Betting on the Basket

Shonali Advani | Sep 3, 2012

Last June, when the e-commerce sentiment in India was high, five individuals decided to make a dash for it. Their proposition, though, wasn’t fashion or white goods, but groceries: a category four of them had ambitiously attempted in 1999 when they co-founded India’s first online store FabMart.com, much ahead of market readiness. However, this time when Hari Menon (50), Vipul Parekh (48), VS Ramesh (55), and VS Sudhakar (51), the team behind erstwhile FabMart.com (now Indiaplaza.in) reunited to launch an e-grocery store, they knew the opportunity and timing was ripe for success. Bengaluru-based bigbasket.com launched in December 2011 after raking in a fifth founding team member Abhinay Choudhari (41) and his 12-month-old startup ShopasULike.com, also an e-grocery store running as a pilot in Whitefield, Bengaluru. “We got a platform, processes, a team of 20, and some supplier relationships,” Menon, CEO and Head-Merchandising,bigbasket.com says explaining the partnership, which didn’t involve any exchange of money.

By February 2012, they raised Rs. 50 crore ($10 million) from PE fund Ascent Capital, sufficient for three-four years and to take business to Bengaluru, Mumbai, Delhi, Chennai and Hyderabad. “This is an atypical investment for us. We are looking at this as organized retail rather than e-commerce,” Raj Kondur, Partner, PE fund Ascent Capital says.

Stocking up

In six-odd months since inception, business at the e-store has grown quite fast, thanks to the vast experience and deep domain knowledge of the founders. It currently services 400 orders a day (Bengaluru only), backed by an inventory of 7,000 stock keeping units (SKUs) split across 129 categories. At an operational level, it works on a hub and spoke model. The firm’s own warehouse to stock products will be operational from August 2012, by which time it hopes to have 10,000 SKUs. Till now, the startup has been sourcing goods daily which are sent to its three sorting centers in Whitefield, Yeshwantpur and Bannerghatta that together cover all four zones in the city. Here, orders are segregated to be delivered to customers in company-owned vehicles.

“We buy FMCG products from Metro cash and carry, fruits and vegetables are sourced from Safal and our own suppliers in Hoskote. For staples too, which we stock, we’ve set up our own supply chain,” says Menon. In case of unavailability, bigbasket.com buys directly from the market. “We want to work on getting fill rates right at the moment,” he says. Post-August 2012, bigbasket.com will go deeper into the supply-chain as it starts sourcing directly from companies and mills. “This will change margin dynamics,” affirms Kondur. For the long term, the firm plans to increase warehouse space to 30,000 square feet capable of stocking 15,000 SKUs.

“This is a complex category and execution-intensive, requiring both retail and technology experience, a combination that’s hard to find. This team has 100 years of experience between founders,” says K Ganesh, serial entrepreneur and co-promoter bigbasket.com.

Double challenge

So far, Menon says, they are challenged on two fronts. The first and most pressing is to get fill rates right, which currently stand at 90-95 percent for bigbasket.com. “Consumers are expecting to get a 100 percent fill rate and that puts pressure on us. People buy online for convenience and even if one item is short, they don’t mind purchasing everything offline,” he highlights.

Second is the problem of suggesting alternatives for stock-outs and at present, bigbasket.com’s platform doesn’t have the intelligence to do so. For the time being, it’s tackling the issue by mentally preparing customers before delivery. Not surprisingly, the company has invested heavily in technology, especially for back-end logistics. A routing software helps them divide the number of orders serviced by each van, which are fitted with GPRS systems to monitor movement in real-time. “Delivery boys carry tablets where customers punch in PIN numbers to confirm receipt of order,” says Choudhari, Head, Customer Experience. There’s no minimum order value and they charge Rs. 20 as delivery charges for orders up to Rs. 1,000. Anything above this is delivered free. Customers have the option of four time slots for delivery. “We hope to touch 1,000 orders a day by November 2012,” Menon says.

Customer demographics

For 36-year-old Amrita Paul, her first tryst with online shopping was on ShopasULike.com, in end-2010, and she has continued as a customer even after it rebranded as bigbasket.com. “I’ve encountered stock-outs only twice and the team’s always been quick to suggest alternatives or take an order for the next day. They take great care in selection of vegetables and fruits, which arrive well-packed,” says a satisfied Paul.

