Indian company Tata is optimistic about e-commerce at a time when regulations threaten to transform the market

Authors: Aditya Kalra and Abhirup Roy

NEW DELHI (Reuters) – India’s Tata Group is increasingly concerned about the rules shaping online markets, pointing to ambition as it reassesses its retail strategy at a time when e-commerce reform threatens to derail plans.

The $106 billion e-commerce conglomerate was much more vocal in discussions than market leader Amazon.com Inc at a July 3 meeting with government officials on proposals such as a ban on the sale of its own brand or affiliated goods, participants said.

According to two participants, the rules would significantly increase the compliance burden on the conglomerate’s many entities and interests and hurt them much more than smaller rivals, Tata Vice President Poornima Sampath said during an online meeting.

Dad declined to comment for this article. Sampath did not respond to a request for comment.

Two weeks earlier, the government scared the industry by proposing increased control of relationships between online platform operators and their partners. The plan was widely seen as an attempt to curb the dominance of Amazon and Walmart Inc’s Flipkart and prop up high street stores.

The 153-year-old conglomerate Tata is ubiquitous on India’s high streets, so its vote in favor of e-commerce at its July 3 meeting shows the extent to which it is changing tactics.

The company is probably best known internationally as the owner of the British luxury car brand Jaguar Land Rover, but it also produces cars under its own brand. The group also deals with steel production, IT outsourcing and hotel and airline services.

In retail, Tata has a broad portfolio of offline products, including a joint venture with coffee shop operator Starbucks Corp and stores it operates for fashion brand Inditex Zara. But it is a minor player on the Internet, a situation it is determined to rectify, said five people with direct knowledge of its plans.

In May, it bought most of online grocery store BigBasket for more than $1 billion, and in June it took control of online pharmacy 1mg. They are likely to join other tent brands in the app, which Tata plans to pilot this year, three people said.

E-commerce is the next big thing for Tata and with that in mind, it plans to buy many more brands, one of the people said.

Neither source was authorized to speak publicly and therefore declined to provide information.

TATA APP

Tata’s latest digital initiative is not its first. In 2016, it launched its online platform Tata CliQ, which saw sales of $36 million in 2019-20. But that’s compared to about $10 billion from Amazon, which has invested billions of dollars in India.

Still, in an e-commerce market estimated to be worth $200 billion by 2026, Tata has plenty of room to grow.

Through its app, Tata plans to combine its brands to offer services such as grocery shopping, food and medicine delivery, electronics sales and online fitness packages, said people familiar with its plans.

Tata is still developing the app’s features and determining its go-to-market strategy, with the app launch likely to be phased, starting in some major cities, one of the people said.

Another said the pilot could start as early as September in Bengaluru in southern India, India’s IT hub.

The developer of the app is Tata Digital CEO Pratik Pal, who has gained extensive experience working with retailers over 28 years at Tata Consultancy Services Ltd’s IT outsourcing unit.

But digitally integrating multiple companies in a conglomerate the size of Tata Group is a daunting task, said Keyur Majmudar, managing partner at India’s Bay Capital, adding that retaining super-app customers will be difficult as several niche e-commerce players grow in numbers.

“They need a radical change in thinking. This (digital integration) is something they have never done before. So the jury is still out,” he said.

Pal declined to comment.

As Tata’s new digital strategy gathers pace with acquisitions and app development, the government has prepared a surprise that could mean a rethink before the app is rolled out in the pilot phase.

A ban on marketplaces selling affiliated products could prevent electronics chains Croma and Starbucks from accessing Tata sites, Sampath said at the July 3 meeting, according to two participants.

The ban on selling private label goods has also raised questions about whether it will be able to sell its well-known brands such as Tata Tea and Tata Salt on its e-commerce platform.

The Tata brand, participants said, provides a level of certainty to consumers, Sampath countered during the meeting, demanding clarity on the government’s policy plans.

(Reporting by Aditya Kalra in New Delhi and Abhirup Roy in Mumbai; Editing by Christopher Cushing)