Tata CLiQ's 'Phygital' Strategy: Differentiation for a Late Mover Advantage?

Tata CLiQ's ‘Phygital' Strategy: Differentiation for a Late Mover Advantage?

“TATA – this brand name is enough for us to rely on. Tata is a brand associated with our beginning of the day to end. When I first heard about this (Tata CLiQ), I was very excited and now I am obsessed with this site. The best thing about this site is its service. It has a huge collection of products (low budget to high), from which you can choose. The services which are given by Tata CLiQ are outstanding.… Another best thing of Tata CLiQ is its product quality. It has an outstanding balance between price and product quality. The cheaper products are also very good in design and quality. The electronics goods are very durable and I didn’t find any issue regarding quality…. Tata CLiQ has one of the best team for its product delivery. You will be notified at every step of the delivery schedule…. The website is loaded with all the information needed.…. The brand Tata is enough for its reliability. You just place your order; the product will be in your home on the given date.”

– Pompi Dey’s review on www.mouthshut.com, August 23rd 2017

By March 2018, Indian e-Commerce industry’s landscape has been through a metamorphosis. Retail (offline) and e-Commerce (online) have not remained two distinct channels anymore – the industries have competed to converge over the years. Tata Group (Tata), trying to bridge the gap between online and offline, boarded the e-Commerce bandwagon and launched its ‘curated’ ‘phygital’ (Physical + Digital) marketplace portal – www.tataCLiQ.com – in May 2006, almost a decade after other major players of the industry.

Being India’s well-known conglomerate (Tata), combined with the learning-edge over other players and having watched the industry’s revolutionary evolution from the sidewalls, would CLiQ be able to turn its late-entry into an advantage? And would its differentiation strategy offer a long-term advantage and steer it unscathed through the crowded and hyper-competitive Indian e-Commerce space? Would CLiQ’s unique proposition of latest products and exclusive ranges from best brands, delivered in a unique online-offline model help it to give a late mover advantage?

Indian E-Commerce Industry

Though e-Commerce has been around in India since 1995 (Exhibit I), it had grown leaps and bounds, since 2002. With increased internet penetration, advanced smartphone technologies, growing and secured digital banking (mobile wallets), the Indian digital netizen had been fed with multitude of options online (Exhibit II). Indian e-Commerce had evolved in terms of business and revenue models that spread across several business verticals. While start up entrepreneurial ventures ruled the roost in the earlier years, big conglomerates too joined the league later, the latest being Tata Group’s Tata CLiQ (CLiQ) with its online omnichannel marketplace model. Would this be a compelling differentiation in hyper-competitive Indian e-Commerce industry?................

Competition

Much of the investment was used by the players to overcome the lack of e-Commerce infrastructure in the country and to create awareness among the Indian consumer through aggressive marketing. Most of the e-Commerce players’ marketing spend focused on garnering a greater market share (especially the marketplace players) with high-decibel marketing blitzkrieg. The expense to sales ratio was more than 1 for most of the players (Exhibit VIII)..........

Tata CLiQ: No ‘Mee-Too’ Business

Tata, the salt-to-steel global business conglomerate, with combined sales of $108.78 billion, headquartered in Mumbai, India, comprised of more than 100 independent companies operating in over 100 countries across six continents. Tata had a presence in the retail segment through Trent and Infiniti Retail, which operated the Croma chain of multi-brand electronics stores. Trent operated Westside (one of India’s largest and fastest growing retail chains); Star Bazaar (a hypermarket chain) and Landmark (a family entertainment format store). Trent clocked sales of about INR2,400 crore18 during FY2015 – 2016. In addition, the group also owned retail chains of Titan (watch brand) and Tanishq (jewellery)............

Tata CLiQ’s Cost Differentiation

In an industry cluttered with homogeneous products and discount-led competition, CLiQ was Tata’s solution to some of the pain points of the discerning and aspirational Indian consumer – unavailability of international brands, lack of authenticity from the sellers and marketplaces, counterfeits of international brands and mistrust from Indian consumers that kept them from buying online............

Tata CLiQ’s Phygital Strategy

The Indian e-Commerce market is still at a nascent stage with just 30 to 40 million (~4% of total population) regular online shoppers. CLiQ comes at a stage when industry players are engaged in fierce price wars. However, it could ride on the emerging online shopping habit of Indian consumers well fed by the pioneers – like Amazon, Flipkart, Snapdeal, Myntra, etc..........