Adds Harmeet Kaur who shops weekly: “They specially sourced a particular brand of ketchup I requested for.”Broadly, its customer demographics are reasonably affluent, dual working households that purchase anywhere between Rs. 1,000-5,000 worth of groceries every month. “There’s no great market for us in tier II or III cities yet,” affirms Choudhari. “In Bengaluru, we’re finding it difficult to break the market in categories like staples, where traditional households prefer going to kirana stores they have a long-standing relationship with,” Menon admits.

While its marketing efforts have been minimal, the firm has been working around doling out free products, like rice, with the aim of converting such customers.

The startup is also targeting B2B clients and has already acquired five thus far. Now keen to expand its footprint further, bigbasket.com has picked Navi Mumbai and Hyderabad as new markets to enter, initially, and has already appointed respective heads to oversee operations. “We chose one big city and one small in the south. Bengaluru’s model can be copy-pasted in Hyderabad or Chennai as these markets are similar. Mumbai and Delhi are tough animals,” Menon notes. Ganesh foresees challenges in last mile delivery as they scale to other cities, but Menon is optimistic given their investment in technology, a big differentiator, in addition to the founders’ deep understanding of the domain. “When I go to 3,000 orders a day, I need to build processes supported by technology to fulfil the demand,” he says.

Excl: E-grocery store bigbasket to expand to Mumbai & Hyderabad by Oct; Delhi, Chennai on the cards

July 24, 2012 | Nandana Das

E-grocery store bigbasket.com, currently operating in Bangalore, intends to expand its footprint to Mumbai and Hyderabad by October this year. It has further expansion plans and by March 2013, bigbasket will also cater to customers in Delhi and Chennai.

Talking exclusively to Techcircle.in, co-founder Hari Menon said, “The e-store model, as well as the related systems and processes, will be the same as the Bangalore one. But once we start operating in other cities, we will have city-specific SKUs, apart from common SKUs.”

Right now, bigbasket has about 8,000 SKUs, but in the coming 5-6 months, the e-store will have 15,000 SKUs. “We will still focus on grocery, food, non-food and other FMCG products. But there will be more items in the household category, such as dinnerware, kitchenware and more,” said Menon.

Interestingly, the entire last-mile delivery is owned by bigbasket, which has its own fleet of 30 delivery vans. Currently, all the goods are stocked in a Bangalore-based warehouse and depending upon orders, these are transported to the nearest hub. The company has three hubs, in Whitefield, Bannerghatta and Yashwantpur, to cover the entire city. When it starts its operations in Mumbai, bigbasket will have a registered office and a warehouse in the city, as well as four hubs – in Vasi, Goregaon, Mulund and Bandra. In Hyderabad, too, it will have a warehouse and an office besides three hubs located in Shivapalli, Boyanapalli and Kukatpally.

Once the company starts its operations in these cities, it will have 20 delivery vans in Mumbai and 15 in Hyderabad. With an average order value of Rs 1,200-Rs 1,250, bigbasket claims to have 450 orders per day.

In March 2012, bigbasket raised $10 million in its first round of funding from private equity firm Ascent Capital. The transaction is believed to be the first institutional investment in an online grocery retailer and the largest Series A round in an e-tailing firm in India. Prior to that funding, serial entrepreneur couple K. Ganesh and Meena Ganesh (who sold TutorVista to Pearson last year) also invested in bigbasket.

The company is utilising the money for expanding to other cities, enhancing technology, hiring new talents and scaling up marketing activities. Currently a team of 150, bigbasket will hire more people to increase its strength to 500 by the end of 2012.

“We will be doing city-specific marketing as we are not operating nationally. We will focus on below-the-line (BTL) activities in malls and apartments besides poster and banner campaigns, radio ads and some print ads in local newspapers,” added Menon.

Power of Ideas 2012: Fighting online grocery retailing challenges

ET Bureau Jun 19, 2012, 05.34AM IST

Grocery retailing in a format other than the unorganized way of push-carts and small neighbourhood vendors seems a big challenge. As the critical factor is to retain the freshness of vegetables and keep prices competitive. In Bangalore, bigbasket.com, started in September 2011, claims to have overcome both the challenges.

