It is nice to bring this old phrase of competition between “brick and mortar companies vs dotcom companies” back to the discussion room.
As India (and the world) tries to revive e-commerce world, the old companies are again worried. There are these usual talks of how the new online world will capture the old market players. Least do they realise, how old players can actually fight the game given their huge cash and asset base, provided they get their act right. Unlike the doctcom players which live on very low cash and asset base, the old players are much sorted.
Here is a story on how Indian biggies are competing in the renewed online space:
Billionaire Kumar Mangalam Birla is known to be obsessed with businesses that generate high free cash flow. This has stood him in good stead through the past two decades, during which he transformed the Aditya Birla Group from a $1.6-billion industrial conglomerate into a $41-billion business empire across telecommunications, financial services, branded apparel and retail.
His fight with discount e-tailers was certainly not going to be the cash-burning exercise of his digital rivals to lure consumers to shop online. Transforming his brick-and-mortar business under the Madura and Pantaloons brands into omni-channel retail — presence across mobile apps, retail and online stores — was obviously the first move.
This led to the launch of trendin.com in 2013, which grew fast and garnered Rs 50 crore in 2014-15, or one per cent of the Rs 5,450 crore revenue of the Madura and Pantaloons brands. This is, however, not enough at a time when e-tailers such as Jabong have grown aggressively, with sales jumping to Rs 527 crore in 2013-14 from Rs 4.6 crore in 2011-12.
“We are not looking at a deep-discount model, but one that is high on the style quotient,” the chairman of the Aditya Birla Group told Business Standard at the launch of e-tail venture abof.com. “Our prices will be quite sharp, which we call ‘honest pricing’,” he said, giving the new venture four to six years to break even.
Birla is not alone. The Cyrus Mistry-led Tata Group and Mukesh Ambani-promoted Reliance Industries (RIL) have similar plans to take on discount e-tailers.
Interesting developments reshaping the thoughts on industrial organisation literature.