Tata is in the last leg of signing the dotted line on its much-talked-about deal with India’s largest online grocer, Bigbasket. The deal will give Tata Digital—Tata’s endeavor to build a digital ecosystem for Indian consumers and businesses—a 68% stake in the e-grocery startup for Rs. 9,500 crore. The 153-year old Tata Group is also on the verge of finalizing another deal with e-pharmacy 1mg for a $200-$250 million investment.
These deals come in the wake of Tata’s aspirations of building a Super App that will extend beyond Tata’s brand to cater to the needs of its millions of consumers. Bigbasket saw a steep surge in business in 2020, with its monthly gross sales at $90-100 million and annual sales at $1 billion, making the Bangalore-based unicorn the largest e-grocer in the country.
This deal, therefore, cements Tata Digital’s position as the country’s leading e-retail player, space where India’s oldest conglomerate couldn’t quite make its mark even with its multiple retail platforms such as StarQuik and Tata Nutrikorner (online grocery), Tata CliQ (e-commerce), and Croma (online electronics).
Is Tata’s super app ambition a mere FOMO-driven signaling gesture to make its presence felt in the digital consumer space, or will the launch of a super app be a game-changer in the world’s second-largest internet consumer market?
In this post, we discuss what the launch of a super app can mean for India and who would be the top contenders of the super app race.
First, let’s understand what a super app is.
What is a Super App?
Blackberry founder Mike Lazaridis coined the term “super app” in 2010 defining it as a “closed ecosystem of many apps.” A super app is a single platform offering multiple services for a seamless, multi-faceted, and efficient user experience.
China was the first country where super apps started gaining popularity, other Asian countries joining in shortly after.
The Success of Super Apps in Asia
Super Apps have been enormously successful in Asian countries—WeChat in China, Gojek in Indonesia, Grab in Singapore, and LINE in Japan.
WeChat’s smashing success in China is one-of-a-kind and can possibly not be replicated anywhere in the world. In addition to being a great product, WeChat owes its success to a mobile-first population cut off from the popular apps and services offered by the global tech giants Google and Facebook, and active support from the government that was keen on connecting 1.2 billion Chinese citizens digitally.
Owned by the tech behemoth, Tencent, WeChat started as a messaging app and now has over 1 million mini-programs offering services such as taxi-hailing, media sharing, money lending, bill payments, flight and hotel bookings, and more. With more than a billion active monthly users that also include government agencies, WeChat is the true definition of a super app with an average revenue per user (ARPU) at $7, which is 7 times that of WhatsApp
Gojek, Indonesia’s first and fastest-growing unicorn, started as a motorcycle ride-hailing app, now offers food delivery, fintech, and even massage services through its app.
Grab is south-east Asia’s first decacorn (startup with more than $10 billion valuations) operating in 8 countries—Singapore, Malaysia, Indonesia, Philippines, Japan, and more. With more than 2.8 million drivers in its fleet, Grab offers ride-hailing, food delivery, payments and loans, hotel bookings among many other services.
The possible reasons for the success of super apps in Asia can be attributed to the homogeneous population, low bank penetration rates, government support, and regulations. Population homogeneity allows apps like Grab to cater to different countries owing to their synchronized needs and similarity in culture. According to a KPMG report, 75% of south-east Asia is unbanked which led to Alipay and WeChat thrive as payments platform.
While super apps have been immensely successful in the East, the west remains less welcoming to the idea of bundling multiple services on a single platform. Why so?
Super Apps – East vs. West
Every single one of the countries that have embraced super apps is developing nations, where the scope for making people’s lives better is aplenty. Change occurs at the intersection of unmet needs and broken systems, both less of a concern in the West, where the infrastructure and services are better evolved and systemized.
The success of a super app in a region promotes monopoly thereby restricting open markets and as a result, limiting innovation. One of the primary reasons why super apps are unlikely to catch on in countries like the US and UK is the difference in regulation and market conditions as compared to the East. Congregation of large amounts of data generated by super apps can pose a threat to data privacy and security, a disadvantage that makes super apps less attractive to the Western markets.