Internet users can order daily need stuff — from toothpaste, ice creams, dairy products, fish, stationery to onions — online and get it packed and delivered at their doorstep. bigbasket.com has a portfolio of more than 6,000 products, gets orders online and has 30 vans to deliver them anywhere in Bangalore.

Says V S Sudhakar, cofounder, bigbasket.com, "we do not keep any inventory. All orders received before 6:00 am are procured by 9:00 am and delivered by 3:30 pm. To retain freshness of vegetables and fruits we buy directly from the mandi (wholesale market) and that helps us keep prices competitive." Besides, "bigbasket's dump or wastage is low, as only what is ordered online is procured and that helps keeps costs under control," says Sudhakar.

He would know as he has been in retailing for long, having co-founded retail chains like Fabmall and Fabmart before starting bigbasket.com.SN Capital put in $10 million in the start-up and its goal is to expand to at least four more cities by the end of 2012.

These include Mumbai and Hyderabad in the next couple of months and foraying into any two cities from between Delhi, Chennai and Pune. bigbasket.com gets about 300-400 orders a day and as they expand, Sudhakar says getting delivery boys is a problem.

Groceries Online, Will it Click?

by Rohin Dharmakumar . June 16, 2012

Image: Jyothy Karat for Forbes India
Mahesh HB, purchase officer at online grocery store Town Essentials, at a wholesale vegetable market in Bangalore. Sourcing and logistics is a big challenge for such online grocers

K Ganesh, 50, the Energizer Bunny of Indian entrepreneurship, is either angry, annoyed or sarcastic. I can’t tell.

“VCs [venture capitalists] have a herd mentality. They don’t mind funding the sixth baby products site or the eighth [discount] deals site. But one of the reasons we got into this business is because it isn’t ‘VC-able’. It means two pony-tailed youngsters out of college can’t enter it. It’s our competitive barrier to entry!” he says.

Ganesh, a 25-year veteran of funding, building, scaling and selling technology businesses, has a near-uncanny ability to spot and ride a trend before it becomes mainstream. His past ventures offer a concise view of how the Indian technology story evolved: Hardware maintenance in the 1990s, BPO in 2000, analytics in 2004 and online tutoring from 2005.

“But this is the toughest and yet most exciting of all my ventures,” he says, with his characteristic half-smirk, half-smile that can be maddeningly hard to read.

The business Ganesh is referring to is bigbasket.com, an online grocer he funded and incubated just a few months back in December 2011. Just three months later he roped in $10 million in funding from private equity firm Ascent Capital.

“No VC can write a ‘Series A’ cheque of that size. And we were clear this isn’t a $2 million or $3 million investment business,” he says.

He is right, VCs don’t like this business.

There’s a reason for their scepticism: Selling groceries online is a bruising, penny-pinching business that has bled entrepreneurs and investors for over a decade and a half.

“My own personal belief is that this is a very complex business where margins will always be under pressure. Hence the amount of investment required to reach scale will be significant,” says Kanwal Singh, co-founder of Helion Venture Partners, generally one of the most gung-ho investors in Indian e-commerce but a marked sceptic on groceries.

But that isn’t preventing a bunch of Indian startups from trying.

Connaught Place, bang in the heart of Delhi, isn’t normally the kind of place where you’d expect an online grocer to set up shop. Real estate is prohibitively expensive, traffic and parking can be maddening and it’s far away from Gurgaon’s dense and rich urban jungle.

Yet, that is where Aaramshop, one of the fastest growing online grocers currently is headquartered.

It can afford to do so because, unlike most of its peers, it has no need for large warehouses, call centres to take orders, engineers or logistics staff. It has just 12 employees.

Yet, it home delivers grocery orders in over 25 cities.

In comparison, bigbasket, that serves just Bangalore city, has over 120 employees, three distribution hubs and 25 delivery vans.

Aaramshop’s secret: It does not source, stock or deliver any or the products ordered by customers. Instead, it acts as the internet face for any neighbourhood grocery store (kiranas) that signs up with it.

“We believe e-commerce in its traditional form will not work with FMCGs [fast moving consumer goods] and groceries. Because unlike other categories, the margins available to retailers here range from 6-8 percent, which makes stocking and logistics of groceries and perishable products a near impossible task,” says Vijay Singh, 42, Aaramshop’s founder and CEO.

