TMRW, an Aditya Birla Group venture, says it is working to build the country’s largest portfolio of disruptor brands in the fashion & lifestyle space. With eight brands under its belt and a revenue rate of close to $100 million, the company has an ambition of building a $1 billion-plus house of brands, said co-founder and CEO Prashanth Aluru in an interview to Geetika Srivastava. Edited excerpts:
Why this sudden burst of activity in the D2C space?
If you think about where the consumer is headed today, many new-age consumers are digitally savvy/digitally native. They are more keen on buying new-age brands that solve unique consumer needs. In some ways, a channel is a means to an end. We’re not saying only one channel matters, what matters is the fact that we’re building new-age brands for new-age consumers, which fundamentally have a digital-first journey and over time get to all the channels that are relevant for the consumer.
What kind of an opportunity do you see in this space in the medium term?
What we’re trying to build is a large house of brands focusing on fashion and lifestyle. Disruption has already happened at a certain scale, but we believe it will happen even more within the next 5-7 years. Digital-first brands alone can be a $20-billion-plus addressable market over this period. In all the large categories of fashion and lifestyle, the top two-three brands will own at least 5% of the share. We also believe that these brands will build associations that are larger than the products that they are selling. Gen Z and Millennial consumers’ association with a brand is all about the community and brand purpose. Hence, loyalty and retention will become far more meaningful. In the next 3-4 years, we will see a lot of loyalty-led growth.
Our ambition is to build a billion-dollar-plus house of brands. So we are building multiple digital-first brands that are leaders in their categories.
What are some challenges in the business and what would be the enablers to drive profitability?
While scaling up, one of the biggest risks is trying to find the correct product-market fit. Are you chasing growth just for the sake of growth or are you able to find a loyal, repeat customer who is willing to stay with you and help you scale sustainably? One of the key issues with digital-first brands is that customer acquisition costs are on the higher side. As you think about finding consumers on different platforms, you must be able to balance your channel mix so that you’re able to acquire consumers at the right cost structure.
With a very strong brand proposition, you have to be able to, over time, get to a healthy balance of existing customer-led growth and new customer acquisition-led growth. Eventually, it boils down to the unit economics of the brand, but of course, in the early phases of finding the right product-market fit, you’ll have to invest ahead of revenue and build a foundation.
What would be the route to differentiation for TMRW?
We’re deep experts on brand building. We are not here to ride particular waves, as the fundamentals of brand building and fashion and lifestyle don’t change. This is why we are the right partners for our brand founders, we help build the next stage of their journey. When we acquire a brand or when brands partner with us, we want them to have crossed certain thresholds or reach a certain scale.
Second, we are investing horizontally in technology-led areas that brands on a standalone basis would find difficult to do. Hence, once you’re a part of the TMRW portfolio, you will have access to both data science modules and tech platforms, which help you scale across channels without having to invest in them individually. That is a big source of both differentiation and synergy.
Third, there’s a whole host of capabilities that digital-first brands have to crack, everything from digital marketing, strategic sourcing, design-led differentiation, and product innovation. You have to be world-class at these to succeed and stand out.
What does it take for a brand to partner with TMRW?
I would put what we’re looking for into two broad buckets. First, we have brands that are in established and large addressable categories in e-commerce, as opposed to categories that are relatively new, emerging, or in creation mode. Here, we look for larger scale and unique consumer insights, where within a large category one has something that is distinctive.
The other bucket is of emerging categories, such as athleisure. The category is relatively small with hypergrowth. Because the scale is not the primary metric, what matters is if a brand has managed to find an innovative proposition within an emerging category and been able to get off the ground quickly. The founders must be able to crack the code on being a category creator.