Inside Tata Digital's plan to launch a super app

Bengaluru/Mumbai: A gathering in Mumbai in the last week of June set the ball rolling on the Tata Group’s ambitious digital plan. Among those at the meeting held in the backdrop of the conglomerate’s annual general meeting were Tata Sons chairman N Chandrasekaran and Tata Digital chief executive Pratik Pal. Also present was Tata Digital’s newly designated president Mukesh Bansal, a startup entrepreneur who’s built companies such as fashion ecommerce platform Myntra (sold to Flipkart in 2014) and fitness app Cultfit, earlier known as Curefit.Having struck back-to-back deals to boost its consumer internet play through acquisitions such as BigBasket, 1mg and Cultfit (which is currently a minority investment), the Tata Group is piecing together its first major foray into a new business area after its entry into the aviation sector in 2013. The meeting of about 20 people had one agenda—the blueprint for Tata Digital’s so-called super app. The discussion focussed on integration of consumer brands the group has acquired into the app, which is slated to be launched in Benguluru in September, as reported by ET earlier.Aside from Bansal, who steered proceedings, two other key startup founders were among those present--Hari Menon of BigBasket and Prashant Tandon of 1mg. This core team of about 20 debated potential collaborations and ways of leveraging existing and new assets. ET spoke to several people who attended the conclave and others aware of the thinking at Bombay House that’s driving the ambitious project. They spoke on condition of anonymity.Scale up Under TataET reported last month that Bansal will play a key role in Tata Digital’s fundraise, estimated at $2-2.5 billion, from global investors. The Myntra founder ensured an entrepreneurial energy infused the debate. Founders spoke about synergies and possible outcomes that stem from Tata’s bundling of top consumer-focused online platforms. Incidentally, 1mg has rebranded itself as Tata 1mg, the first such move after a Tata Digital acquisition.“It was just the beginning of an ongoing interaction among all company executives,” said one of the persons. BigBasket, 1mg and others made brief presentations on scaling up under the Tata umbrella. Work on cross-leveraging platforms and brands has begun. 84321778“BigBasket’s Menon and 1mg’s Tandon want to work together and are in discussions on how to best use each other’s capabilities.”Menon has joined 1mg’s board as both explore multiple synergies. The two companies are exploring collaborations besides their core offerings of groceries and medicines.There will be no overnight change in strategy, the process will be slow and steady, said Sanchit Vir Gogia, chief analyst, founder and CEO of Greyhound Research.“They will exchange customer data from these businesses and understand it further on multiple aspects like customer overlap, what kind of cross-selling can be done,” said Gogia, who works with several companies in the area of online and offline commerce. “In parallel, they will look at better cost efficiencies among the brands and their products from a supply-chain perspective.”Experts have said Tata will look to leverage its countrywide offline presence to boost online commerce. This could include omni-channel strategies--delivery of online orders by offline retail outlets and seeding online brands in these stores. Getting it All TogetherIt’s rare for startup founders to come together under one roof and collaborate. Most entrepreneurs in India have avoided mergers, even in hyper competitive sectors--think Uber and Ola, Swiggy and Zomato.So how did this happen? Over the past year, people who have been briefed on the manner in which Tata stitched together these deals said the founders were able to feel comfortable enough to sign on the dotted line and work with others. While large conglomerates are increasingly looking at the digital economy, what helped the Tata group bring the entrepreneurs on board was the promise that they would be able to push ecommerce operations and play a meaningful role.“That was a big differentiator... If you notice, even in cases of majority acquisitions, there are other investors staying on in the company and some have put in more money along with Tata,” said a person who worked on one of the deals.At least one startup founder had spurned overtures by a rival conglomerate.“The founder didn’t take it ahead after a few calls. It was important that they get enough of an operating role and Tatas have been respectful of that,” said one of the persons cited above.Bombay House insiders said Tata Digital wants to infuse a ‘startup culture’ into the company. Having started off with talent with mostly B2B experience, it was looking for consumer-facing internet company leaders.“Tata Digital has TCS (Tata Consultancy Services) talent, which is different from product startups. Both Bansal and Pal will put together the integration plan with Menon and Prakash Tandon to figure out synergies and create a structure that can get off the ground quickly,” said an executive close to developments. The biggest advantage for Tata is the trust factor, which could reduce customer acquisition costs substantially and build loyalty, said Rishi Jhunjhunwala, vice president and lead analyst, technology, at IIFL, a Mumbai- based brokerage. “It could give them an advantage over Reliance, Flipkart and other technology platforms, provided they are able to execute on their Tata Digital strategy.”Execution, ChallengesAmong the challenges will be possible tussles over decision making, given that startup founders are used to having their own way, experts said. The entry of the high-profile Bansal did raise eyebrows within Tata Digital in terms of how his role would differ from that of Pal. Some said chairman emeritus Ratan Tata, who had invested in CultFit in his personal capacity in 2017, could have suggested Bansal’s name to Chandrasekaran. 84321824Others said not much will change right now. Pal handled the retail vertical in TCS, the company’s strongest business, and knows the technology involved in running the platform. Bansal's role would be important in fundraising. They complement each other, an executive said. "As personalities they could be different, but execution will be team work," said an executive close to the Tata group. The new entrants will help establish a B2C approach and a more consumer interactive culture led by tech. The presence of startup founders on the execution team will also bolster its confidence.As for Tata Digital’s executive board, that’s still a work in progress. “For 1mg, it will be a boost in brand and consumer acceptance as they plan to be a wider healthcare platform than just delivering medicines,” said a person involved in the planning. “Tatas have done a lot of work through Tata Memorial and have the trust factor. To build a healthcare business at a scale to go beyond the first stage of active internet users, you would need that.” 84321963E-pharmacies such as 1mg, Netmeds and PharmEasy have driven most of their business through delivery of medicines but are now working to expand into verticals such as diagnostics and consultation. PharmEasy recently acquired Thyrocare for Rs 4,546 crore. 1mg, ET has reported previously, is planning to set up its own diagnostic labs to expand this vertical. Tata Consumer has the potential to “extract sourcing synergies and increase revenues leveraging BigBasket’s platform,” said a recent Goldman Sachs research note.“We believe if Tata Consumer, using BigBasket’s platform, were to offer a subscription service to consumers, it would likely have a positive impact on its market shares, increase consumer loyalty and generate higher ebitda per consumer,” the note said. Tata Consumer can “potentially drive larger sourcing agreements that could reduce both price and supply risk going forward” for its own private labels and BigBasket’s in-house brands as well. The private labels include Tata Sampann, BB Royal and BB Popular. BigBasket gets about 40% of total sales from private brands. 84321894People involved in the discussions said Chandrasekaran’s direct oversight of the ecommerce effort sets the stage for deeper integration among brands and products.For now, the founders are back in their offices and are discussing all the ideas that came up with their leadership teams.The super app shouldn’t be super-laden, said Jhunjhunwala of IIFL.“In our view, a super app can be successful when it is restricted to integrating properties in the same industry vertical,” Jhunjhunwala of IIFL said. “Making a one-stop shop across various verticals robs the offering from the specialisation in consumer experience that people expect.” Restricting it to a single vertical can lead to better experience, he said.

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