If you cannot beat them, join them. Or kill them through acquisitions and gain market control. The era of "consumer is king" could perhaps make way for brand monopoly. Recently, there were talks of a merger between leading cab aggregators Ola and Uber. The two control almost 90% of India’s taxi market which is predicted to reach $14.3 billion by 2022. Both Ola and Uber have a history of acquiring cab rivals and allied ventures like ticketing apps, bike sharing companies, etc..
If this merger happens, it may mark a near market control by one brand that will not just eat into smaller brands, but drastically reduce the question of "choice" for consumers, subjecting to the diktats of one brand, say experts.
Similarly, the $4-billion online fashion market in India is dominated by Flipkart alongside its acquired subsidiaries Myntra and Jabong which together control over 70%. Internationally, brands like Facebook corner a large chunk of the social media pie (through acquired subsidiaries Instagram and WhatsApp). Last year, French uber luxury retailer Louis Vuitton Moet Hennessy (LVMH) reinstated its global dominance by acquiring Christian Dior for $13 billion. LVMH also owns brands like DKNY, Fendi, Tag Heuer, Sephora, Bulgari, Kenzo; all of which it has acquired in the past.
Says Bejon Misra, founder, Consumer Online Foundation, a registered body with the Competition Commission of India, “Consumers stand to lose in terms of a fair market that is driven by transparency and competition. The brand that monopolises can stagnate in terms of products/services, thereby giving consumers lesser value for their money.”
According to Misra, if mergers and acquisitions (M&As) of big brands are allowed without proper due diligence, then consumers would be denied choice.
Experts say brands that acquire competitors claim to save the consumer money and bring prices down, but in reality, that’s often not the case. “The big guns playing the acquisition card often kill healthy competition. Together with their strong technology, distributor networks, brand equity and the large-volume, low-price strategy, it is impossible for a newer player to gain a foothold in the market,” say experts.
“What consumers want is a competitive market, and the ecosystem to come up with innovative solutions. That does not allow one brand to have a monopoly in a category,” says Pranay Swarup, co-founder and CEO, Chtrbox, an influencer marketing agency and technology platform.
But with the digital economy, consumers still make the final decisions, feel experts. Swarup feels that M&As are a natural phenomenon today considering the need for innovative solutions and technology disruption. According to Swarup, strong brands will either innovate, consolidate or acquire for innovation, like Facebook (Instagram) or Google (YouTube).
“Most M&As are done to acquire the user-base of the competitor to reduce competition. However, the reality of the consumer internet businesses ensures that users don’t miss out on popular or innovative features (post M&A) and only duplication gets erased,” says Yash Mishra, founder and CEO, VoxWeb.
The internet can cushion consumers from the dangerous aspects of consolidation. Mishra says that since the "barrier to entry" for a new competitor is generally very low, especially in the internet businesses, it is near impossible to achieve "eco-system lock-in" even for a big incumbent. “There will never be a stable unassailable monopoly in any consumer internet business and consumers will be protected,” explains Mishra.
Furthermore, millennial consumers are protecting their rights by being tech-savvy, experimentative and intuitive to changing market dynamics.
Every consumer today has a growing influence on social media and is smart enough to go for the best solutions, feels Swarup. “The inhibition to experiment is less. Consumers are willing to give new solutions a chance. This is the perspective and power that consumers must maintain, and keep brands accountable to their promises," says Swarup. Moreover, consumers should stay "demanding" and not allow big brands to "break promises". According to Mishra, one of the reasons WhatsApp became popular in many geographies is because of its promise of staying ad-free. "But now Facebook has started making ground to monetise WhatsApp by showing ads on the status section of the app." Experts say consumers should remain vigilant and ensure that brands are not shifting their goals post acquisitions to suit their "profit maximisation" agendas.
WHO’S THE KING?
- Millennials are protecting their rights by being tech-savvy, experimentative, intuitive to changing market dynamics
- Moreover, consumers should stay “demanding” and not allow big brands to “break promises”
- Experts say brands that acquire competitors claim to save the consumer money and bring prices down, but that’s often not the case
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