Aditya Birla Group Chairman Kumar Mangalam Birla is looking for a major strategic shift in business plan by focusing on sunshine sectors. In an interview to Bloomberg TV India, Birla says he is looking at different opportunities of growth and e-commerce emerges as a very natural choice.
The idea of launching next-gen fashion e-tailer abof.com was to capture a bigger pie of the online fashion industry that is expected to grow to $15 billion in five years.
We have been looking at different opportunities of growth — we are always doing that — and e-commerce emerges as a very natural kind of choice. Within e-commerce we looked at different verticals. Fashion is something that we chose to focus on for two reasons.
One is we have some experience with offline fashion, where we are the largest player in the country. Also, it’s one of the largest growth segments within the e-commerce space. I believe that five years from now, the space will actually be $15 billion. Obviously there is huge growth potential.
Those are the two primary reasons why we have chosen to focus on fashion.
But we already have a lot of players focused on dedicated niches as well. Of course it’s a bouquet of other areas that they cater to. You have competition already with established brands. How do you see yourself in a crowded market, getting your own share?
I don’t think we have ever been scared of competition. That’s something that we are quite used to in every space that we are in.
Having said that I think abof is very specifically targeted at the millennial as the primary audience, which comprises 18-to-25-year-olds. Looking at the site, I was quite amazed to see the visuals — I think they are very appealing.
Also the ease with which you can navigate, place an order…all those things matter. I think the other very distinct factor is that they put out what they call a curative collection, which means that while the range is still very large, it doesn’t run into thousands.
So abof would do the job of putting together a tighter product range, which is much more in sync with what the millennial is looking for, making that part of the job so much easier for the purchaser.
So what was the idea of setting up a closely owned company and a separate company apart from it? Why couldn’t it have been an extension of your already existing garments business?
I think that’s a good question but the answer is that our existing businesses are for customers across age groups. The target audience for this venture abof is the millennial.
It’s not as if there is not any product for people who are older. It’s a very different target audience (abof’s) from the audience that we are catering to today from our existing fashion business. Therefore, we thought that rather than create confusion in terms of product differentiation, in terms of product positioning, it makes much more sense to have a new operation and a new company.
Are acquisitions something that you would like to focus on to speed up growth?
We are always open to growth inorganically but I don’t see us having to do that. Actually we have got a great team, we have got immense potential.
You said e-commerce is a sunrise sector and so it has many players entering it. What is the target for the group to achieve in the e-commerce space? Where do you see yourself in the e-commerce base over the next, say, three-five years?
There is no group mandate. We don’t have a target, to have a certain percentage of our revenues coming from e-commerce by three or five years. Each business has its own plans as to how much it wants to grow in the e-commerce space.
Can abof.com be listed at any point?
Sure! I think the idea is to list at some point. Could be three, four or five years, can’t say as of now. But I think once there is sufficient traction, once we have a committed and a loyal customer base, which I am sure we will given the kind of offering that it has, the idea would be to get external funds.
How about investments? I am sure you have set up your own logistics and also tied up with many of companies…
Abof has third parties working for it for different things. So we have a logistics third party which we are partnering with, rather than investing in logistics ourselves. The idea is to have business partners as opposed to doing everything ourselves.
You acquired a payments bank licence. What are your plans? When do we see the bank really coming up? Are you on track?
I think we will hit our time target given by the RBI for the launch of the payment bank, which I think is some time in the second half of next calendar year.
Any progress in terms of what’s been happening?
The phase of putting together a team is currently on and the idea is to actually come out with a superior product.
You also spoke about other investments — how do you see cement and telecom as your other sunrise sectors? You said if you were given an option to put money somewhere, you could choose other businesses and not telecom…
I probably said that five years ago, not two years ago, because I think the last two years have seen a very good run and the telecom sector has evolved. A lot of regulatory overhangs are now behind us but there are new challenges. There are new threats so to speak — data and 4G being the biggest ones. But I believe that Idea is very well positioned to take that on and to emerge successful, like it has so far.
Also, on cement, post-monsoon season we know that it will take off.
With all that talk about the infrastructure sector picking up and the economy reviving, will we actually start seeing growth and demand for cement?
Cement is pretty much a factor of growth in GDP and if we are going to see more infrastructure happening, which is necessary to achieve the kind of growth rates that the government is talking about, then cement growth is bound to see a pretty sharp increase.