Customers who log in to Aaramshop must select the kirana store nearest to them before ordering any products. Within seconds, Aaramshop relays the order via SMS and email to the kirana. And within hours the kirana delivers the order, with the customer paying in cash. The average order size a kirana gets through Aaramshop is around Rs 570, says Singh, compared to Rs 100 when customers were directly calling them up.

“The fundamental advantage of the kirana is their proximity and huge amount of trust with consumers. Besides, the view most of us have of the kirana store manned by an old gentleman wearing a banian is no longer true. Having seen the Subhiksha model, there is huge interest in them to change. Counters have changed, aisles have come in and most owners use high-end smartphones and Facebook,” says Singh.

Subhiksha was, of course, the discount supermarket chain that rose dramatically to 1,600 outlets across India in just over a decade, before spectacularly flaming out in early 2009. Its twin value propositions of deep discounts on groceries and FMCG products together with local neighbourhood availability were fairly successful with Indian consumers.

The other impossible task is for any startup to match the extensive, deep and low-cost distribution network put in place over the decades by large and small FMCG companies in India: 7.8 million outlets retail groceries across India, of which grocers alone account for nearly 60 percent.

“The FMCG industry has a distribution system that can service the nearest kirana store [meaning, they can get their products to even the smallest kiranas]. Till that exists, any new startup’s ability to compete from, say 20 kilometres away, will remain in question,” says Damodar Mall, the head of Future Group’s food business.

Before joining Future Group, Mall headed Sangam Direct for Hindustan Unilever, which aimed to deliver FMCG’s directly to customer doorsteps.

Launched in 2001, Sangam was sold off in 2007 to Mumbai-based Wadhavan Retail which ran a chain of stores under the Spinach brand. Sangam turned out to be the kiss of death for Wadhavan too, because in 2010 it shuttered all its Spinach stores.

Margins aren’t the only aspect that makes grocery e-commerce so tough to pull off: Customers expect 24-hour delivery. That entails maintaining your own warehouses, significant inventory, and delivery vehicles and staff. A centralised Amazon or Flipkart-style warehouse using third-party couriers is out of the question. Add perishables like fruits, vegetables or meats into the equation and the supply chain costs and risks increase exponentially. Finally, the scale of FMCG distribution and the high service levels of the neighbourhood kirana (who will often home-deliver even one or two items at no extra charge) set impossibly high benchmarks to beat.

These factors forced Singh to give conventional wisdom a go-by when it comes to revenue. Instead of charging a commission from either its customers or the kirana stores, he charges FMCG brands for running promotions and marketing campaigns on its website. Singh believes FMCG companies don’t have the last mile connect with their customers in spite of being the largest ad spenders in the country. Aaramshop is the platform that he sells to them as the solution.

“Which is why in just our eighth month of business we’re close to breakeven,” he says.

BEEN THERE, HEARD THAT

bigbasket’s is a more conventional approach in the sense that it relies on its own warehouses. Yet, its strategy is disruptive: It includes multiple warehouses and inventory; a wide range of over 6,000 stock-keeping units (SKUs) including fruits, vegetables and meats; and plans to expand to five cities in the first year and 12 in the second.

“We’ve been hearing the kirana argument back since we were starting our chain of supermarkets,” says VS Sudhakar, 52, co-founder of bigbasket.

Sudhakar was one of the co-founders of Fabmart.com, arguably India’s first e-commerce website (it currently operates as Indiaplaza.com), back in 1999. When Fabmart fell victim to the dotcom crash, he started a chain of supermarkets in Bangalore under the Fabmall brand in 2002. Those got sold in 2004 to Hyderabad-based Trinethra Super Retail in 2004, which subsequently got acquired by the Aditya Birla group in 2007 and became part of its More chain.

Having tilted at India’s dysfunctional retail realities for well over a decade, Sudhakar certainly isn’t a greenhorn.

“Tell me, if most Indians love to buy from kirana stores, why would modern retail take off?” he asks.

He has a point. According to the latest data from global information and measurement company Nielsen, in just over a decade modern retail chains have captured from kiranas nearly a third of the market share in home, personal care and food products in 17 of the biggest urban markets.

“Besides,” says Sudhakar, “I’m not replacing the kirana, but the need to go to a supermarket!”

