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August 13, 2013 4:27 pm
How does a purveyor of comfortable shoes to middle-aged Britons become one of the fastest-growing retailers in India? By listening to the shop staff, says Stuart Paver, managing director of Paver Shoes.
The business was founded more than 40 years ago by his mother, Catherine Paver, after she identified a market niche for people with problem feet like her own. Initially selling from village halls and via house parties, the business spread across the north of England to reach annual sales of more than £60m, but it has continued to keep it simple while listening to what customers want.
The UK stores are crammed with long racks of shoes and boxes displaying all the stock in order to keep staff costs down. But in India, which accounts for a quarter of group sales, spacious Paver shops are plastered with Union Jacks and ooze glamour and bling (see box). Mr Paver, whose appearance puts him in the smart, comfortable-clothes-wearing-Brit category, credits his Indian staff with helping to get the product right.
“In the UK we sometimes try to be subtle,” he says. “[But] people actually don’t want you to be subtle in emerging markets. They want the brand to stand out and be visible. And the staff said to us [that customers said]: ‘I want people to know I bought a pair of Pavers England. I want a flag on the outside, I want a logo so that people can see.’ ”
“Right from the start we decided we would have to sell in India what India wanted,” he adds. “There are certain UK retailers who seem to put a package into their stores that just makes no sense for the weather or anything else. They sell jumpers when it is 40C. They sell shirts for £150 where people would only spend £5. There are a lot of retailers very unhappy in India at the moment.” Even Walmart, the world’s biggest retailer, recently lost the executive leading its Indian operation, after falling behind with its store opening programme.
Mr Paver says many retail experts believe the market in India is set to replicate developments in China but that it is 12-15 years behind it. “And retail space is very, very expensive in comparison to China. Everything is. Their whole logistics nightmare is beyond belief.” He says any delivery, however small, requires at least 13 pieces of documentation all hand-signed, stamped and dated. “If any are not legible, a whole truck can be delayed at a state border for days until a new set arrives.” He spends up to 10 days in India every six weeks.
Pavers, based in York, had retail experience of India. In 2008, it partnered with London-based Indian entrepreneur Ravi Mehrotra’s Foresight Group to run franchised shops. Then, last year, it was the first foreign retailer to take advantage of a new law allowing non-Indian companies to open wholly owned shops. “You get there in the end as long as you’re doing everything correctly,” he says. Plus, he smiles, some Indian ministers wear Paver shoes.
Pavers England, the India operation, now has 450 staff, 32 stores and 120 concessions, and hopes to add two wholly owned stores a month. It expects to be profitable next year, after a £120,000 loss in 2012. It has invested $25m with a further $25-$50m planned.
“We use exactly the same systems in India as the UK and we can log in and monitor everything 24 hours a day, seven days a week from anywhere,” says Mr Paver. “We also have daily calls and various meetings which I attend via Skype.”
Utsav Seth, chief executive of Pavers England, tells how the venture began during a thunderstorm, writes Avantika Chilkoti. He and Stuart Paver were flying back from a trip to explore opportunities in China: “The plane was taking off through thunder and lightning and I was nervous. To divert my attention, Stuart said: ‘How about retailing in India?’ We borrowed some crayons and came up with the idea then and there.”
The word “England” was affixed to the Pavers brand and the joint venture with Foresight Group was formed.
Mr Seth is speaking in a Pavers England store in Mumbai, where a map of the British Isles is on the wall and even the price tags have Union Jacks on them.
Like the shop assistants, he is wearing a polo shirt emblazoned with a Union Jack. He explains that foreign status is a big selling point in India, where consumption is driven by an aspirational middle class.
“We are a European brand with an Indian heart and that heart is our R&D,” he says. Before opening in Mumbai in 2008, the company spent two years on product development. It has invested $6m in a research centre where about 150 employees study materials and designs to develop samples for the global business.
Pavers England targets the premium market. Prices start at Rs1,499 (£16) and it sells 350,000 pairs of shoes a year. Bata, the mass market retailer, offers flip-flops for as little as Rs299 and sells 45m pairs of footwear a year in India.
But Pavers England has ambitious plans. Revenues to the end of March 2013 were Rs750m and it aims to reach 10 times that within five years.
In his corner office filled with designs and awards on an industrial park outside York, the softly spoken Mr Paver seems an unlikely invader of a country whose retail sector was only recently opened up to foreign direct investment. But he has thoroughly transformed a family business in which his formidable mother is still heavily involved as a key buyer and as a director at 85 (“Don’t write that she’s retired – she’ll be on the phone”). Cathie Paver had started a small business in 1971 with a £200 bank loan. The bank would not give her money to start a business but it was happy to lend the same sum to buy a sofa. She took the money, and the bank manager never asked to see the sofa. Mr Paver’s father, a postman, did the accounts.
Mr Paver worked at the company as a summer job after school and loved selling so much that he did not take up his place at university. His two brothers, Ian and Graham, were also involved in the business but he became managing director because he had the “right skill set”, he says. Also, “I was the middle child who always has to negotiate a tightrope as a child growing up”.
The business always kept pace with innovations in retail. It opened permanent stores when out-of-town shopping centres sprang up in the 1980s. Later, it moved online. It is about to launch an in-store collection service for purchases made on the internet.
Mr Paver decided three years ago to stop selling most non-Paver brands online because of competition. “We turned off £2.5m of turnover, but in the end it was the right decision to control our own destiny,” he says. “When it’s your own brand, you’ve got control over margin, you’ve got control over distribution. You’ve got control over everything.”
After the death of his father, Mr Paver had a tough job to persuade his mother and brothers, co-owners of the business, to invest in expansion in India. He convinced them that they could still reap profits at home while exploring the country’s huge potential. “We weren’t gambling the family jewels,” he says. “We were basically gambling a few years’ dividends, perhaps.” The UK business, which has 950 employees, made a £5.3m pre-tax profit on £63.4m turnover for 2011.
The clincher for the move overseas was the prolonged UK downturn. “You think . . . wouldn’t it be lovely to work in an expanding economy, a growing new opportunity? And it is.”
He sought advice from Chinese shoe company Belle International, whose Staccato brand Pavers represents in the UK. Its advice was to focus just on India. “If we can be number five in India, [that is] 2,000-3,000 stores. It’s just huge numbers. And you get the mentality then of the Chinese, which is, this is growing so much, why try to change everything to open in a small country with a few million people?”
India’s market leader, Bata, is entrenched but Pavers aims to be among the top five in the country by 2020. It is already in the top 10, selling 1m pairs of footwear a year, compared with 3m in the UK. Mr Paver notes that customers in India are more likely to spend more on footwear than people in the UK.
Although confident, Mr Paver acknowledges that he faces fierce competition. “It’s not going to be a straight road. It’s going to be a very, very bumpy road,” he says.
It’s a good job he has a pair of sensible shoes.
This article has been updated to incorporate details of how the business was started by Catherine Paver.
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