Table of Contents

Project Summary ............................................................................................................................................................ 1

Background ..................................................................................................................................................................... 2

Objectives ........................................................................................................................................................................ 3

Methodology .................................................................................................................................................................. 3

Key Findings .................................................................................................................................................................... 5

Marketing: ................................................................................................................................................................... 5

Distribution: ................................................................................................................................................................. 8

Sales & Distribution Network: .............................................................................................................................. 8

Distributors .............................................................................................................................................................. 8

New Distribution Formats: .................................................................................................................................... 8

Retail Store Layouts: ............................................................................................................................................... 9

Refill management: ................................................................................................................................................ 9

Online Distribution Strategy: ...................................................................................................................................... 11

Conclusion ..................................................................................................................................................................... 14

Glossary & References ................................................................................................................................................. 16

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Project Summary

Khadim’s is one of the oldest and most prominent footwear brand in the economical category. Our initial study about the firm

revolved around brands, products, and store locations among other things. Based on these observations we concluded that

Khadim’s distribution network is one of its key strength which is why we decided to focus on distribution strategy of Khadim’s,

both online and offline.

Our analysis is primarily based on information from interviews with the following key stakeholders of Khadim’s:

Mr. Sabyasachi Sanyal , Senior Marketing Manager

Mr. Akhilesh Singh, Sales Manager

Mr. Prashanth Banik, Store Manager

The primary source of information is also backed by the secondary analysis done by team members. The report does a critical

analysis of the distribution strategy of the company. The key findings were in the areas of the formal feedback systems,

distribution architecture and margins, branding and marketing strategies, online retail distribution and future plans, their target

segments and distribution systems, discount strategy, sales targets, level of IT involvement in inventory management, product

retrenchments, dealer relationships and terms and conditions of selling. Khadim’s envisions a pan India presence and has

embarked on an expansion project. This explains their foray into online marketplace and recent fund raising activity.

The recent fundraising by Khadim’s from Reliance Private Equity Fund and injection of new board members is clearly bringing

fresh perspective and expertise which will help Khadim’s to prepare for the next level. The latest attempt at celebrity marketing

reflects the shifts in paradigm in marketing philosophy and it’ll be very interesting to see how the company evolves from here.

“I am not a magician, but we are a strong team now and, with new learnings from our equity partners, we understand the

national market better,” – Siddarth Roy Burman

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Background

INDUSTRY OUTLOOK:

India is the fifth largest retail destination globally. The Indian retail industry has experienced tremendous growth over the last

decade with a significant shift towards organised retailing format and development taking place not just in major cities and

metros, but also in Tier II and Tier III cities. The overall retail market in India is likely to reach Rs 47 trillion (US$ 792.84 billion) by FY

17. India is the second largest global producer of footwear after China, accounting for 13% of global footwear production of 16

billion pairs in different categories of footwear. India exports about 115 million pairs. Thus, nearly 95% of country’s production

goes to meet its own domestic demand. The footwear market can be segmented into a number of categories: Premium/High-

end, Medium priced, low priced and plastic slippers/leather strapped one. Again, organized footwear retail has again a number

of segments based on the type. The booming Indian economy offers the prospect of higher disposable incomes and a change

in consumer preferences leading to a probable increase in per capita footwear ownership.

KHADIM’S: INTRODUCTION:

Khadim’s footwear is one among the top 3 footwear retailers in India and its flagship brand “Khadim’s” is considered as the

most preferred footwear brand in Eastern India (IMRB survey). It has over 650 retail outlets all over India, offering a wide range of

footwear (80%) along with accessories (20%) for the entire family, at various price points, catering to different income groups.

BACKGROUND & OVERVIEW:

Khadim’s was established in 1965 with the acquisition of a small shop in Chitpur by Lt. Shri Satya Prasad Roy Burman. Through

the next many years, the company was involved in whole-selling and distribution of branded basic utility footwear. Aggressive

marketing and advertising spend has helped to create a strong brand recall in its catchment area, essentially across East and

South India. The group made its retail debut in 1993 with 3 showrooms in Kolkata. With its foray into retailing, Khadim’s

emerged as a popular fashion footwear brand, as also one of the leading organized footwear retailers in India with a 5% market

share (80% retail & 20% wholesale). Though it has a factory that makes wash-and-wear and premium leather footwear,

Khadim’s' success primarily rests on its outsourcing strengths. The company relies on over 200 third-party vendors for sourcing

material and finished footwear.

