Fashion retail major Aditya Birla Fashion and Retail (ABFRL) plans to acquire 10 digitally-native or direct-to-consumer (D2C) brands in the next 12-14 months while at the same time launch five-six such brands in-house as it tries to grab a share of the rapidly-growing D2C segment, the company’s Managing Director Ashish Dikshit told Moneycontrol.
In the long term, about three-four years, the ABFRL subsidiary that will be created to invest into early-stage brands, will house about 25-30 digital-first brands, he added.
According to Dikshit, the company has set its sight on the channel as it does not want to miss out on consumers of the future.
“While our existing brands will grow and continue to remain relevant and (eventually) become more digitally-savvy, there is a whole bunch of new digital-first brands, which would come up and that's why we decided this strategy,” said Dikshit.
The company, said the MD, is eying 10-15 percent of its revenue coming from its D2C subsidiary in the next five years.
“We have approval from the board to start a subsidiary and invest in a bunch of promising early-stage brands and help them grow using our capability; whether it's in supply chain sourcing or access to the marketplace are capital of finance,” said Dikshit.
ABFRL plans to initially deploy its funds for the acquisition and launch of digital-first brands. However, it will also look at raising funds given the need as its subsidiary scales up.
ABFRL’s strategy to acquire digital-first brands resembles the Thrasio-style model being deployed by several start-ups such as FirstCry’s GlobalBees, Mena Brands and Upscalio. The model has been popularised by US-based company Thrasio, founded by Joshua Silberstein and Carlos Cashman in 2018, which acquires sellers on Amazon in the consumer products space and helps them scale up. GlobalBees has acquired brands like The Better Home, andMe, Prolixr, Absorbia, Yellow Chimes, HealthyHey, while Mensa Brands has acquired Karagiri, Priyaasi, Dennis Lingo, Ishin, Hubberholme, Anubhutee etc. ABFRL, however unlike these start-ups, plans to acquire companies only in the fashion, beauty and allied lifestyle segments.
“We want to clarify that we will acquire brands only in adjacent spaces,” said Dikshit.
“We will be acquiring brands and developing brands which can be sold on multiple platforms such as their websites, apps, marketplaces and other channels. We are investing in these brands to help them accelerate their growth on multiple platforms that they may or may not be selling,” he added.
The retail major, according to analysts, will have to address several challenges as it makes a beeline for the D2C segment.
ABFRL, which has several major brands in the men’s apparel segment such as Louis Philippe, Van Heusen, Allen Solly, and Peter England – is working towards diversifying its portfolio and has made several acquisitions under this strategy. The company in January picked up a 51 percent stake in designer Masaba Gupta's brand House of Masaba Lifestyle for Rs 90 crore. In December, ABFRL had signed a long-term licensing agreement with US-based brand management company Authentic Brands Group (ABG) to distribute and sell Reebok products in India and other ASEAN (Southeast Asian) countries.
“If you see our strategy for the last five years, we have identified large consumer segments and are trying to create a play in them,” shared Dikshit.
The company has shown a particularly keen interest in building its ethnic wear portfolio and acquired key designer labels. In January this year, it acquired a 51 percent stake in bridal couture brand Sabyasachi, established by Kolkata-based designer Sabyasachi Mukherjee, and later in February partnered with Tarun Tahiliani, taking a 33 percent holding in his men’s ethnic wear label house.
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