Info-tech

Aditya Birla Group shuts down its online fashion retail unit

Priyanka Pani Tanya Thomas Mumbai | Updated on January 10, 2018 Published on September 22, 2017

abof

Diversified conglomerate Aditya Birla Group might just have shut its e-commerce venture too early. The textile to telecom major had launched its e-commerce fashion venture in 2015 and has officially announced that it will shut down the business by end of this year attributing to the unviability of the e-commerce ventures as a whole.

Talking to Business Line, Santrupt Misra, the Group’s Head HR, said, “Every business starts with a set of assumptions. We expected ecommerce to mature faster than it is maturing at right now. Consumers are constantly looking for discounts and we were not sure how long it would take to turn profitable. We hoped to earn a return but hope is a poor strategy.”

Aditya Birla Group, which a large interest in retail and textile, however is not new to the e-commerce business compared to its peers such as Tata Group (Tata Cliq) and Reliance (Ajio), who entered this segment last year. The company ventured into this burgeoning market in 2013 with Trendin.com, a business by erstwhile Aditya Birla Nuvo, to sell all its fashion labels --Allen Solly, Van Huesen, Louis Phillipe, People and Peter England, amongst other brands, with a click and brick strategy. However, the company pivoted that portal and instead created separate portals for each brand.

Business Line spoke to several employees at Abof, few consultants and industry experts, to understand why the company had to shut Abof completely and not get all its online fashion ventures consolidated.

A retail consultant, who requested anonymity, said “At a time when the Amazon’s and Flipkart’s are still burning huge cash to acquire customers, why would anyone go to Abof to buy products at full price and that too private label,” he added. Abof was created with an idea to manufacture and sell private labels under the same brand name.

He also said that approach of the company may have been unlike a start-up.

“I think they spend a lot of money and time strategising and charting out a plan for Abof, whereas the e-commerce business is one of the most dynamic one and keeps changing every 6 months. Such businesses have long gestation period and one has to keep patience,” he said adding that Amazon posted loss for several years before making its first profit.

Misra, however, dismissed these views, “Just because other players are burning cash, it doesn’t make sense for us to do so. Ecommerce is not our only business. We could use this money more productively in other businesses.”

Anil Kumar, CEO of e-commerce consulting firm RedSeer Consulting said that in e-commerce customer acquisition is still very high and in such as scenario a model without discounts and marketing would result in poor traffic thus translating into poor sales.

“e-commerce is an expensive and painful journey and it all depends on the company whether they want to be a part of it or wait for the market to mature,” Kumar said adding that compared to Abof, Ajio and Tata Cliq seem very serious about e-commerce and are already putting the omni-channel strategy in place to compete with pure play online companies.

Aditya Birla group, has however clearly said that they are not keen on revisiting this business and the employees, about 240-odd, have been given 4 months of time to figure out if they want to stay with the group or quit. If they wish to quit, they would be provided with four-and-half months' salary as compensation, Misra said.

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Published on September 22, 2017
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