The recent Independence Day weekend saw e-tailers push their sale events aggressively to take advantage of the long holiday and a relaxed consumer. One of them, Tata Neu, the year-and-a-half-old digital application from the Tata group, did all it could to keep pace with its older rivals Flipkart, Amazon and JioMart in terms of promotions.
Tata Neu offered massive discounts of up to 85% on apparel and footwear; gave up to 70% off on select electronic, beauty and grooming products. And sold groceries and fresh fruits at a discount of up to 50%.
Unicommerce, a third-party Saas platform, which tracks these events, said this year’s I-Day sale season saw a 23% year-on-year surge in orders across key segments. Tata Neu was among e-tailers who benefitted from this trend.
For Tata Neu and its holding company Tata Digital, which is the ecommerce arm of the Tata group, this is the start of a long journey. In the last year-and-a-half, Tata Neu has launched and revamped itself to try and keep pace with competition.
Financials for FY23 shows that Tata Digital has reported a 13-fold growth in revenue versus the previous year to Rs 204.35 crore, according to Tata Sons latest annual report. But losses have also widened at the same time – from Rs 1,122.88 crore in FY22 to Rs 1,370.09 crore in FY23. These financials do not include the performance of units such as BigBasket, Croma, 1mg and Tata Cliq, which are part of Tata Digital.
But the trend is no different within these subsidiaries: Revenue has grown in FY23, but so have losses (See chart). For instance, BigBasket, the group’s e-grocery wing saw its revenue jump about 30% from Rs 7,462.18 crore in FY22 to a total of Rs 9,695.67 crore in FY23. BigBasket’s revenues were split between Supermarket Grocery Supplies (the B2B arm) and Innovative Retail Concepts (the B2C arm). While B2B’s revenues accounted for Rs 2,261.28 crore, B2C’s revenue share was much larger at Rs 7,434.39 crore. Despite the surge in topline, bottomline was in the red. BigBasket incurred a total loss of Rs 1,750 crore in FY23 nearly double of Rs 896 crore it incurred in FY22. A split showed that BigBasket lost Rs 1,535.2 crore through B2C and Rs 215.2 crore via B2B in FY23.
Even Tata 1mg, the group’s e-pharmacy division, saw its revenue increase by over three times from around Rs 544.28 crore in FY22 to about Rs 1,685.48 crore in FY23, the annual report showed. The group owns the e-pharmacy business through two entities – Tata 1mg Healthcare Solutions (100%) and Tata 1mg Technologies (63.55%).
The e-pharmacy losses also grew sharply. In FY22, Tata 1mg incurred a total loss of around Rs 486.92 crore, which jumped to Rs 1,261.99 crore in FY23 (See chart).
Similarly, Tata Unistore, which owns and runs Tata Cliq, posted a 16% increase in net loss at ₹874.7 crore for fiscal 2022-23, even as its turnover dropped to less than half at ₹407.7 crore compared with ₹844.6 crore the year before, as per its latest regulatory disclosures. Tatas have attributed the drop in turnover to the company’s exit from certain categories of electronics and the loss to investments in scaling up business.
The Tata group has said in its latest annual report that the e-commerce business is in investment mode and will take time to turn profitable. The group has so far invested Rs 18,943 crore in Tata Digital and remains committed to its long-term growth, it said.
Experts say that the Tata group, a late entrant in the e-commerce sector, is up against formidable rivals such as Amazon, Flipkart and Reliance Industries, who’ve been longer than it has in the business and are well-entrenched. Future growth will be predicated on overall experience rather than discounts alone.
“E-commerce in India has come a long way and now reflects a maturing ecosystem,” says Kapil Makhija, CEO of Unicommerce.
“Brands are now prioritising a seamless experience as opposed to simply focusing on acquiring customers through discounted prices,” he says.
The recent revamp of Tata Neu, for instance, was meant to provide this seamless experience to consumers. The app was given a complete facelift in terms of design as well as improved navigation and payment systems. According to industry sources, the app has since seen 75 million members for its Neupass rewards programme; with downloads touching 60 million for the revamped app over the last few months. Also, multi-category purchases on the app have grown by 25% in the last few months versus 10% earlier.
Tata group sources say that the conglomerate is looking at profitable growth for the e-commerce business in about three to five years. It may also continue to invest in the business to strengthen its digital offerings, fix technical glitches, and meet new spending needs.