Products

Selection and authenticity are two important drivers of CLiQ’s product strategy. Also, its clarity on private labels and product categories seems to be working in its favor for now.

While on other online marketplaces, any seller was free to sell any product, CLiQ featured merchandise only from major brands. It maintained their exclusivity by entering into strategic partnerships with select national and international brands/manufacturers like Westside, AND, Vero Moda, Croma, HP, Apple, etc., and not their representatives, brokers, or dealers............

Delivery

The true omnichannel retail experience would be if a customer can browse for fashion, try it out, and then order what he liked online and have it delivered. In omnichannel, the entire process of identifying a product, browsing, showing interest, purchasing, and delivery can be done across any channel..........

Branding and Brand Communication Strategy

CLiQ is targeted at consumers who are tired of sifting through the endless listing of unknown brands, doubtful about their quality and authenticity, and are seeking a curated, genuine brand-led shopping experience. CLiQ’s creative agency Cartwheel chose to go with a brand idea, ‘CAMEL’, to help position the e-tailer distinctly..........

Expanding Brands and Sellers

The company claimed it to be India’s first online omnichannel marketplace that offered its customers a first-of-its-kind, revolutionary, multi-brand, ‘Phygital’ and an authentic brand experience along with added convenience. It offered a wide assortment of products across categories like apparel, footwear, mobiles, kitchen/home appliances and other electronics. As of June 2017, it had 800 Indian and international marquee brands and...........

Challenges for ‘No Me-too’ Player

CLiQ bets on its ‘phygital’ model, branded products and brand communications to ram its way out of the clutter. However, many analysts point out that, to be a ‘no me-too’ player, it would have to overcome myriad challenges in the form of enormous trust, significant investments (especially in technology and other physical infrastructure), managing brand & partner relationships, managing customer expectations, etc..........

Assignment Questions

I. How would you characterize the nature of competition in Indian e-Commerce industry? What are the possible sources of differentiation for e-Commerce players in India – for both the market players as well as the independent/category-specific e-Commerce players – and how would you characterize the nature of differentiation in Indian e-Commerce industry?

II. What are Miachel E. Porter’s Generic Strategies? How would you characterize Tata CLiQ’s differentiation strategy? What according to you are the pros and cons of Tata CLiQ’s phygital strategy? Do you think this would be a true differentiator for Tata CLiQ in the long-run?

III. ...............

Exhibits

Exhibit I: Timeline of the Indian e-Commerce Industry

Exhibit II: Drivers of Growth and Key Success Factors for Indian e-Commerce Industry

Exhibit III: Indian Consumer Spending, Retail and e-Commerce Markets

Exhibit IV: E-Commerce Business Models, Revenue Models and Major Business Verticals

Exhibit V: Funding in the Indian e-Commerce Industry

Exhibit VI: Investments in 2016 and 2017 and Some Recent Investments

Exhibit VII: E-Commerce in India – Market Shares (2017)

Exhibit VIII: Expense to Sales Ratio

Exhibit IX: Indian e-Commerce industry: Sales Revenues vs Losses

Exhibit X: Major M&A Deals in Indian e-Commerce Industry

Exhibit XI: Closures in the Indian e-Commerce Industry

Exhibit XII: Startup Geographical Clusters in India – 2016

Exhibit XIII: Tata CLiQ’s Growth Figures

Exhibit (TN)-XIV: Tata CLiQ’s ‘Phygital’ Strategy

Exhibit XV: Tata CLiQ’s Logo, #SureThing and Ad Featuring Camel

Exhibit XVI: Tata CLiQ’s Print Ads

Exhibit XVII: Number of CLiQ’s Sellers and Sales Volumes Contribution

Tata CLiQ's ‘Phygital' Strategy: Differentiation for a Late Mover Advantage?

Synopsis

In May 2016, Tata entered the Indian e-Commerce space with Tata CLiQ (CLiQ). After a great deal of market scanning and being on the drawing board for 18 months, Cyrus Mistry (the then Tata Sons Chairman) gave a go ahead with a clear mandate, “no me-too business”. While CLiQ was a late entrant, it positioned itself as a differentiator among the players in the crowded marketplace with a three-pronged strategy – Curated marketplace model, Branded products and a ‘Phygital’ strategy. Would CLiQ’s CLAP – Curated Marketplace model, Luxury Goods, Authenticity and Phygital Model – give a late mover advantage? CLiQ claimed that these strategies give it an advantage over others in terms of authentic products, consumer trust, lower order fulfillment cost, etc. As the company claims, it is on the verge of breaking even within about 18 months of its launch. As the company aims for a “20-30-year play”, is CLiQ’s differentiation strategy good enough to give it a long-term and sustainable competitive advantage? This case study enables the participants to discuss whether the company was able to gain a late mover advantage with its ‘Phygital’ strategy and whether it would let it stand in good stead vis-à-vis the entrenched e-Commerce competitors in India.

