Tata Group's all-in-one 'super app' ambitions face multiple challenges

The group plans to launch an umbrella portal in December, but there are major challenges in its ability to compete with RIL, Amazon and Walmart-owned Flipkart

When N Chandrasekaran, Tata Sons chairman, made it public last month that the group was building a super app that would go live in December, Mukesh Ambani-led Reliance Industries was already in the midst of a similar project — perhaps much more ambitious. 
 

In April, social media giant Facebook had struck a deal to invest $5.7-billion in Reliance Jio Platforms for a 9.9 per cent stake in RIL’s telecom subsidiary — a move that would result in a multi-purpose app or a super app like the Chinese WeChat combining e-commerce, digital payments, social media and even gaming. Facebook-owned WhatsApp, which lists India as its top market, would be a critical platform in RIL’s super app universe while the entire Jio family will drive the content and service, according to industry watchers.

Against that backdrop, analysts are curious about the Tata strategy to launch a super app. RIL has not given a timeline for its super app. The Tata group by setting a date has raised the expectation of the industry. Devangshu Dutta, CEO of consulting firm Third Eyesight, says building the umbrella of a super app requires a core app that would be used frequently and widely to gain the benefits of the network effect. “The core, therefore, could be a usage such as messaging or payments. E-commerce isn’t the natural starting point of a super app,’’ he said. 

Dutta is posing a question: What is the hook that will help Tatas create a wide user base? A Tata group spokesperson declined to comment on the matter when contacted. But sources say the holding company of the salt-to-software conglomerate, Tata Sons, is overseeing the super app project with inputs coming from consumer-facing businesses including Trent, Croma and Tata Cliq, among others. Tata Consultancy Services (TCS) is believed to be actively involved in the super app venture. It seems Tatas’ larger plan is to include retail, e-commerce, financial services and entertainment in a single basket to make it convenient for the user so that it can compete with RIL, Amazon and Walmart-owned Flipkart.

Critics are quick to point out that Tatas’ e-commerce business has not really made waves. The group’s e-commerce firm Tata CLiQ, launched under Tata Unistore in 2016, has been facing pressure in the competitive online market. Focused on selling apparel, footwear and electronics, the company received a Rs 300-crore fund infusion from the Tata group to support its expansion. This follows similar funding rounds earlier. 

Reports suggested that the company is shifting to a seller-led inventory model from a typical marketplace format to survive the competition. Where the platform could earn revenue from retailers earlier, the new system implies direct sales to consumers with better control over prices and discounts. In a regulatory filing late last year, Tata Unistore had said, “Considering the funding requirements of the company to enable it to run its business effectively are intended to be mobilised through the issue of the equity shares of the company, the board of directors have recommended that the authorised share capital of the company be increased from Rs 1,150 crore to Rs 1,500 crore.’’

In retail, it’s a mixed bag. The group’s retail mainstay, Trent, has been a performer. Its revenue growth had surpassed those of its peers last year. But, Trent, which includes Westside, Zudio and Landmark, experienced a dismal FY21 first quarter due to the closure of stores during the lockdown. Its standalone revenues showed a de-growth of 87.4 per cent to touch Rs 96.3 crore during the quarter.

Although Trent’s latest numbers reflect an industry-wide phenomenon during Covid-19, some of the group’s other retail exposures lack the punch. Croma, the group’s electronics products chain, was the country’s first original digital retail product but it’s fallen behind its rivals in the recent years, as Technopak founder Arvind Singhal says. According to reports based on an investor presentation, Reliance Retail’s consumer electronics sales grew 14 per cent to Rs 44,625 crore in FY20. In comparison, Tatas’ Infiniti Retail, which runs the Croma chain, did sales worth Rs 5,173 crore in the same period, an 11 per cent increase, Registrar of Companies (RoC) filings showed.

Titan, the group’s consumer business company focused on jewellery, watches and fashion segments and which includes the Tanishq brand, is however considered a successful venture. Even as the revenue numbers were dented in the first quarter of FY21, its recovery has been better than projected, according to analysts.  

Then there’s a joint venture between the Tata group and UK’s Tesco — the only Indian group to have any foreign direct investment (FDI) in B2C retail. But due to the regulatory environment, the Tesco JV is limited to very few locations in the country, and may not come handy when there’s a super app. The Zara venture is another in the Tata retail stable that can be part of the super app.

But the Tata group would also need a payment channel to bank on to make its super app plan a success, according to an executive in a rival firm. There also has to be a robust messaging platform. Currently, it has neither. At a time when Jeff Bezos-led Amazon may be eyeing a large stake in Reliance Retail to heat up the e-commerce competition even more, Tatas may need more firepower to be counted as a big player in the space — both for e-commerce and super app, according to analysts. 

With many entities failing to take off smoothly on the super app front including some in India such as Snapdeal and Hike, it will take some effort to match WeChat, a multi-purpose messaging, social media and mobile payment app that was developed by Chinese major Tencent and which commands over a billion active users a month.