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The positioning in the market is that of “value-for-money family footwear brand” for all age groups. The biggest strength of the

brand is its reach coupled with customer loyalty. In a brief period of less than two decades, Khadim’s has been transformed into

a much-loved iconic brand. The group recently entered into the online retail segment, with own e-store available at

Khadim’s.com and other market places like Flipkart from July 2014 to target the newer segment of audience. While keeping

pace with the rapidly changing retail environment, global fashion trend and consumer behavioural paradigms, Khadim’s has

also consciously adopted contemporary retail store aesthetics for an enhanced shopping experience, and to boost its brand

appeal to Generation-Next. Aggressive global footwear brands are increasing their reach in terms of price and touch points

across the country and their biggest rival Bata is already double in terms of store count at 1,250, with years of legacy. But

Khadim’s isn’t giving up. The time-tested strengths of the organisation as wider market reach through dealer-distributor

networks and company-owned outlets, the flexibility of trader-cum-manufacturing model, and the brand equity built over the

years, helps to withstand competitive pressures.

Objectives

Understanding the market strategy for one product category (footwear)

Studying the advertising methods for this category

Effectiveness of the online marketing strategy

Analysing the reasons behind the concentration on certain distribution channels

Looking at the sales conflict between franchise stores and online retail marketing

Methodology

The initial background about the firm Khadim’s regarding the brands, products, store locations, history and recent news updates

was understood from the website and a few other news articles. The initial observations made were that the company recently

entered in to the online retail space and also that the company grew from a mere 250 retail stores in 2006 to 650 in 2014 which

was quite impressive. With the background and history in mind the group talked in person to the Senior Marketing Manager,

Mr Sabyasachi Sanyal who is working out of the headquarters of the company at Kolkata. The interaction lasted for close to 2

hours and 15 minutes.

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We had questioned him on the following broad areas:

The general history of the brand

The formal feedback systems

Distribution architecture and margins

Branding and Marketing strategies

Online retail distribution and future plans

Their target segments and distribution systems

After getting the inputs and assimilating them together with the group, in order to check the ground reality, a retail store visit in

Behala, Kolkata was planned and the group interacted with the company owned store’s manager Mr. Prashanth Banik for 45

minutes.

The questions addressed by the store manager were the following:

Store ambience and store design

Discount seasons

Autonomy of store manager

Warranty terms

Fast moving and slow moving items

Sales targets

The insights from this interaction helped us question the Senior Sales Manager, Mr Akhilesh Singh who works out of the Sales

office in Kolkata. This interaction went on for 1 hour and 15 minutes. The following questions were pondered over during the

interaction:

Distribution Architecture

Decisions on store design, area, sales force and sales target

Level of IT involvement in inventory management

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Product retrenchments

Dealer relationships

Terms and conditions of selling

The above interactions gave us great insights on the idea of marketing with an in depth understanding of the distribution

networks because Khadim’s is a company thriving due to their strong distribution.

Key Findings

Marketing:

Khadim’s intend to further expand the retail footwear operations by leveraging their existing sales and distribution network and

apply innovative retail marketing initiatives. Khadim’s already has a substantial presence in Eastern and Southern markets. They

are in the process of expanding their presence in the growing Western and Northern markets.

“How do you think Khadim’s marketed themselves?"

“We do not get into guerrilla marketing ever. “

Mr. Sabyasachi Sanyal, Senior Marketing Manager

Comments: The message and objective must be clearly defined in order to avoid being misunderstood in case of Guerilla

Marketing. Since Khadim’s target a wide range of audience and since it has never been into this mode of marketing, there

might be a risk of backlash if the company plans for Guerilla marketing.

