Monday, 25 September 2017

Did Aditya Birla Group shut down fashion portal Abof too soon?

Diversified conglomerate Aditya Birla Group might have shut its e-commerce fashion venture too early. The textile-to-telecom major has officially announced that it will shut down (All About Fashion) — launched in 2015 — by the end of this year, attributing it to the unviability of e-commerce ventures as a whole.

Talking to BusinessLine, Santrupt Misra, the group’s Head HR, said: “Every business starts with a set of assumptions. We expected e-commerce to mature faster than it isright now. Consumers are constantly looking for discounts and we were not sure how long it will take to turn profitable. We hoped to earn a return, but hope is a poor strategy.” Aditya Birla Group, which has a large interest in retail and textile, however, is not new to the e-commerce business compared with its peers such as Tata Group (Tata CLiQ) and Reliance (AJIO), who entered the segment last year.

The group ventured into the burgeoning market in 2013 with, a business by erstwhile Aditya Birla Nuvo, to sell its fashion labels — Allen Solly, Van Heusen, Louis Philippe, People and Peter England — with a click-and-brick strategy. However, the company pivoted from that portal and instead created separate portals for each brand.

BusinessLine spoke to several employees at Abof, few consultants and industry experts, to understand why the company had to shut the website completely and not get all its online fashion ventures consolidated.

A retail consultant, who requested anonymity, said: “At a time when Amazon and Flipkart are still burning huge cash to acquire customers, why would anyone go to Abof to buy products at full price and that too private label.” Abof was created with an idea of manufacturing and selling private labels under the same brand name.

He also said that the approach of the company may have been unlike a start-up.

“I think they spent a lot of money and time strategising and charting out a plan for Abof, whereas the e-commerce business is one of the most dynamic ones and keeps changing every six months. Such businesses have long gestation periods and one has to keep patience,” he said, adding that Amazon posted loss for several years before making its first profit.

Misra, however, dismissed these views. “Just because other players are burning cash, it doesn’t make sense for us to do so. E-commerce is not our only business. We could use this money more productively in other businesses.”

The waiting game

Anil Kumar, CEO, RedSeer Consulting, said that in e-commerce, customer acquisition is still very high, and in such a scenario, a model without discounts and marketing will result in poor traffic, translating into poor sales. “E-commerce is an expensive and painful journey; it all depends on the company whether they want to be a part of it or wait for the market to mature,” Kumar said, adding that compared with Abof, AJIO and Tata CLiQ seem very serious about e-commerce and are already putting omni-channel strategies in place to compete with pure-play online companies.

Aditya Birla Group however has clearly said that it is not keen on revisiting the business, and the employees, about 240-odd, have been given four months of notice to figure out if they want to stay with the group or quit. If they wish to quit, they will be provided four-and-half months’ salary as compensation, Misra said.

No comments:

Post a comment