“Head to head with modern retailers, I figure we can save 10 percent in costs because things like rent, utilities, staff and shrinkage simply don’t exist at the last mile for us. And compared to their 3 percent net [profit] margins, I think we can get to 6-7 percent,” he says.

By virtue of the location and experience of its founders, and given the city’s comfort with modern retail, bigbasket currently operates only in Bangalore.

Isn’t that too small a potential market?

Apparently not. Because bigbasket maintains that the monthly grocery spends in the city range from Rs 400-500 crore, of which modern retail accounts for nearly Rs 150 crore. Even assuming bigbasket’s target is only the latter, that’s an annual market of nearly Rs 1,800 crore.

Armed with oodles of venture funding, experience and derring-do, bigbasket is leaving no stones unturned in its race to capitalise on what it sees as the last great frontier in the Indian e-commerce story.

Customers can order either via the web or phone. Orders are then automatically fulfilled either from its own inventory or via partners.

Currently bigbasket stocks most provisions (which it cleans and packages under its own brand) while most fruits and vegetables are sourced twice daily from wholesale mandis or Safal, and FMCGs from Metro Cash & Carry. It claims to be shipping nearly 400 orders a day with an average order ranging between Rs 1,000-1,100.

“It’s a model that will evolve as volumes grow. Over time we will increase the number of vendors for both fruits and vegetables and FMCG products such that any time an ordered item should be available from vendor A, B or C and our technology will automatically route it appropriately,” says Sudhakar.

Orders are delivered either the same day or at worst, the day after. The person delivering the order is equipped with a tablet PC on which he enters a unique code that is SMS-ed to customers, in order to track delivery times. The tablet also lets him map routes or take instant feedback.

Even with all of this, Sudhakar says bigbasket is aiming to break even in Bangalore within 12 months when his daily order volume hits 1,000.

HOLY GRAIL TO HOLY SMOKE

In many ways grocery is the Holy Grail of online commerce—a category where significant amounts of money are spent in every household, week after week, buying the same set of products. Most consumers have no desire to waste their time driving to a store, walking through aisles and standing in crowded checkout counters.

In theory it’s a category ripe for digital disruption.

Yet multiple failed experiments in country after country over the last decade have proved that theory is near impossible to implement.

To begin with, profitability must be built into the DNA of an online grocer right from day 1. For, while a website can sell books or mobile phones at a slight loss in the hope of winning a customer over the long run, in groceries the razor-thin margins rule that option out.

Over a period of time, profitability must cover three milestones: At the unit (order) level, at the customer level and the business level.

There aren’t too many synergies a firm will get by spreading to multiple cities, unlike say, a Flipkart that can service literally the entire country from a few centrally located warehouses. In fact, early and aggressive expansion is exactly what destroyed firms like Webvan. Business models need to be proven and profits need to be generated at a city, or even a locality level.

Another sure-fire way to crash and burn is spending too much on acquiring new customers—usually the biggest cost element for an online grocer.

The way to avoid this is to resist the urge to splurge on generic TV or web advertising and instead run targeted local advertising on, say, radio and below-the-line promotions within specific areas.

Judiciously choosing which products to stock themselves and which ones to purchase after consumer orders, is another critical area. Unsold inventory is a slow and sure poison that can kill even mature businesses.

Being technology-driven businesses, there is also the tendency to overestimate its abilities and hence, overspend. One of Webvan’s most vivid acts before going belly up was to place a $1 billion order to build a warehouse!

The final tripping point is the cost of delivering orders. Thanks to the low benchmarks set by kirana stores and other e-commerce websites for home delivery, online grocers have to deliver large and heavy orders for free or at best, Rs 20-30.

“Where the cookie crumbles is the cost of logistics which makes sense only when scaled up over, say, a five year period. The margins in this category are so low that you literally run out of money the moment you’ve travelled 5 kilometres to deliver an order,” says Future Group’s Mall.

Fingers burnt and lessons learned, Mall now believes the only model that will work in India is a network of physical stores integrated through a centralised online order booking system. He says Future Group will have such an operation shortly.

Then there are risks beyond anyone’s control: If one madman gets funded by a mad VC and plays the discounting game, that might derail the entire sector for two-three years.

Thankfully there don’t seem to be any such madmen around.

As for Ascent, the company it has chosen to fund is run by a bunch of battle-hardened retail veterans and a canny entrepreneur with a Midas touch.

