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Biggest business conglomerates venture into ecommerce

By Meenakshi Kumar

14 Sep 2016

With ecommerce retailing witnessing phenomenal growth in India, the retail segment is attracting big wigs. Now the country’s two biggest business conglomerates have also ventured into online retailing with a bang. The Aditya Birla Group launched the much anticipated Abof, an online fashion and lifestyle e-tail venture in October 2015 and more recently Tata Group stepped into this space with an e-commerce venture called Tatacliq that sells lifestyle, apparel and fashion ware, and electronics.

Both groups have diversified businesses ranging from salt to technology to telecom to textile with combined annual revenue of around 150 billion dollar (around Rs 1,003,499 crores ). Hence, it was inevitable for both the group to eventually tap the huge potential of ecommerce in India. They have tapped into a segment that is fiercely competitive with more than 1,000 startups powered by around 12 billion dollar (around around Rs 80,000 crores)of venture capital funds. The segment is heated up with some of the biggest global players like Amazon, the world's largest e-commerce player, which has pumped in 5 billion dollar (roughly Rs 33,543 crores )into the India market, and Indian companies like Flipkart, Snapdeal, Shopclues and Paytm.

Late entry an advantage

Late entry into the online market has certain advantages as both groups know competition and can create a strategy. They are leveraging strengths in offline to build online play. Prathyusha Agarwal, Head of Marketing, Tatacliq says less than 3 percent of the business has gone online and there's plenty of room to grow. The two groups have twin advantages — established brands and the network their various businesses provide. Both are being helmed by the two veterans of the field. While Tatacliq is headed by Ashutosh Pandey, who previously led Landmark E Tail, Tren’t online retail business as COO and Prashant Gupta is heading ABOF who earlier was a Partner at McKinsey.

Both groups also have clear positioning as Tatacliq pitches with ‘Phygital’ ecommerce, multi brand , multi product play with strong online and offline presence and ABOF pitches with its huge domain knowledge of apparel, fashion and lifestyle marketplace for millennials.

However some experts remain sceptical as both groups also have to face new challenges on the way. Vijay Shekhar Sharma, Founder Paytm believes Tatacliq and Abof's entry makes it clear that e-commerce is becoming mainstream.But they can't build technology companies with traditional mindsets. Traditional business houses are consumers of technology and not builders of technology and that's lot of difference as e-commerce is a technology business. Indeed, at Amazon, Flipkart, Snapdeal, Paytm etc, technology specialists comprise the largest teams, catering to millions of customers every second in real time.

Tatacliq, for its part, has a technology team of 50 of the total workforce of 180. It relies on 20 tech partners, including SAP and Adobe. Up to 300 people from Tata company TCS also supports the business. Still, it remains to be seen if Tatacliq and Abof can make inroads into e-commerce.