Tata, Birla, Reliance, Bharti. Each a titan in Indian business. Last year, their cumulative turnover was around 235 billion $. They were massive 5 years back as well. Now consider Flipkart, Snapdeal; To name two. They were unknown/ did not exist then. Retailing is what connects them. The conglomerates were into organized retail much earlier before action hotted up in e-commerce.
Each of Tata, Reliance, Birla and Bharti has a retail business. Reliance started with great fanfare a decade back, with the classic HR path. They started 5 companies and poached all their CEOs from retail and FMCG. Tata had a more sober launch with Westside and Croma. Birla had their More stores and Bharti did a high profile tie-up with the granddaddy of all, WalMart.
The businesses did not take off as expected. The rental costs were seen as the first big dampener. Sales per store were not too great and labor productivity is among the lowest. The neighbourhood grocer was proving to be far more resilient than expected. While he/she had a living to make from retail, for all others listed above, retailing was an investment as their core businesses are different.
Today, Reliance is around 2.5 billion $ turnover, Tata (after counting high value Tanishq and Titan) is around the same number.
On the other hand, look at Indian ecommerce. In a short span of 5 years, a bunch of 30 somethings have built businesses that are half the size of what century old companies have done. Flipkart, Snapdeal etc. are more than 1 billion $. Now the irony.
- How come 4 of the largest Indian groups, did not even consider ecommerce as a parallel growth initiative? In 2009, Flipkart was 2 young entrepreneurs, while Tata was more than 80 billion $.
- Indian ecommerce is built on the reach of mobile and broadband. Ecommerce is enabled by a surge in broadband connections that are accessed by computers and phones by the youngest demographic in the world.
- Who are the leading telecom companies in India?
- Bharti Airtel
- Vodafone ( who are a pure telecom play)
- Idea of Birla
- Reliance
- Among others Tata Docomo.
Think through this. Bharti makes all its money from telecom, but when it is time to invest in retail, does not even think about ecommerce. Birla and Reliance are conglomerates, who look at telecom and retail as different businesses with different set of problems.
Tata’s story is even more ironic. They not only have a telecom play, but also own TCS, India’s largest IT services company. TCS does nearly $ 1.5 billion business with retail companies. So,
- You have at least 25,000 engineers working with all leading retailers of the world.
- You have your own internet and broadband company.
Still, you don’t make more than a dent in Indian organized retail and ecommerce. It does not take too many smart engineers to start up an ecommerce platform and at least earn from the telecom investments?
It is not even the Silicon Valley paradigm of original product development. By the time Flipkart et al started, Amazon.com had been in operations for more than a decade. Alibaba.com, the marketplace had also been in place for more than a decade. Indian ecommerce is just trying to reproduce those ideas here. Since both are green field ventures, Clayton Christensen’s Innovators Dilemma does not hold good either. Bharti Airtel just needs to believe its own broadband growth to leverage ecommerce. Why would you try unsuccessfully to be Walmart, when you can write your own cheque by becoming the Alibaba of India? An option that is not open to AT&T or Verizon..
What do you do, when a bunch of kids+ VC funding+ imported business model do so much better than India’s revered business houses with their access to McKinsey’s of the world? This reminds me of an exchange between the Ferrari mechanic and Niki Lauda in the movie Rush, based on F1 racing
Niki Lauda: [Testing his Ferrari at Fiorano] It’s terrible. Drives like a pig.
Lauda’s Mechanic: [Offended] Oh, you can’t say that.
Niki Lauda: Why not?
Lauda’s Mechanic: It’s a Ferrari!
Niki Lauda: It’s a ****box! It under-steers like crazy and the weight distribution is a disaster. It’s amazing – all these facilities, and you make a piece of **** like this.
Just how much chutzpah our business houses have? Or they acquired a halo when cash flow was abundant and will always find it a challenge to really differentiate and compete?
hr3by2 
Excellent and very astute observations. It is indeed very surprising that none of the big and established companies did not see the opportunity. You are quite right, they had what was needed but it took two mavericks to dramatically create a big business like Flipkart from nothing.
We are often unable to see opportunities that are not related to businesses we see ourselves to be in. What we do leads to creation of hypotheses about logical extensions of businesses we are in. And so, Bharti Airtel probably saw the retail business as distinct and significantly removed from the cellular business. While that is true, it also kept them from leveraging what they already possessed to create competitive advantage in an unrelated business: online retailing. Clearly they saw opportunity in retailing. That led to a tie up with Walmart but not in creating an online business.
We can observe similar patterns in the behaviour of other companies. Our ability to observe is facilitated by the fact that we’re observers. Had we been in their shoes we may not have seen the world the way we can now as flies on the wall. This is what strategic thinking is about.
Just 1 thing i wanna ask the author … How many cities have Flipkart BUILD ? [PS : i m not a fan of tata nor i m related to them in anyway , but i am just a person who is more worried about economical growth of Indians on a grass root level ] . Think all aspects before actually giving a review / statement. Dear friend , everything is linked , New entrepreneurs are hungry for self-success not the success of Indian people , While the A business should run with only one thing in mind – profit n economic growth of the state – NOT SELF.
Flipkart has been spending time to penetrate the market segments while TATAs were more worried about the people [A time well spend] .
U can see the result – and of course – definitions of success varies from leaders to managers .
success – is it improving condition of state or improving condition of self ? You decide .