Buying spree: why retail biggies are developing taste for start-ups

When EkStop.com disappeared from the online food & grocery space, consumers thought it had shut shop like some of the other start-ups. The fact that it had been acquired by Godrej Group’s retail chain, Nature’s Basket, was not public knowledge.

Had Ek Stop not found a suitor in Godrej, it may have closed down.

Similarly, another start-up, Baby Oye, was also on the threshold of wrapping up before the Mahindra Group’s retail company decided to snap it up for its distressed Mom & Me Stores.

Big conglomerates are on a start-up acquisition spree, and it is proving to be a win-win deal for all. The cash-strapped start-ups offer technology while the giant enterprises bring in scale and funds. Thanks to the start-ups they acquired, both Mahindra and Godrej are now better positioned in their respective retail businesses.

Need for expertise

For Mahindra, making money through Mom & Me in the fragmented kids category hinged on going online, for which it did not have the expertise and technology. “We were weak in e-commerce and were not able to build traction in the business on our own. The acquisition of Baby Oye was a quicker way to ramp up quickly and take the enterprise to profitability,” observed Prakash Wakankar, CEO, Mahindra Retail.

Nature’s Basket also got infused with new technology through Ek Stop. “With the acquisition of Ek Stop, we got a readymade web platform, achieving speed-to-market in e-commerce. Now we expect our online business to scale up fast and get profitable quickly even before our brick & mortar stores,” said Mohit Khattar, Managing Director, Nature’s Basket.

The temporary shutdown of food & grocery start-ups such as Greencart and Local Banya also indicates the possibility of a bailout by conglomerates. While both these start-ups may cite a temporary shutdown of their operations, scaling up with fund infusion may prove critical to their revival.

Open to buys Local Banya has already forged partnerships with big retailers such as Spencers and HyperCity and is also open to getting acquired by a bigger corporate if needed.

“We will be happy to collaborate and consolidate with an offline (store) and will not say no to an acquisition if it is a huge company which has large infrastructure,” said Karan Mehrotra, CEO, Local Banya.

In the past few months, there have been strong indications that even the Future Group has been scouting for start-ups to expedite the food & grocery vertical of its Big Bazaar stores.

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