India's one of the biggest corporate groups the Tata group has set up Tata Digital to build digital businesses with an aim of addressing the needs of Indian consumers as well as businesses which may help the group gain market share, said a report from brokerage firm JM Financial.
Tata Neu, the flagship super app launched by Tata Digital, is not merely a digital front of a hypothetical Tata mall hosting multiple Tata brands at one place, but an eco-system bringing Tata’s data-driven omnichannel experience to consumers across multiple channels, JM Financial said.
The brokerage firm in a report highlighted that Tata Neu, the recently launched super app, is symbolic of the transformation across Tata’s consumer brands.
Tata Digital is at the fulcrum of this transformation, forging collaboration within group companies to leverage in-house technological know-how and plugging portfolio gaps through bolt-on acquisitions.
JM Financial is positive about the digital transformation of Tata Group and has highlighted the below four points to support its views:
1. Bridging the data divide: Transition from a traditional to a digital commerce enterprise requires a shift from a product-centric to a data-driven, consumer-centric business model. Gathering and pooling data of a disjointed set of consumers across multiple channels are, therefore, central to Tata’s digital shift.
Tata’s two-pronged digital strategy – a unified digital gateway at the front and digitally aligned consumer businesses at the back – attempts to do just that. "We attempt to decipher both leg of Tata’s digital transformation strategy in this report. In the first section, we look at the front-end, consumer-facing digital initiatives that are reflected in Tata Neu. In the next section, we dig into the back-end digital transformation underway at individual consumer businesses," said the brokerage.
2. Tata Neu - Not just old wine in a “Neu” bottle: Tata Neu is not just a mosaic of various consumer brands in one app, it is an ecosystem binding various Tata brands to one platform. Customers’ check-in and check-out across channels (Tata Neu or brand’s app/portal/site) happen on the Tata Neu platform.
This gives Tata Neu a singular view of the customers’ journey, which will enable it to offer personalised recommendations and offers. More than stitching together various brands, it is trying to stitch together data of these disjointed customers. This is further evidenced by the fact that NeuPass – Tata Neu’s reward programme – allows users to earn and burn NeuCoins across channels, thus binding them to the Tata eco-system rather than the Tata Neu app, the brokerage firm said.
3. Transforming individual businesses to be “Neu” ready: Tata Digital is orchestrating the digital transformation of individual consumer businesses to complement the digital front-end. Having put together a strong leadership team, it is heading digital committees of these businesses to align leadership, forging collaborations with the group’s technology and strategy companies to define the digital product roadmap, and plugging portfolio gaps through bolt-on acquisitions.
More importantly, it is acting as a platform to raise capital and deploy it in product development and marketing centrally, thus taking the burden of investment (and profitability conundrum) away from individual businesses. With a war chest of about USD 2bn and generous media spend on Tata Neu’s launch, Tata has taken a firm step towards its digital transformation journey, the brokerage firm said.
4. A formidable omnichannel retailer spanning 95% of the market: Tata Neu’s product coverage spans about 95 percent of India’s e-tailing market. Further, its market leadership in the fastest-growing grocery segment and a compelling omnichannel presence in two of the largest segments – Lifestyle and Electronics – position it favourably to gain market share, in our view.
That said, the brokerage firm sees market consolidation in favour of larger players aided by acquisitions of niche companies.
"Based on individual businesses’ sales and our estimate of their likely online GMV, we believe the value of Tata Digital could be upwards of USD 15bn. The valuation picture is likely to evolve as more number of products and services are on-boarded and smaller services scale. One thing is certain though. If executed well, there is a lot of value within the Tata group which Tata Digital can help unlock," said JM Financial.
Disclaimer: This article is based on a report by brokerage firm JM Financial. The views and recommendations made above are those of the broking firm and not of MintGenie.