Will Tata Neu Make the Cut?

This year, the Easter weekend was special in India—the holidays commenced on Thursday with Mahavir Jayanti and went on till Sunday. Yet, on the day the long weekend commenced, salt-to-software conglomerate Tata group was hard at work explaining how its latest bet—Tata Neu, which it claims is India’s first super app—was a symbol of synergy for the group.

“What we have accomplished is that we have brought all the group brands together… in a way that it makes a compelling value proposition for the customer,” N. Chandrasekaran, Chairman of Tata Sons, said at the post-launch event. The app dropped on Google’s Play Store and Apple’s App Store on April 7, at the perfect time for many planning for the long weekend. No wonder that the app had seen 2.2 million downloads and enrolments till April 14, the day of the event, according to Pratik Pal, CEO of Tata Digital, which owns all e-tailing properties of the Tata group. As of April 24, the app had seen more than a million downloads on the Google Play Store and was the No. 2 shopping app on Apple’s App Store.

But what is a super app? P.N. Sudarshan, Partner and TMT Industry Leader at Deloitte India, says it is probably the right time for India to have a super app. According to him, there are three things a country needs, to enable a super app: high smartphone penetration, cheap data, and a large young population which spends a lot of time on mobile phones. India, like China, has all three, but it requires something more from the super app developers: a way to address a heterogeneous population. “And by this, it’s not merely converting everything into vernacular; it is also the way you deal with different segments of the population,” he says. For example, voice-based interactions for the hinterlands. Industry experts say that the world’s most popular super apps have incredible messaging capabilities.

Agrees Satish Meena, an independent analyst tracking the consumer internet space. “What matters [for a super app] is the one use-case based on which the customer keeps coming back to the app [multiple times a day]. What also matters is how frictionless the other services on the app are,” he says.

But according to Tata Digital President Mukesh Bansal, there is no established definition of a super app. “[A] super app, in our definition, is that we want to cover multiple consumer consumption patterns,” he said at the post-launch event.

The super app market has great potential. “In China the total commerce enabled through its leading super app is about $350 billion, and the super app itself generates about $10 billion in revenue,” says Sudarshan, adding that in India, a super app could generate $5 billion of commerce and $200 million of revenue in three years from now; this could rise to $15 billion and $600 million, respectively, in five years.

It makes sense for one of India’s largest conglomerates to come out with a super app. The Tata Sons Chairman says that the app was in the works for over two years. “Over the last two years, we spent a lot of time on our own retail businesses such as Croma and Westside. This was to understand what product categories work well online and offline. In that sense, a lot of time has gone into data mining and that is really the starting point,” Chandrasekaran says.

Meena says that the app could help the Tata group get back in the retail business, where it has fallen behind peers. “It is targeting 100 million online buyers to start with, and it faces tough competition to make them spend more on Tata Neu,” he says, adding that apart from bigbasket, most of the other services are targeted at the metro and Tier I city customers. And the data will help them identify the customers, though they will need to work hard to incentivise them to be loyal to the app. “Tata Neu has to offer something which pushes customers to come and open the app. It can be superior customer experience; it can be cash incentives; or it can be frictionless experience. But as of now, it’s not standing out,” he says.

Tata Neu does offer incentives—NeuCoins. Those who booked tickets or rooms on the app for the long weekend were rewarded with NeuCoins under the NeuPass loyalty programme, which the group says is its biggest hook. Pal said at the event that the loyalty programme is Neu’s flywheel as it entices customers to buy products, earn NeuCoins (equivalent to 5 per cent of the value of the purchased product) and use the accumulated coins to shop for clothes, etc., on the app.

According to Bansal, Tata Neu’s performance during the pilot run has been good. “The average revenue per user (ARPU) pattern that we have seen during our pilot is three-four times [of what] one sees on comparable platforms. The reason for that is [that] we have huge depth of category coverage,” he said at the event.

All that’s well, but how does a super app make money? While Tata Neu did not reveal what its business model was beyond saying that it had agreements with the brands, industry experts say that super apps usually make money by way of commissions. The basic premise behind a super app is that it should enable four-five common use cases, of which two or three would make money. “So, payments could make money, e-commerce transactions could make money. But it also needs to have a messenger and/or short video app, which in most cases may not make money,” says Sudarshan. A super app needs to enable a lot of transactions and keep taking small cuts as fees. Meena says that the Neu app can either charge commissions from group companies (and other companies when they come on to the app). Or, it can be funded by the group firms that use the app as a front-end for their products and services. What experts agree on is that Tata Neu should be careful of avoiding the slippery slope of discounts and cashbacks—as these aren’t sustainable. And as Chandrasekaran said, the app is just the first version.

“We will take a calibrated approach to the business, and it will not just be about GMV multiples. There will be a lot of focus on cash flow. We are only at the beginning of a long journey,” he tells Business Today.

There have been earlier instances of all-in-one apps being launched in India, though none claimed to be a super app. But whichever way Tata Neu goes, one thing’s for certain: it will set the template for other super apps in India.

With inputs from Krishna Gopalan

@abhik_sen