashing. Mittal is more blunt. “As traders, we can help in the distribution of these [PPE] products and can do our part in standing against this pandemic, and beyond this, we do not believe the footwear industry can be of much assistance in this situation,” Mittal remarks.

Rajesh Vig and Ritu Vig, promoters of Happy Feet, feel, "The major issue will be restarting the business, finding customers to manage sales, correcting cash flow and also ensuring that the vendor should be ready for supplies to be delivered on time. For all these to happen in the proper manner, a high level of communication is required among all members of the industry, especially between buyers and sellers, for orders, supplies and payments to encash just after or within 45 days of the lockdown ending."

Meanwhile, Tergus Works, which expects a 35–40 per cent drop in business this season, started a campaign in which all proceeds generated through online sales will be donated.

Footwear industry consultant Vikas Bagga feels the need for an exclusive commerce ministry taskforce that can co-opt with stakeholders on course correction. “Since the revival must be inclusive, the measures must encompass micro aspects on all facets of the industry, be it manufacturing, raw material sourcing, ancillary services, trading, distribution, trading,distribution, retailing and supply chain,” he concludes.

This article was first published in the May 2020  edition of the print magazine.