Prerequisite Conceptual Understanding/Before the Classroom discussion

The participants should be encouraged to read up on omnichannel retailing to have a conceptual understanding of the operational dynamics of omnichannel retailing, the probable advantage of the same and the challenges of being adept at omnichannel retailing. The participants should also be mandated to read the following material along with the interview with Jamval (YouTube Video).

• “Porter’s Generic Strategies - Choosing Your Route to Success”, https://www.mindtools.com/pages/article/newSTR_82.htm – To understand Michael E Porter’s Generic Strategies and their applicability to CLiQ
• Anita M. McGahan, “ Note on Competitive Positioning”, Harvard Business School Publishing, September 15th 1994 [Ref. No. 9-794-108] – To understand the concept of competitive positioning and its relevance to differentiation
• Michael E Porter, “What is Strategy?”, Harvard Business Review, November-December 1996 (Reprint 96608) – To understand the foundational elements of what constitutes a strategy with a specific focus on the importance of tradeoffs in strategy making and how does the same translate into CLiQ’s differentiation strategy
• “Looking at how Tata CLiQ is transforming retail through digital”, https://www.youtube.com/watch?time_continue=50&v=nZg6tAEf06M (Interview with KRS Jamwal - YOUTUBE VIDEO)

Case Positioning and Setting

This caselet can be used in the MBA/Executive MBA or EDPs for either of the following:

a) Strategy Course: To discuss CLiQ’s Phygital strategy, and debate on whether CLiQ’s points of differentiation – with its CLAP (Curated Marketplace Model, Luxury Products/Brands, Authenticity & Trust and Phygital delivery model) approach – can help CLiQ to have a late mover advantage in a keenly contested Indian e-Commerce industry
b) Retailing/E-Commerce Course/Module: To understand how CLiQ’s phygital strategy is different from that of other e-Commerce competitors in the country and debate on whether the well-intended differentiation can help it garner a sizeable market share in a crowded and competitive Indian eCommerce industry.

Assignment Questions

I. How would you characterize the nature of competition in Indian e-Commerce industry? What are the possible sources of differentiation for e-Commerce players in India – for both the marketplace players as well as the independent/category-specific e-Commerce players – and how would you characterize the nature of differentiation in Indian e-Commerce industry?
II............

Preamble to the Case Analysis

This case helps the participants in getting to know the nature of competition in the Indian e-Commerce industry and the nature of differentiation – the possible sources of differentiation - in the industry. Then the case characterizes the differentiation strategy of CLiQ using Michael E. Porter’s Generic Strategies and analyzes the Points of Parity and Points of Differentiation of CLiQ when compared with other players in the industry. The second segment of classroom discussion may be used to discuss possible sources of CLiQ’s differentiation with a debate on whether those points of differentiation are non-imitable and sustainable. The last section offers a scope to highlight possible differences in advantages amongst first mover and late mover in Indian e-Commerce industry. The broad contours of this case study’s classroom analysis are presented in Exhibit (TN)-I..............

Exhibits

Exhibit (TN)-I: Suggested Classroom Orchestration

Exhibit (TN)-II: Changing Nature of Indian e-Commerce Industry

Exhibit (TN)-III: Possible Sources of Differentiation in Indian e-Commerce Industry

Exhibit (TN)-IV: Nature of Differentiation

Exhibit (TN)-V: Order Fulfillment Cost vs Margins

Exhibit (TN)-VI: Michael E. Porter’s Generic Strategies

Exhibit (TN)-VII: Tata CLiQ’s Differentiation strategy

Exhibit (TN)-VIII: Points of Parity and Points of Differentiation for Tata CLiQ

Exhibit (TN)-IX: Tata CLiQ’s Tradeoffs

Exhibit (TN)-X: Tata CLiQ’s Relative Competitive Position

Exhibit (TN)-XI: Advantages and Disadvantages of First- and Late Movers

Exhibit (TN)-XII: First Mover vs Late Mover

Exhibit (TN)-XIII: Tata CLiQ’s Late Mover Advantage Possibility