Will TATA be able to deliver better with acquisition of BigBasket?

The TATA Group is now going to join the race of apps in India by building its “super app”. Yes, you heard that right. With the exclusive deal between TATA group's digital arm TATA Digital and India's largest e-grocery BigBasket, the company has joined the league of e-commerce giants.

The Covid-19 pandemic has had a significant impact on consumers’ buying behaviour, making more companies to sneak into this sector, TATA being one of them. The Competition Commission of India (CCI) has approved the TATA Digital offer of acquiring up to 64.3% stake in BigBasket B2B arm supermarket grocery supply which in turn will take control over the B2C company. This acquisition fits well into the larger consumer play market.

Let's dive deep into how this deal will change the algorithms of e-commerce.

What made BigBasket enter the deal?

There were two companies that majorly started off selling online grocery - i) Softbank backed Grofers; and ii) Alibaba backed BigBasket.

The growth prospectus of BigBasket was enormous until last year as it did a turnover of 1 billion and took a big lead over the Grofers. However, internal tensions in China made it difficult for the company to look for a partner as Alibaba decided not to invest further in India.

With such a need for deep pockets, BigBasket entered a deal with TATA. The deal can help BigBasket get fresh investment and deflect the pressure against restrictions from the Chinese environment. Also, by eliminating the middlemen, there are chances that the company may gain an upper-hand over its competitors like Grofers. Moreover, with the entry of Jio Mart, the market has turned hyper-competitive for the BigBasket due to the strong backing up of Reliance’s strategy of huge discounts.

The ‘Big’ advantage for TATA

TATA Digital, a subsidiary of TATA Sons, is a significant player in India's food business with its strong market positions in beverage especially tea and coffee but has no direct online presence for the same.

With the acquisition of BigBasket, it will gain a majority stake in India's online grocery business thereby increasing its digital presence as the conglomerate is sensing a high growth in the e-commerce industry post-covid scenario. The deal will help the launch of their super app which will give the consumers a single platform for access to all services such as online fashion, groceries, medicines etc and bring all the diverse customers under one roof.  It will increase the reach and margin, and ease the way for transactions, ultimately benefiting TATA consumer products. 

Conclusion 

The exclusive deal of the two companies means that both can cross-sell their products on each other platforms. For instance, the BigBasket platform would show more search results related to TATA company consumer products. Also, the deal will lead to an exit of Alibaba which has backed the startup BigBasket through many rounds of findings. It will be interesting to see how TATA’s BigBasket acquisition helps in competing with Amazon’s pantry and Reliance’s Jio Mart, the current giants of online grocery business in India. 

Check out more such articles below to stay updated:

1. Surviving Covid-19 layoffs: From investment banking to launching a successful menswear line
2. Budding startup Finshots wins applauds by prioritising employees over work in COVID-19 pandemic
3. Story of the woman who transformed Vimeo from a failing company into a Billion-Dollar SaaS company
4. Will Byju's be the next Master of Ed Tech after plans of acquiring Gradeup & Great Learning?
5. Can you win the startup race without a unique business idea? | Success story of boAt