Ecomm exciting; eyeing $5-bn revenue in 5 yrs: Kumar Birla

abof.com, Birla says, will be an online one-stop shop for clothes, footware and accessories for both men and women.

One could argue the online foray comes with a slight delay, but Birla believes the ecommerce space is a sunrise sector that has scope for much more in the days to come.

While he sees no overlap between its current business and abof.com, Birla expects the retail business vertical to have a revenue of more than USD 5 billion.

Below is the transcript of Kumar Mangalam Birla’s interview with CNBC-TV18's Sajeet Manghat.

Q: What's the rationale in this new venture?

A: We looked at ecommerce as a space I don't need to explain why and the team looked at different options. Fashion for two reasons. One is because we are the largest player offline in fashion in the country through our brands in Madura Garments and Pantaloons.

Also the fact that it is one of the fastest growing segments within the ecommerce space. I believe that five years from now the business in this vertical will be of the tune of about USD 5 billion. So, great opportunity potentially just in business terms and also a business that we have at least some familiarity with.

Q: The group has a familiarity with fashion but you chose to go as a closely held company instead of using your existing companies which have expertise and are leaders in their own right in the market. Why you chose to go with a closely held company or a private company?

A: Like I explained earlier this evening this offering is for a very different consumer group. This offering the target audience is really the millennials which is people in the age groups of 18-25 doesn't mean that there isn't something for you and me, but they are the primary target audience.

None of our other existing offerings really cater to that group of people and therefore there is really no overlap between what we have today and what Abof will offer which is why they have been kept as two distinct entities.

Q: There is an uniqueness in that sense because you are going to target 18-25 but that uniqueness also brings in risks because you don't know how the millennial acts with respect t the existing market place where you have discounts in every website and you chose not to go for discounts and go for exclusive and trendy dresses or fashion in your website. So, how is that risk going to be countered by this platform?

A: Of course it is about risk pricing, it is more about choices. The millennials are the most savvy and the most comfortable making purchases on net for example. Also the fact that the current merchandise that you would see on Abof is very sharply priced to start with and therefore we have kept to what the team calls honest pricing as opposed to huge discounts. And I see when you go to the site you will get a sense of why there is a philosophy of not having deep discounts.

Q: I am sure you would have gone through a detailed exercise before coming out and targeting that specific segment and that also happens to be the demographic dividend for the country as well, that 18-25 category. What were your findings when you decided to go, okay, let us go for this vertical instead of going for all out.

A: Like I said, there is something for most age groups. I have bought a lot on Abof already, so have my children, so have some friends and family. I think the target group primarily being the millennial because that is their lifestyle, because that is their lifestyle. I mean that is what they like to do, they like to order on the net. They are very comfortable doing that. They like the choice, they like the fact that it is convenient and therefore, it caters to their kind of lifestyle and their kind of behaviour pattern.

Q: You spoke about you shopped yourself, your children shopped on the website as well. Were there any specific feedback that came from them because they are part of that group?

A: That age group is a very fussy customer group. So, they did have some feedback, not on quality, but on packaging when the product came. But this is when we had a soft launch phase and the whole idea was to figure out where really the snags are and to clean those out. So, a lot of that, in fact, all of that has now been debugged.

Q: This entire fashion segment has a lot of players. You have Myntras of the world, you have boutique fashion websites or e-commerce sites which are already there. And it took us a lot of investment commitment as well. I am sure that from your group, there will be a lot of backing going on into that website. But, from an investment point of view, what is the kind of horizon you are looking at for this website to mature into a successful fashion portal so that it has lion’s share of the USD five billion market which you were talking about in the next five years?

A: Firstly, I should say that we do not believe that this is a market where there will be one winner who takes it all. We believe that it is a very fragmented market today and then there will be consolidation, but there will probably be three or four players who will actually get the lion’s share of the customer’s wallet at the end of day. And the idea really is for us to be in the top-three of such portals in the next five years. Very difficult to talk about revenues and targets because it is a bit of a journey into the unknown. But I think there will be enough investment power either from the group or from external investors as the case might be, not sure how exactly it will pan out today, to ensure that we put our best behind Abof.