Puma clocking sales as much as leader Adidas despite its late entry into the country


June 2, 2015

Shambhavi Anand & Richa Maheshwari, The Economic Times

New Delhi, 2 Jun 2015

Puma, which made its India debut in 2006, said it posted sales of Rs 766.75 crore in the 2014 calendar year, inching closer to companies such as Adidas and Nike that entered the country earlier.

The company has built on the advantage it took of a gap in the market when Reebok India took time out to deal with an alleged fraud in 2012 "I would not deny that the competition’s weakness was an opportunity that we grabbed," said Abhishek Ganguly, managing director of the German company’s local unit, in an interview. Among the measures it took was stepping up engagement with Reebok’s biggest vendor, Rishabh Sports Station. Around 300 of Reebok’s 900 stores were shut by parent Adidas as it sought to take stock and relaunch the brand.

This allowed Puma to fill the gap in the market created by Reebok’s absence. It also won the trust of Reebok’s vendors by utilising their capacity.

"Puma reacted to the vacuum that was created suddenly by Reebok’s misfortune. They were able to win over some of the vendors whose capacities were lying unutilised," said an executive at one of the suppliers that works with both Puma and Reebok. Reebok franchisees that approached Puma for a possible tieup were carefully evaluated. Puma was conservative with its store opening strategy.

"We did not convert… stores (where) we already had a store in that market or they were at undesirable locations," said Ganguly.

"In terms of franchisee management, we focussed on long-term sustenance of our stores and never opened multiple stores in the same location. We have always believed in quality distribution and not in over distribution. In some ways, we had the late-mover’s advantage and we learnt what not to do. So while others focussed on just opening stores, we put our energies in improving our customers’ experience in our stores."

"They’ve focussed on product design, and the brand is clearly at a premium position through its pricing. They’ve been able to connect well with the younger consumer on the desirability plank," said retail analyst Devangshu Dutta of Third Eyesight.

The Bangalore-based company also created open sandals and flipflops exclusively for the Indian market. "We sell over 5 million pairs of these every year," said Ganguly.

Among the competition, Nike India posted a loss of Rs 47 crore for the year ended March 2014, according to a filing with the Registrar of Companies (RoC). The company entered India two decades ago. Despite its troubles, Reebok posted a net profit of Rs 14.5 crore, while Adidas made a profit of Rs 136.9 crore.

According to internal numbers, Puma made a profit of Rs 29.09 crore in calendar 2014.

"We have grown over 13% in 2014 as compared to 2013 in terms of same-store sales," Ganguly said. Puma has 340 stores, of which 40 are run by the company. Product prices range from Rs 1,599 to Rs 15,000.

The entry level price has come down substantially in the last few years and so have discounts. Puma will boost its online presence in the coming months. It will also act as a market place for its franchisees. They are currently barred from selling on marketplaces such as Flipkart, Amazon and Snapdeal in a bid to curb any heavy online discounts. The company currently conducts business on those marketplaces directly.

(Published in The Economic Times.)