ABOF to shut shop in December; says ecom hasn't come of age

Faced with heavy competition in the market, Aditya Birla decides to shut ABOF, its second venture in the ecommerce market after Trendin.

Earlier this year, industry body NASSCOM predicted a 17 percent growth in the Indian ecommerce market, but not all players are being able to keep up. The undisputed leaders are Amazon and Flipkart, successfully keeping competition at bay by not only conducting lucrative annual sales, but by also offering heavily discounted prices throughout the year.

This discount-heavy business model is what led Aditya Birla to decide to shut down its ecommerce site All about Fashion (Abof) by the end of 2017. It is the company’s second venture into this space, after Trendin, which was spun off earlier this year. At the time, all the employees of Trendin were absorbed by Abof.

Related: Jabong acquisition: Is it Flipkart vs. Amazon now?

Founded in 2015, the company had decided to not follow the ecommerce model of a discounted catalogue and instead chose to offer quality products at affordable rates. However, unable to make a mark in the market, more than 70 percent of the items were on discount less than a year after its launch.

The company has announced December 31, 2017 to be its last operating day. Dr. Santrupt Mishra, director of group HR at Aditya Birla Group confirmed the shutdown and said, “Looking at how the big and long term e-commerce businesses continue to struggle and are unlikely to make money for some time, it did not seem logical to continue as if everything is all right in the sector.” According to him, the ecommerce space is “not mature enough to give a return on investment,” and the company does not expect an immediate change in the situation.

Mishra added that the 200-250 employees of Abof will be offered alternate roles in the group, or be compensated with four-and-a-half-months’ salary, in case they wish to leave. Additionally, Abof’s exclusive brand Skult will be absorbed by Madhura Fashion and Lifestyle, the branded apparel division of the group.

Related: Death of e-grocery companies

Abof has a delivery network across more than 500 cities in India coupled with customer service portals. The only other established conglomerate venturing into the rocky world of ecommerce is the Tata Group. The company already has an online shopping portal ‘TataCliq.com’, and is now planning to enter the online grocery space as well.

Ironically, Flipkart and Amazon are conducting their biggest annual sales this week. Will the two outlive all the other kids on the block?