Corporate File

The digital metamorphosis of Bombay House

Forum Gandhi and Nandana James | Updated on March 14, 2021

Follow the consumer: Tata Sons’ leap from brick-and-mortar dominance to leverage the e-economy   -  BLOOMBERG

N Chandrasekaran, Chairman, Tata Sons — a new way of working   -  PAUL NORONHA

The Tata group is radically transforming with a super app unifying all its products and services. Will it work?

Sometime in early 2019, N Chandrasekaran, Chairman, Tata Sons called his key advisors and strategists within the group and laid out his vision to build a digital platform that would make available a range of products and services, including food and grocery, consumer durables, financial services, education, and healthcare on a single super app. For many old-timers at Tata group, this was a radical shift from the primarily brick and mortar existence of over 150 years. But for Chandra, this was the obvious thing to do given that the consumers were rapidly moving to online platforms and other large businesses including Amazon and Reliance Jio were already making big bets to tap into this growing market.

Bridging the two worlds

“It was a sort of clash of two worlds when this idea was first presented. Coming from TCS, Chandra’s ideas were all about using digital tools and technology to be agile and nimble. But most of the Tata group entities- from salt to cars to steel- were still deeply entrenched in the old economy. How do you transition such a group to be able to take on the likes of Amazon and Reliance? Tatas have the brand, the services, and products. All it needs now is a channel to reach customers more efficiently. Super app is the answer to this problem,” says a senior Tata executive.

Over the last 18 months, Chandra and his team have been carefully piecing together a strategy aimed at putting the Tata group in a position where it can leverage the digital economy. “The first part of this plan was to restructure various group companies to derive synergies. For example, consumer products under Tata Chemicals and Tata Global Beverages were brought under a new company — Tata Consumer Products Ltd. The second part was to plug gaps in the existing portfolio through acquisitions,” said a source close to the group.

In February, Tata Consumer Products said it will acquire Bengaluru-based Kottaram Agro Foods for ₹155.8 crore. KAF makes healthy breakfast cereals and millet-based snacks under the trademark Soulfull. Tata Group is also eyeing the online pharmacy space and is in talks to buy a controlling stake in Gurgaon-based 1MG. In addition, a deal has been signed to acquire a 68 per cent stake in BigBasket for nearly ₹9,500 crore through Tata Digital which has been specifically set up to spearhead the conglomerate’s foray into e-commerce sector. The Tatas are is also planning to apply for a new umbrella entity licence that will enable digital payments.

“The broad framework of the super app strategy is in place. It’s only a matter of a few weeks before the app is unveiled,” said the source.

While Tata Sons declined to comment on their plans, Satish Meena, senior forecast analyst, at research and advisory firm Forrester believes that the Tatas are on to something big. “This move by Tata should be looked as an entry into high spending Indian households. The recent acquisition is an attempt to make inroads in a market dominated by incumbents. Grocery segment has seen strong growth in the aftermath of Pandemic and this is a segment that is expected to maintain momentum at least for the next two years, acquisition of BigBasket and Soulfull is directed at gaining a piece of this market.”

The online opportunity

Lloyd Mathias, Investor and Business Strategist said that it’s natural that the Tatas would seek to have a significant play in the rapidly growing online retail space through acquisitions. “For the Tatas these potential partners offer a good strategic fit with their considerable Consumer Product portfolio. Many of these companies will synergise well and give the Tatas a head start in key segments — on-line grocery retail/ online pharmacy and digital payments,” said Mathias.

But it’s not as if the Tatas were not tapping into the online opportunity so far. Brands such as StarBazaar, Croma, TataCliq, Tanishq and Titan have been selling online. But other than TataCliq, most of the other brands are largely focussed on physical stores with the online channel being an additional channel where every brand had its own strategy. Under the new super app model, all of Tata group products and services will be offered under a unified platform.

Renuka Kamath, Professor of Marketing and Associate Dean, SPJIMR, Mumbai believes that the Covid-19 pandemic has decisively swung business models to the online medium. “The online/ e-commerce market is the fastest-growing channel in India today. The pandemic has hastened its growth. At the peak of Covid, consumers gave availability higher priority to data security and privacy, factors that were slowing the adoption of this channel. The e-commerce space is very attractive to many large conglomerates and it is a market that is theirs to lose,” says Kamath.

According to a new report by global financial technology company FIS (Fidelity Information Services), India’s e-commerce market is expected to grow dramatically due to the Covid-19 pandemic. The market is forecast to increase by 84 per cent by 2024 to $111 billion.

