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After Reliance, India’s USD 113 billion Tata Group prepares for the e-commerce challenge

Written by Moulishree Srivastava Published on 

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Tata said it would roll out a super app to offer grocery, fashion, jewelry, consumer electronics, and financial services, among other things.

Two months ago, when Natrajan Chandrasekaran, chairman of Tata Sons, in an interview with UK-based Financial Times revealed the Indian conglomerate’s plan to roll out a super app, it caused a frenzy in India’s soon-to-be USD 85 billion e-commerce market.

While billionaire Mukesh Ambani’s Reliance has been working for years to enter this space, this was the first time that Tata, the USD 113 billion conglomerate with a sprawling empire across diversified businesses including automotive, airlines, defense, steel, FMCG, finance, hospitality industry, IT Services, and retail, publicly divulged its e-commerce plans.

Tata Digital, the one-and-half-year-old digital arm of Tata Group, the wholly-owned subsidiary of Tata Sons, is expected to launch the proposed super app by the end of this year. Its retail offerings would include food and grocery, fashion, jewelry, consumer electronics, consumer durables, financial services, education, healthcare, and bill payments, among other things.

This essentially means Tata will directly compete with the likes of Amazon, Flipkart, Bigbasket, Grofers, and Reliance’s JioMart, as well as other vertical e-commerce companies.

Laying the foundation

Tata Group has a presence in over 100 countries through its 30 companies and is popularly known for bringing global firms like Starbucks and Air Asia to India through joint ventures. It has a slew of successful consumer businesses including Tanishq’s jewelry stores, Titan watch showrooms, Star Bazaar supermarkets, and the chain of Taj hotels, among others.

However, so far, the company had been keeping a low profile, especially on its initiatives in the online commerce segment.

Although Tata-owned multi-brand electronics store chain Croma Retail has an online store since 2012, the company established an e-commerce presence in May 2016 when it rolled out an online platform called Tata CLiQ for apparel, electronics, and footwear categories through its business venture, Tata Unistore.

Startup

Read this: Reliance expands its e-commerce venture JioMart to 200 Indian cities

Later that year, it launched an online premium and luxury fashion destination, Tata CLiQ Luxury which offered brands like Hugo Boss, Armani Jeans, Coach, and Furla. In 2017, it entered the e-grocery space by leveraging the network of retail outlets under its Star brand to offer daily essentials, fresh produce, bakery, beauty, and home needs, among other things.

In the first half of 2019, the conglomerate took one more step toward creating a digital business empire by setting up Tata Digital, a new entity to incubate new-age digital businesses. Local media reports at the time said Tata Group was planning to infuse up to INR 10 billion in its digital vertical.

After Reliance made its debut in the e-tail segment with a big bang earlier this year, Tata said it would double down on its efforts to create an omnichannel empire of its own.

“This is a late realization for Tata Group,” Satish Meena, senior forecast analyst at Forrester told KrASIA. The massive USD 20 billion funding by Reliance for its digital arm Jio Platforms earlier this year, might have been one of the things that provoked Tata into taking up the e-commerce challenge, he feels. Reliance’s e-tail platform JioMart is a joint venture between Jio Platforms and its retail arm, Reliance Retail.

“Reliance has limited retail brands, while Tata sells everything from grocery items to electronics, to fashion, to cars. Compared to Reliance, Tata not only has a massive footprint in retail but a better connect with consumers. Reliance is still not that good a consumer brand,” Meena said. He believes, Tata wants to build on that brand trust that they have.

Tata’s multi-pronged strategy

Soon after Tata announced its plans on the super app in August, the Mumbai-headquartered company was reported to be talking to potential investors for selling a stake in its digital platform. The move was uncannily similar to that of Reliance, the oil-to-internet conglomerate that brought high profile investors including American tech giants Google and Facebook on the cap table of  Jio Platforms, by selling stakes in the entity.

One of those potential investors who had rendezvous with Tata Group was Walmart. The world’s largest retailer, which acquired Indian e-tailer Flipkart for USD 16 billion in 2018, has reportedly been looking to invest up to USD 25 billion in Tata’s yet-to-be-launched super app.

The efforts to raise external capital coincides with the fact that the conglomerate needs funds at the moment. Last month Shapoorji Pallonji Group, which holds an 18.4% stake in Tata Sons, announced that it would end the 70 years of partnership with the latter. This means that Shapoorji Pallonji Group is willing to sell its stake and move out of the company.

Read this: The making of Reliance’s omnichannel retail empire in India

“They need funds to consolidate. Other than TCS (IT services firm), none of their businesses are doing that great. So retail is something where they have an opportunity,” Meena said. “They have offline assets, brands, and consumer trust, and that is what they want to build (an e-commerce business) on.”

While the company is working on its all-in-one shopping app and trying to raise funds from global investors to fuel its e-commerce ambitions, it is also seeking to scoop stakes in Indian online retailers to ramp up its presence in e-commerce, a recent Bloomberg report said, citing sources.

Tata has reportedly reached out to IndiaMart, a USD 2 billion B2B marketplace, for a potential stake purchase, the people said, asking not to be identified as the plans are confidential. Earlier this week, local media reports said the company has held discussions with e-grocer Bigbasket, looking to buy a 20% stake in the latter.

The new kid on the block

Meena feels that it might be too late even for a company like Tata to build a super app.

“All the super apps that are big, they have a core use case, for which users come to that app every day. In Tata’s situation, that core use case and connectivity with users is not there,” he explained.

Even when Jio app was launched in 2016, it was almost a super app offering movies, chat, payments, music, among other things, he said. But consumers did not want to go there because, for every use case, India has a superior platform that provides that experience.

“For instance, for booking tickets, you have BookMyShow. Similarly, for food, you have Zomato and Swiggy,” he added. “And none of the companies have shown an inclination to do multiple things in a very good way in India.”

However, he believes, Tata may find success if it acquires stakes in existing online commerce firms like Bigbasket or Grofers. As such, it is actively seeking to form an alliance with other e-commerce platforms to strengthen itself against Amazon, Flipkart, and Reliance.

“That’s the path they can take because it is a little late for them to start building an e-commerce arm. They don’t have time to build that expertise, and they have to raise funds also,” Meena said. “They should be able to raise funds like Reliance did, but the expertise is going to be more important.”

Currently, Tata is working on different pieces parallelly–creating a super app, getting investors on board, and beefing up an online presence through tie-ups. But once it brings all the pieces together, Tata would emerge as one of the strongest challengers in the e-commerce space.

“There are already three big players in online commerce–Reliance, Amazon, and Walmart-Flipkart,” Meena said. “Tata can be the fourth player in the ecosystem and acquire companies like Grofers or Bigbasket to build on top of that.”

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