“Our strategy has always been building visibility through the stores themselves as we try to cover geographies with as many stores

as possible. We call this the Cluster bombing Strategy”

Mr Sabyasachi Sanyal, Senior Marketing Manager

Comments: Khadim’s already has a strong store presence in India with average store-area of 1000 sq.ft. . Hence, the Stores

serve the dual purpose of selling and marketing thereby reducing the additional marketing cost. Besides, the ease of accessibility

to consumer feedback is high. Also, there is an option of customizing the marketing campaign as per the location of the store.

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“Though we haven’t been advertising our brand aggressively for the past 2 years but we continued with tactical advertising

which is basically TV ads and print ads during festive seasons. The reason for not having too many ads for the brand was to actually

concentrate on improving the store experience in terms of the ambience and other factors. We will be back with the brand

advertising by the next FY”

- Mr Sabyasachi Sanyal, Senior Marketing Manager

“We do not believe in celebrity marketing. We think Khadim’s is a family brand. As per celebrity marketing is concerned, it works

with a product like coke and with the youth, where a Salman Khan can increase sales. And there are products like Navratna oil

which is aimed at rural markets; here too celebrity advertising works well. It might also work well with some premium brands but for

Khadim’s we feel it won’t.”

-Mr Sabyasachi Sanyal, Senior Marketing Manager

Comments: Khadim’s as a brand is more oriented towards families and the same is being reflected in the portfolio of products

which they have. They do not charge premium on their products. Despite this, Khadim’s should not completely do away with

the celebrity marketing. Khadim’s should look for celebrities who can connect with the family audience and at the same time do

not charge high. The same celebrity can be used for online advertising as well since they have recently forayed in to online

marketing. Some of the celebrities which they can rope in are Prachi Desai, Sushant Singh Rajput etc. (because of their popularity

with family as well as young audience).

“We are planning to implement full-fledged structured CRM from next FY with Customer Loyalty programmes. We feel it is very

necessary because it is tough to retain a customer than to get a new customer. Only when the best of analytics are in place and if

the customer is informed with exactly what he wants does CRM make any sense, otherwise it would be a harassment of the

customer.”

- Mr. Sabyasachi Sanyal, Senior Marketing Manager

Comments: Khadim’s is planning to implement full-fledged structured CRM from next FY along with Customer Loyalty

Programmes. It seems that Khadim’s is planning to go ahead with CRM implementation because its competitors have done it

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already. The motive behind, might be clear and may not be to cause deterrence in the customer experience, but getting in place

the "best of analytics" will be a challenge. Now that they have entered into online markets, CRM might be helpful in their online

customer handling. But, brick and mortar store customers might not have a desired experience unless proper structure is set.

Findings on formal feedback mechanism:

A customer database is maintained which is regularly updated with the help of retail stores. Name and phone no. of customer

are the inputs to this data base. But this database is not used for any structural analysis.

A Toll-free number is also available to collect customer feedback. An average of 40-45 calls are received per day (mostly

complaints) and the resolution is provided within 72 hour

These are the only two feedback mechanisms till 2012, after which Facebook page is started which acts as a better interface for

customer feedback.

Khadim’s Marketing Mix:

Product: (apart from Khadim’s)

Price: The prices vary from product to product and brand to brand. The lowest price available is 200 INR and the high price

product is 3000 INR. The price range covers all the income groups.

Place: 650+ retail outlets all over India with good penetration in South and East India (West Bengal, Bihar, Orissa, North East

states) and wholesale mostly in rural India.

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Promotion: The Company is focussed on improving the store experience in terms of the ambience and other factors and also

increasing the number of stores.

Distribution:

Khadim’s is the 3rd largest footwear retailer in India with presence across 22 states through 600 retail outlets of which 112 are

company owned.

Khadim’s operates in a ‘hub and spoke system’ for effective sourcing and distribution. They have set up regional distribution

centres for efficient storage and timely delivery of material to their retail outlets and channel partners. The distribution and

logistics network comprises of three distribution centres i.e. Kolkata, Delhi and Chennai. All the stores and distribution centres are

connected through a company-wide virtual network connection

Sales & Distribution Network:

Comment: The Senior Sales Manager in our interactions with him claimed that each of the retail outlets has ERP systems for

inventory management and is connected to the central office. But at the same time the actual placement of order is done

manually still with the TSO playing a large role. Now with the planned expansion of Khadim’s, they need to utilize the system

that they have already put in, more efficiently.