“In two years we want to be Rs 100 crore in revenue. How many e-commerce companies have done that in India?” asks Sudhakar.

Quick view : bigbasket.com raises $10 m from Ascent Cap

Posted: Thursday, Mar 08, 2012 at 0126 hrs IST

The online grocery store bigbasket.com announced that it has raised $10 million in equity capital from Ascent Capitalin, in its first institutional round of funding. bigbasket.com’s founding team started e-commerce site FabMart.com in 1999. It runs the Fabmall-Trinethra chain of more than 200 grocery supermarkets stores in South India. The Trinethra business was sold to the Aditya Birla group in 2006 and currently operates under the More brand name. FabMall co-founders VS Sudhakar, Hari Menon, Vipul Parekh, VS Ramesh, and Abhinay Choudhari have also roped in entrepreneur couple K Ganesh and Meena Ganesh for this venture.

bigbasket plans to expand to five cities by the end of this year.

We Want To Scale Up Profitably: Hari Menon, CEO, bigbasket.com

March 7, 2012 | Madhav A Chanchan

For the founding team of bigbasket.com, a grocery e-tailer based in Bangalore, this is the second innings in e-commerce. The team of five – VS Sudhakar, Hari Menon, Vipul Parekh, VS Ramesh and Abhinay Choudhari – had earlier launched Fabmart.com (backed by ChrysCapital), selling music, books, toys, jewellery and finally, groceries. But the grocery business later became pure play retail, was hived off and merged with Trinethra, did raise funding from India Value Fund and was ultimately sold to the Aditya Birla Group. The online business finally became Indiaplaza.com, an online shopping mall, and the five founders still remain shareholders.

However, in September 2011, they got together to launch the grocery e-tailing business bigbasket.com, roping in TutorVista’s K. Ganesh and Meena Ganesh as angel investors. The firm has also raised $10 million from Ascent Capital, which marks the first institutional investment in this space and the largest series A round of funding in an e-commerce firm. bigbasket.com plans to add products like organic foods, pesticide-free fruits and vegetables, exotic cheese and frozen foods to its inventory, and also wants to feature international brands. The company will also introduce private labels across categories, which will help it spread brand awareness and increase margins.

bigbasket.com plans to scale profitably and sees margins improving as it moves across the value chain. “At the peak level, when you are buying directly from companies, this category will run at a margin of 20-23 per cent,” said co-founder and CEO Hari Menon in an interview with VCCircle. Till recently, Menon was the CEO of IndiaSkills, a joint venture between Manipal Education and UK’s City & Guilds. Here are the excerpts:

What has changed since you started Fabmall in 1999?

One fundamental change is how users have adapted to the Internet as a medium for shopping. The fear associated with online shopping has reduced considerably and in this category, a lot of sales happen through cash on delivery (COD) and Sodexho coupons. Also, people today are much more focused on profitability. Earlier, they focused more on topline and market valuation, driven by an exit perspective. Scaling profitably is critical, though, and that’s how a player approaches a business today, as compared to 1999. Plus, we are a lot more networked now, being in this business for the past 8-9 years.

How are you sourcing products across categories?

Right now, we are dealing in four broad categories. First is staples (rice, dal, spices, etc.) and within a month of starting operations, we have moved to private label. We currently source these from the mandis to one of our suppliers who cleans and packages those. From mandis, we will move further down the supply chain to the mills, and that is how your margins keep rising.

One category, which will be a big differentiator for bigbasket.com, is fruits and vegetables. But it will be very difficult to crack. We have a farm-to-home concept where we intend to get the produce directly from the farms, without the intermediaries. Typically, the produce stays at least 24 hours in a store when you see it deteriorating. Right now, we are working with Safal but over a period of time, we will build our network of farming bodies and that will help us ship directly to buyers.

Another growing category is frozen meat and dairy products. Then there is FMCG foods and non-foods (toiletries and personal care). Right now, we deal with the distributors in these categories, but over the time, we will move up the value chain. Currently, we are working closely with Metro Cash & Carry. But once we start building our volume, we will approach these players directly. In fact, we will start approaching the top 8-10 suppliers within the next 6-8 months. We will also introduce private labels in categories like jams and pickles, but that will be one year down the line.

But what about the delivery model?

