A well known Indian footwear brand was facing a decline in sales after the division of the family business. The new generation who took over the business were inexperienced in steering the company and driving business growth.
Situation
The company had aggressively extended credit to its channel partners to drive sales . However, this was carried out without adequate checks and balances. This led to large receivables and bad debts and subsequent shortages of material supplies and product availability in the market. The company had a strong brand lineage in their flip-flop (sandal) range, which it was unable to leverage due to limited distribution set-up. Trust levels among the company’s channel partners were also low, since the company neither documented its business policies nor implemented them.
Solution
X-PM’s recommended and monitored action plan:
1. Segregated channel partners into three groups on the basis of credit worthiness.
2. Drafted and communicated fair business policies transparently to reduce conflicts and improve trust.
3. Identified towns for increasing reach. Created a dedicated sales team to drive rapid expansion.
4. Revamped the product strategy by focusing on key categories (fast moving and premium) and launched new products.
5. Changed the credit policy to reduce credit days and limits and also improve rotation.
6. Brought in a new Sales Head to support execution of strategy.
7. Outsourced selected processes to vendors to enhance production without further capital investment.
Results
Financial year 2020-21 is seeing 44% year on year growth.
Credit levels declined from 100 days to 65 days.
The number of active distributors increased 50%, expanding reach, lowering dependency on large volume players and saving cost.
Working capital and EBITDA margins improved from 20% to 30% due to top-line growth, without any increase in staff.
The company began to expand into new footwear segments, to consolidate its top line and franchise with trade and consumers.