Distributors

Although Khadim’s directly supplies many Company Operated Outlets (COOs), Exclusive Brand Outlets (EBOs) and Brand

Outlets (BOs), the Distributors provide their footwear to BOs and Multi-Brand Outlets (MBOs) at places where they do not find it

feasible to set up their own distribution channels due to factors like low requirements. However, these distributors do not supply

directly to customers through stores or outlets.

New Distribution Formats:

Online retail (new, younger segment of audience targeted compared to traditional retail)

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o Own e-store : available at Khadims.com

o Other market places : presently only on Flipkart

MBOs: It is the primary driver of sales in rural areas due to lower demand. Wholesale and MBOs achieve large volumes

with lower margin in low price products.

Retail Store Layouts:

Khadim’s is looking to add a new format in the rural markets. This format known as Family C will have 90% Khadim’s and 10%

brands which will mainly cater to the floating population here.

Refill management:

Every week a refill of inventory is done based on expected product demand. This need is established by the store manager

along with the TSO, despite the presence of an automatic inventory system.

Initially, when the store is setup, a level of inventory for each size of each foot wear is established, but this is flexible, depending

upon the store layout. When sale occurs, the manager has to note the decrease in stock and report to the TSO about the

amount required, in consultation with him. Based on the interaction between the TSO and the store manager a refill is done

before the next week.

The ERP system developed by SAP has been in use in each store and each store is connected to the centre. The managers get

to see the detailed reports of sales in each and every store if need be.

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Terms and conditions of Franchisee

"We treat our franchise stores like our own. We share everything with them: our good practices, servicing, team management tips,

even the salesman's salary"

- Siddhartha Roy Burman.

Khadim’s uses 1 out of its 3 own vendors to design the stores, according to the store layouts above, to maintain uniformity of

experience. According to the senior sales manager, “He gives us business guarantee; we give him monopoly in that area. So we

avoid overlapping with MBOs etc.”

“If the person makes a secondary sale of 10 lakhs on non-moving articles, and if he sells them at an average discount of 25%, we

contribute 25% of his loss in order for him to liquidate his non-moving articles”

-Senior Sales Manager, quoting an example of the deep relationship that Khadim’s shares with its franchises.

If the dealers complain about the non-moving articles, khadims is ready to retrench the product. An example quoted by the

Senior Sales Manager is “TSAR” which was positioned as an elite product for the Family A and Family B stores which was

retrenched due to the complaints of high pricing and relatively poor quality by customers and low movement by store owners.

Sales Target is based on the population. The TSO visits the particular area, understands the market, business specific

requirements, organized and unorganized players in the market and then gives us the data. Based on the data a primary yearly

target is set. This is then divided into peak and non-peak seasons’ sales target.

Target if not reached are passed on to the next month. Every month TSO will reach out to the EBOs and discuss on how to

reach targets. The interdependence between the company and franchises is well recognized.

"…we do not provide any credit to new dealers, but for our older dealers the credit duration depends on the level of relationship

khadims shares with the dealers. We have had relationships as old as 20 years with some of our dealers and they enjoy a very

relaxed subjective credit policy. But on an average you can mention that we have a 30 days credit policy."

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"As a policy we never take back the goods we have once sold (primary sale) except for the 2 sales seasons during which we

encourage our dealers to overstock with the promise that we take back whatever is unsold by the end of the season."

– Sabyasachi, Senior Marketing Manager, Khadim’s

Large Retail Distributions

The reason for not entering into an SIS even though it offers an access to a larger audience is that the terms and conditions and

rentals are unfavourable for our brand.

Comment: Khadim’s plans to expand its operations to 1000 stores by 2018, through its recent funding by Reliance, which

roughly translates to 1 store every 4 days. This exponential growth would be possible only if it optimizes its present distribution

system and adds on to it (the Delhi distribution centre will be supplying the Gujarat expansion plan). The rationale given by the

manager for not entering into a Shop-in-Shop with Big Bazaar (losing exclusivity, higher rental costs) holds little water, as each

new store requires a capital of INR 40 lakh. In fact, it would provide them a larger audience, given that they project themselves as

a middle class brand.