The entire last mile is owned by bigbasket.com. We have our own fleet of 50 vans, which are being commissioned for delivery. We follow a hub-and-spoke model where all the goods are bought and stocked in a warehouse (it will be built as the company moves into direct purchase in the next 6-8 months). The warehouse will then supply to the hubs. We have three in Bangalore – in Whitefield, Kanakpura and Yashwantpur – and they cover the entire city. From there, the delivery executives (called customer experience managers) deliver the goods in four time slots – 7 am-9 am, 11 am-1:30 pm, 3 pm-5 pm and 7 pm-10 pm.

The funding we have raised will help us expand into four other cities by December 2012. In the next few months, we will crack the Bangalore model – so that we can replicate it in other cities (which are yet to be decided).

How is the traction on the site? What’s your average billing?

We have launched the site on December 5; so it’s been a little over three months. At present, we average a little over 300 orders a day and the average value per order is around Rs 1,200, compared to Rs 300-400 for a physical store. This is because customers come to us for monthly purchase, which is a very sticky category. Customers visit us at least twice a month and we expect that to increase with the rise of fruits and vegetables sales. As per the last count we have had, about 3,500 customers have shopped here at least once.

You said that when you started Fabmall, you looked at it as a retail business. Do you feel the same about bigbasket.com?

This is a business which is much more retail and physical than any other e-commerce business because we have to operate warehouses, maintain hubs and a supply chain, and will eventually deal with more than 250 vendors and carry 7,000 SKUs (stock-keeping units). So if you don’t have the retail ingrained and think that you just need e-commerce and technology, you’ll be dead. You need to understand supply chain really well to run this business.

How long a runway does the series A round give you?

This round should last us for three years. The whole concept is to scale up profitably. We want to expand to new cities and that’s why the capital is required. From an operational perspective, we don’t need much capital.

bigbasket.com raise USD 10 mn from Ascent Capital

PTI Mar 6, 2012, 10.18PM IST

NEW DELHI: Online grocery store bigbasket.com today said it has raised USD 10 million (about Rs 50 crore) from private equity firm Ascent Capital in its first round of institutional funding for expansion.

"The funds would be used for expansion of bigbasket.com. By the end of this year, we plan to establish presence in Delhi, Mumbai, Chennai and Hyderabad," bigbasket.com Finance and Marketing Head Vipul Parekh said.

He, however, declined to provide exact details on equity dilution but said "it is in double digits."

bigbasket.com that currently operates in Bangalore executes around 10,000 orders per month with an average size of about Rs 1,200.

Parekh said the firm started operations in December 2011, with initial investment of about Rs 5 crore. "The USD 10 million raised from Ascent is enough for the next 24 months," he added.

Currently, the company's management team includes VS Sudhakar, Hari Menon, Vipul Parekh, VS Ramesh and Abhinay Choudhari, who founded e-commerce site FabMart.com in 1999.

The team had later set up Fabmall-Trinethra chain of more than 200 grocery supermarkets stores in South India, which was sold to the Aditya Birla group in 2006 and currently operates under 'More' brand name.

Leading private equity firm Ascent Capital has partnered with over 45 companies since 2000 and currently manages around USD 600 million across three funds.

bigbasket Raises $10 Mn From Ascent Capital

By : Irfan Khan | 5 March 2012

Bangalore-based online grocery store – bigbasket.com has raised $10 Mn first round of funding from Ascent Capital, according to TOI.

bigbasket is founded by K Ganesh, Meena Ganesh, V S Sudhakar, Hari Menon, Vipul Parekh and V S Ramesh.

bigbasket offers over 6,000 products all categories such as Staples & Provisions, Fresh Fruits & Vegetables, Toiletries, Branded Food & Non-Food products, Bread & Bakery Products, Dairy Products, Frozen Foods such as Ice Creams & many more.

Entrepreneur duo to make e-com splash

Samidha Sharma & Mini Joseph Tejaswi, TNN | Jan 16, 2012, 01.24AM IST

BANGALORE/MUMBAI: India's "enterprising couple" K Ganesh and Meena Ganesh, who last year sold their venture education services firm TutorVista to Pearson Group for Rs 577 crore, has lined up a slew of e-commerce investments. The duo will unfurl their co-promoter stakes in four different ecommerce start-ups in the coming weeks, including an e-grocer bigbasket.com, which is first off the block.