Moreover, changing the behavioral patterns of a population that already has access to top-notch services and offerings and is accustomed to them seems like a losing battle the startups and conglomerates in the west don’t want to be a part of.
Is India ready for a super app?
Each one of the successful super apps that exist today was launched with a single feature that got users’ buy-in, adding more features and services over a period of time, increasing the utility of the app to encourage users to spend more time on it. Moreover, all of them were built by startups.
Startups require a considerable amount of time to establish credibility and gain user trust. That means around a decade gets spent in building a best-in-class app, acquiring customers through free services, ensuring higher retention rates, and then eventually moving towards adding more value and features. Such constraints don’t exist for conglomerates such as Tata, Reliance, or even Amazon and Paytm.
They are in a far better position to build and launch a super app that will find ready users willing to pay for their services. The paid digital services industry is still in nascent stages in India with a humungous growth potential. According to a McKinsey report, by 2023 the estimated number of internet users will increase by 40% and the number of smartphone users will double to between 650-700 million.
The proliferation of digital services across various new sectors including agriculture, education, energy, healthcare, logistics, and retail will result in exponential growth in valuation from the country’s emerging but fast-growing digital economy. Tata’s deal with Bigbasket couldn’t have been timed better as the e-grocery segment too is estimated to reach $24 billion in value by 2025.
Capitalizing on their trusted ecosystem and loyal customer base, legacy companies such as Tata and Reliance have a bigger advantage in building a super app and thriving in the super app race as compared to new and upcoming startups that lack capital and resources to help them manage the operational challenges of the first few years.
The super app race in India – the top contenders
While the $106 Billion Tata Group is aggressively developing its digital infrastructure to build the Tata super app by investing more in its own ventures and acquiring new ones, Jio has also expressed interest in launching super app in collaboration with Facebook.
Both, RIL’s JioMart and Bigbasket had 11 million active users as of December last year. In 2020, Jio also acquired startups such as NetMeds and UrbanLadder adding them to its existing fleet of digital services.
Nobody holds a stronger position in the online consumer marketplace than Amazon with its own brands Amazon Fresh, Amazon Pantry, and Amazon Basics.
While Amazon and Jio have successfully built their online retail ecosystem with a massive customer base giving them a head start in the super app race, Tata Digital is catching up real quick with its new acquisitions and deals. This pits Amazon, Jio and Tata directly against one another.
Paytm, which started as a digital wallet, now offers a host of services including Paytm Money for finance, Paytm Mall for e-commerce, Paytm, Insider, for entertainment, Paytm first games for gaming and even Paytm Payments Bank for banking. While few argue that Paytm might have been the first super app of India, it’s certainly evolving to be one stiffening the competition among the big players. To double down on its super-app ambition, the $16 billion company launched a Paytm Mini App Store for Android to support local developers and take on Google in the app distribution space.
While we cannot put a finger on who will emerge as a winner in the super app race, we can certainly see Tata Digital, Reliance Jio and Paytm among the top contenders.
Future of Super Apps in India – Can India pull off a China?
In India, super apps can be thought of as the result of Darwinian evolution with the population needs shifting from convenience to comfort to convergence. However, a single app like WeChat in China is unlikely to dominate the vast Indian market.
The launch of super apps by the established industrial powerhouses of the country can lead to multiple partnerships among non-competing smaller apps sharing their customer base with each other. There could also be a rise in service aggregation by the leading marketplaces like Flipkart and Amazon.
The idea of a conglomerate wooing to keep customers within its ecosystem by extending its services and offerings is conducive to creating a system of monopoly. However, given the diverse digital consumer demographic, vastness of the Indian market and ever-growing number of smartphone users in the country perpetually looking for better options, it’s impossible for a single app or conglomerate to meet the needs of the entire population.
While all of this narrows the scope for monopolization, it’s overly optimistic to expect the continued existence of free markets. The future of India’s digital landscape might sit somewhere between the two possibilities hinting at an oligopoly with few large operators running the show.