Online Distribution Strategy:

Khadim’s entered into the online retail market last year around September with their exclusive website – www.Khadims.com.

They have a designated team to handle the online sales and logistics. They also tied up with Flipkart in June this year to expand

their online presence. We discuss the nuances of these recent strategic changes brought about by Khadim’s in order to capture

larger market share.

Reasons for late entry into the online market:

“The CMD was against online retail because Khadim’s always believed in sharing a long term relationship with the dealers. Why

should a dealer have 5 competitors around him when he has done everything to accept our conditions and take up our franchisee?

But we though a huge growth is possible through the online market and it’s anyway targeting a new segment all together. So we

had to come in”

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– Akhilesh Singh, Senior Sales Manager, Khadim’s

As stated, they did not want to increase unnecessary competition for the dealer who had done everything to accept their

conditions and taken up their franchise.

They later had a change of heart considering the huge growth possible and as it was anyways targeting a new segment all

together.

Other reasons for not entering the online market earlier:

In 2004, when retail was booming industry experts showed fantastic growth path of 33% annual growth rate which never

happened

International brands also closed down due to lack of online sales

Inhibition due to the negativity set in because of the failure of dotcom companies

Reason behind choice of online market place as Flipkart and not Myntra

“The choice of Flipkart has a reason. All the online market places charge similar commissions and we got offers from all the market

places. When you compare BigBazaar and Pantaloons, you understand the difference to be that the former is a complete family

store while the latter is limited to fashion. We are not a fashion brand, we are rather a family brand which focuses on utility. And

hence when we had the choice of Myntra and Flipkart, we chose Flipkart rather than Jabong or Myntra. Even going further we are

looking at Snapdeal etc.”

– Sabyasachi, Senior Marketing Manager, Khadim’s

Flipkart is comparable to Bigbazaar whereas Jabong is similar to Pantaloons

Bigbazaar signifies value whereas pantaloons signifies fashion

Khadim’s believes it will be portrayed as a fashion brand if it goes with Myntra and hence they went on to choose Flipkart as

their market place

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Research done and factors considered before entering into online market place:

The factors considered were existing price points, categories, shipping, logistics

Their main goal was to not compromise on profit margin

Segment targeted in online market is 15-35 years compared to 25-40 in brick and mortar stores

They devised proper merchandise to be sold online through secondary research(different categories to be sold in men and

women)

Difference in online product mix compared to that in brick & mortar retail stores

No. of product types available in Brick and mortar stores vs. Online = 1800 vs. 115

Fixed cost for brick and mortar stores is higher as compared to no fixed cost for online stores.

Variable cost for online store includes returns, shipping, cost of inventory, operations, 3rd party logistics

Very low price products like Hawaii(MRP 130) can’t be sold online because of more overheads(logistics)

The price range of products available online is Rs.275-Rs.5000

No discounts are given on the products available online in order to keep the prices same as in the retail stores.

Performance and Conflicts due to online retail:

“We are keen on maintaining uniformity in prices all over. When we decided to go into online retail, the Flipkart guys wanted us to

give huge introductory offers and they generally try to lure you into giving discounts by saying, if you give a 20% discount, I'll get

100000 sales in a day or something like that. But, we never went with that idea because we wanted uniformity and we didn't want

to spoil our relation with our regular brick and mortar dealers. Also, we do not let our dealers to sell through the online market places

because this will also lead to a similar price conflicts which we do not want to encounter i.e. if one dealer somewhere in northern

India wants to clear off his stock he will give discounts on Flipkart and sell it off, which will cause a magnification effect and finally

conflicts arise"

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– Sabyasachi, Senior Marketing Manager, Khadim’s

Flipkart online market place was hired in June 2014 and was started with 78 product offerings

Online sales as on Aug 1st = 30000/day. Very strong start with good results right from the first month.

They plan to come up with different collection next year exclusively for online markets

Target group for Khadim’s retail stores is different from target group for their online market

Growth in Sales: Online vs. Brick & Mortar Retail stores

Online retail ~ 200%

Footwear growth rate (brick and mortar) ~ 12-15%

Future Plans to catch up with the pace of online retail

A cross functional team has been created for e-commerce to take care of the design, logistics, and marketing.