But given that other players such as Amazon, Walmart-led Flipkart, and Reliance Jiomart have already made deep inroads into the e-commerce market, is it too late for the Tatas?

“Indian online retail market is still dominated by three categories — smartphones, appliances, and lifestyle. The rise of new vertical players indicates that there is still space for new players in other categories along with these larger ones,” says Meena.

According to Anuj Kapoor Assistant Professor (Marketing) at IIM-Ahmedabad, the right mix of clever execution, data access, seamless experience, and building a trustworthy and reliable brand will be critical. “BharatPe was able to outmaneuver biggies like Paytm — again hefty execution, seamless experience and rich data gives competitive advantage,” says Kapoor.

For Kamath, the India e-commerce growth story has just started so Tatas still can make an impact. “However their challenges might be different from those of Amazon and Flipkart whose main business and expertise are linked to the platform — all their businesses are around the platform. They don’t have distractions. Tatas on the other hand have many businesses and diverse ones. So to get them all together is going to be far from easy,” said Kamath

Will a super app work?

One of the big challenges for the Tatas could be to get users hooked to a super app model. Super apps haven’t seen many takers in India because consumers still download specific apps for specific needs. These specifics apps are superior both in customer experience and product choices. “It is very difficult for a super app to fulfill all the needs of an Indian consumer. The problem with super apps as of now is that they are too cluttered and don’t always provide users a good navigation experience. A specialized app on the other hand has a tighter UI and fulfills specific needs. A specific app also typically has a good redressal mechanism for feedbacks,” says Meena.

Others like Kavin Bharti Mittal who started Hike Messenger with a vision to make it a super app have had to shift towards creating individual apps for specific user needs. “For a market that has such good smartphones at low price points, data that is practically unlimited, customers can download 80-90 apps on their phones. The super app is not what customers want, customers want the best user experience. Now, businesses would absolutely love a super app as they can pack in more things into an application and the distribution is there, so customers can use more of their services. It is always a business-first mentality when people want to build a super app as they want to control all the customers. But customers don’t necessarily want that,” Mittal had told BusinessLine in an interview in November explaining why he moved out of building a super app.

On the other hand, Mathias is convinced that Tatas have got it right “Consumers are increasingly being swamped with multiple apps on their phones and real estate on smartphones is already an issue. Given concerns about usage and battery drain consolidating onto a super app may be a smart way to get on the phone. Also, users tend to become app-loyal once they get used to the interface thereby resulting in a better user experience. So the Tata’s creating a super app is a great strategy and not a day too late,” said Mathias

Kamath agrees. “Theoretically speaking, a super app is the best strategy. We must remember that there is user fatigue and consumers spring clean their phones frequently to reduce the number of unused apps. Consumers are tired of remembering their passwords (each app prompts for complexity in password composition). Done right, imagine the power the business has and the loyalty they can derive from any consumer with whom they have even a single interface across their businesses,” says Kamath.

A super app provides businesses access to complete user data but at the same time it also provides the users the benefit of a personalised and seamless digital journey, says Kapoor. “With GDPR and Google’s new privacy policy on cookies and growing debate on first party versus third party data, it makes all the sense for large conglomerates to have access to first party data rather than relying on third party data — that way — they can rely on their own data and are privacy compliant as well,” said Kapoor.

Sanchit Vir Gogia, Chief Analyst, Founder & CEO, Greyhound Research has a more pragmatic view. “It is an ambitious strategy, I would be cautiously optimistic about the expectation and success of a strategy of this sort,” Gogia says. “Simply because you are changing user behaviour and that too at that scale takes an awful lot of time. Beating similar category leaders takes lot of effort and money. So the Tatas will have to pool in all resources within the conglomerate, and then take steady steps towards for the success of an app like this. Tata Cliq, for example, wasn’t able to do so. The response has been rather tepid there”

According to Gogia, there are two things in favour of Tatas. First, the e-commerce market is still a very tiny fraction of the larger and second, Tata has a very strong offline presence and brand presence in key categories. “So I think the winner in India, from a super app perspective, will be somebody who can marry online to offline experience a lot more seamlessly,” he says.

Tata insiders say that the super app is one of the biggest bets the group is making as part of its transformation aimed at leveraging the fourth industrial revolution. “Reinvention is never easy. One must devise an entirely new way of working, without the reassurance that comes with replicating already existing best pracices. This isnt just about finding new application for the technology,” Chandra writes in his book Bridgital Nation while explaining the challenge ahead for India to emerge as a digital nation. He may well have been thinking about Tata group’s roadmap.

Published on March 14, 2021

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