Ganesh and Meena will join hands with the country's e-commerce pioneers who floated FabMart.com — the poster boys of first generation dotcom boom a decade ago — to promote bigbasket for e-tailing of groceries, staples, fruits, vegetables and other perishables.

India's second brush with e-commerce has not had any big online grocery play till now, with the leading store chains like Big Bazaar and Reliance Fresh not making significant digital moves. The duo's other investments will include online jewellery store Bluestone, book store BookAdda and a trip planning and travel sharing site Must See India. Most of these are 'platform deals' where the two would work with professional entrepreneurs to roll up e-commerce engines. Earlier, Meena spearheaded global retailer Tesco's plans to for a tech hub in India in 2004.

Global venture capitalists have invested $1 billion in the domestic digital consumer story as the number of internet consumers could double from the current 120 million within three years. Ganesh said: "I am quite bullish on e-grocery online. London-based pure-play online grocer Ocado became hugely successful and it went public sometime ago. Tesco.com reports $3-billion revenues from online grocery sales. I have been observing this space sometime now." He declined to comment on the other e-commerce investments at present.

FabMart and FabMall (a physical store chain sold to Aditya Birla) co-founders V S Sudhakar, Hari Menon, Vipul Parekh and V S Ramesh are the other promoters of the venture. They have also rolled up a small e-grocery firm, shopasyoulike, set up by IIM-A alumnus Abhinav Chaudhari some 20 months ago.

Sudhakar, a partner, said, "To start, our services are launched in Bangalore, with 50 delivery vans and six warehouses. We will enter four more cities this year and would have covered 20 cities in the next couple of years."

bigbasket will be raising $6 million from venture capitalists to ramp up warehousing, cold chain and logistics facilities. "The success of this business model lies in the effective marrying of technology, internet, domain knowledge and logistics," Ganesh added.

Grocery e-tailing is a complex business unlike selling books. On average, Amazon sells 1.6 SKUs (stock keeping units) of books while the figure is 12 SKUs in grocery sales. It is about handling high volume, uneven packages — like say a 100gm pack of chilly power, half a dozen eggs, 25 kilo of sona masuri rice or a litre of cooking oil. bigbasket is offering delivery of orders within six hours. The domestic online grocery market has a few smaller players, and bigbasket's differentiator may be the 'scale with speed' plans.

Ganesh and Meena are working on similar ramp-ups for their other e-commerce investments. The online jewellery store, for instance, has already received a funding commitment from a Silicon Valley investor. Their two other investments BookAdda and Must See India will be entering a market where there are already well-entrenched rivals.

Meet entrepreneurs who faced the dotcom bubble burst and relaunched their businesses

Like Hemrajani, VS Sudhakar and five other friends launched online retail website Fabmart in 1999. Though a few early adopters used the service, they were ahead of the curve and could not move the mass market in terms of volumes. The dotcom bubble burst worsened the scene. "We underestimated the situation," says Sudhakar, who was the first chief executive at India's first internet services company Planetasia.com.

He kept the online business on backburner but continued running it in a small way and put all the energies on physical retail chain of grocery stores under the brand name of Fabmall, which merged with another grocery retail chain Trinethra.

Seven years later, the chain was acquired by the Aditya Birla Group after the venture reached to 200 stores across Andhra Pradesh, Tamil Nadu, Karnataka and Kerala. Last year, Sudhakar returned to his original idea of selling grocery online—a $1-billion opportunity— following a casual conversation with serial entrepreneur Krishnan Ganesh. He launched online grocery store bigbasket.com in December last year along with Fabmart co-founders Hari Menon, Vipul Parekh, VS Ramesh and Abhinay Choudhari. Ganesh also became an angel investor in the firm.

Within a few months of the launch, ChrysCapital co-founder Raj Kondur, who had invested $4 million in Fabmart, dialled in Sudhakar again. Kondur, who had joined Ascent Capital, led a first round funding of $10 million in bigbasket, three months after the startup was launched. bigbasket now delivers food items such as fruits, vegetables, bakery, dairy products, frozen foods and toiletries to over 15,000 customers in Bangalore.

The startup's network, which relies on a fleet of Omni vans to deliver products, aims to expand the service to cities such as Hyderabad and Mumbai by the end of this year.