The above pool of knowledge will work on the innovation in e-commerce products.

Planning stage of entering into tie-ups with - Snapdeal and Indiatimes

They plan to expand their online presence through their own website as well as the existing online retail players.

Conclusion

It is clearly evident that strength of Khadim’s lies in its aggressive distribution strategy which serves the dual purpose of

marketing as well. The past 20 years have provided Khadim’s with a strong base in East, South and Central India and the future

plan lays down the similar footprint for West India as well. We strongly believe that this is a sound strategy and shall only

increase Khadim’s foothold in the coming years.

However, Khadim’s scepticism about online distribution channels and extreme conservatism to experiment and adapt has led

them with very little understanding of an online consumer. Though efforts have been progressively made to extend their foray

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in online retail, we believe it is a bit late and too little especially considering the fact that e-commerce is expected to grow at over

200% consistently in coming years.

Along with the analysis, we’ve also attempted to critique and recommend some of the marketing and distribution strategies of

Khadim’s. Some of the key recommendations are given below:

1. Brand presence in multi-brand retail: Khadim’s must ensure presence in major multi-brand retail stores like Big Bazaar,

Reliance Trendz, Vishal Mega Mart etc. This would not only add a touch point to their existing customers but would

also enable them to grab attention of new untouched customer base.

2. Online distribution: Rather than implementing a strategy based on intuition, a market research of online footwear

shopping must be conducted to understand buying behaviour of an online consumer. Based on the findings, a

comprehensive online marketing and distribution strategy must be formulated. More investments must be made for

infrastructure development and hiring of e-commerce managers.

3. Celebrity marketing: Though we welcome the move of venturing into celebrity marketing by Khadim’s, we believe that

roping in a big celebrity might do more harm than good. It would be more fruitful to choose a smaller celebrity which

reflect Khadim’s brand image better such as Prachi Desai, Sushant Singh Rajpoot who have started their careers from

TV and graduated to Bollywood.

4. All through our interactions, the senior management continually stressed the importance it places on maintaining good

relations, with its franchise owners, going to the extent of providing them training. In fact the Senior Sales Manager even

said that they provide a part of the loss that a store owner might bear on the sale of a non-moving article. This shows

that Khadim’s realizes the importance of its franchisee partners as well.

5. The actual order placement is still done manually with the TSO playing a large role in deciding new order levels. Now

with the planned expansion of Khadim’s, they need to utilize the system that they have already put in (ERP system

based on SAP), more efficiently.

The recent fundraising by Khadim’s from Reliance Private Equity Fund and injection of new board members is clearly bringing

fresh perspective and expertise which will help Khadim’s to prepare for the next level. The latest attempt at celebrity marketing

reflects the shifts in paradigm in marketing philosophy and it’ll be very interesting to see how the company evolves from here.

16

Glossary & References

Guerrilla Marketing: A marketing strategy in which low-cost, unconventional means (including the use of graffiti, sticker

bombing, flyer posting, etc.) were used in a (generally) localized fashion to draw attention to an idea, product, or service. Today,

guerrilla marketing may also include promotion through a network of individuals, groups, or organizations working to

popularize a product or idea by use of such strategies as flash mobs, viral marketing campaigns, or internet marketing.

Celebrity Marketing: Celebrity marketing is a tactic featuring a famous person to offer an endorsement of a product. They do

not need to be international superstars; they only need to be familiar to the target audience.

Cluster bombing strategy: A marketing strategy in which the brand visibility is built by establishing large number of stores.

Stores act as the platform for advertisement.

http://www.ibef.org/industry/retail-india.aspx

http://www.Khadim’s.com/Khadim’s-corporate-overview

http://articles.economictimes.indiatimes.com/2010-02-24/news/28480241_1_egaro-footwear-km-

Khadim’s

http://www.thehindubusinessline.com/todays-paper/tp-marketing/Khadim’s-india-unveils-national-

expansion-plan/article1755632.ece

http://forbesindia.com/article/hidden-gems/Khadim’s-india-taking-steps-towards-a-national-

presence/38222/0

http://www.outlookbusiness.com/printarticle.aspx?280921