bigbasket in the Media
Bigbasket: Delivering the goods
Bigbasket has survived the funding slowdown by keeping its business simple, but with Amazon a looming threat and staff retention a challenge, the online grocery start-up has its work cut out
Deepti GovindSayan Chakraborty, Livemint | October 13, 2016
Bengaluru: It takes three steps for someone to place an order on Bigbasket: browse, select and pay. The simplicity, speed, convenience and, of course, attractive prices are driving e-commerce in India.
What sets Bigbasket apart from the rest is the company’s sharp focus on also keeping its business simple. Investors love it. The company raised $150 million in March amid a funding slowdown even as rivals PepperTap and Localbanya shut down.
That it seems to have survived the storm has a lot to do with its founders—two of them are in their 40s and three in their 50s—who, unlike the young brigade at the forefront of India’s start-up movement, have survived the 2000 dot-com bust, built a supermarket business and sold it before Bigbasket. Thus, what started as an online grocery store in 2011, today sells everything from staples, vegetables, meat and fish to gourmet and ready-to-eat food, household goods and personal care items.
To understand how Bigbasket took shape, one needs to go all the way back to 1999.
The beginning
It was about two years after Steve Jobs rejoined Apple and revolutionized the way people used computers, mobile phones and the Internet. Much of the world hadn’t adopted the Internet in a massive way then, but Jobs knew that they would eventually do. Three friends in India—Hari Menon, Vipul Parekh and V.S. Sudhakar—shared a similar belief.
“1999 is when we started our entrepreneurial journey with this company called Fabmart.com. It was basically a horizontal, which is what Flipkart is today,” recalls chief executive Menon. “But it was just simply too early for any of the Internet businesses to take off. People were worried about sharing their bank details online. There weren’t robust payment mechanisms. There was no broadband. The dial-up lines were so slow that every time you had to open the site, it was like an endless wait.”
Those days, not even one in every 100 Indians used the Internet. According to the World Bank, it was 0.273 out of 100 in 1999, compared with 18 out of 100 in 2014.
- Hari Menon, founder and chief executive, Bigbasket
“While there was much hype, there was no customer traction. This went on for about a year before we realized that the business was ahead of its time. We knew that this is the future and it’s going to kind of take off at some point. You could either stay put or shut down and move on. We decided to stay on and run the business, albeit on a lower scale,” said Menon.
Stay on they did. Fabmart first sold music then diversified into books, toys and jewellery before launching grocery in early 2000 in Mumbai, Pune and Hyderabad. Initially, they picked up goods as and when orders were placed from Metro Cash and Carry and delivered them to consumers. Simple as it may sound, the trio realized they were missing a piece in the puzzle. A warehouse, or a storage facility.
They leased storage facilities, a decision that would become no less than a watershed moment in their entrepreneurial journey in the days to come.
“I remember the three of us were travelling to Pune for some work. On our way back to Bengaluru, we were discussing about what next for the business. All of a sudden, this brainwave struck that we’ve got all these small warehouses, so why don’t we get into physical stores,” said Menon.
Thus, Fabmall happened. Around the same time, Kishore Biyani-led hypermarket chain Big Bazaar was planning to launch its grocery business, Food Bazaar. Menon, Parekh and Sudhakar were offered a chance to use the ground floor at the Big Bazaar store in Koramangala, an upmarket Bengaluru locality, for a year until Food Bazaar launched. Needless to say, they grabbed the opportunity.
Over the next five years, Fabmall scaled to a network of 210 stores before the business was acquired by the Aditya Birla Group in late 2006 and re-branded as More.
That was the end of the journey for the three friends, for the time being. Post the acquisition, they chose to go their separate ways. But only until Bigbasket happened.
It was around May 2011 that serial entrepreneur and angel investor Ganesh Krishnan nudged the entrepreneurial bug in the three friends. E-commerce was taking off in India, with the likes of Flipkart and Snapdeal seeming to do everything right around electronics, books and fashion. But there was a glaring void in the grocery space.
Krishnan had a simple question for the trio, “Would you like to give the grocery business another go?” An offer, it seems, they found too good to refuse.
This time, they were joined by V.S. Ramesh, Sudhakar’s brother and another budding entrepreneur Abhinay Choudhari, who, back then, was running an online grocery business called Shop As You Like. In fact, Sudhakar, Parekh and Ramesh were mentoring Choudhari.
Choudhari merged his business with Bigbasket right at the beginning and became a part of the founding team, bringing along with him a ready-to-use technology platform.
Menon, an alumnus of Birla Institute of Technology and Science, Pilani is the chief executive officer, while Parekh, an Indian Institute of Management Bangalore alumnus dons the hat of chief financial officer, apart from handling marketing. Ramesh, a former officer with the Indian Navy, oversees the company’s warehouses and storage locations. Choudhari, an Indian Institute of Management Ahmedabad alumnus, heads the express delivery business. Sudhakar, who graduated from the National Institute of Information Technology, Allahabad, is the executive director and represents the company’s founders on the board while also being responsible for innovation, be it around technology or business processes—along with Ramesh.
Bigbasket’s first year was spent on building the back-end, a decision that traces its roots to the founders’ experience in building an offline grocery business. “The year of the back-end”, as it was called internally, went into putting in place a regimented sourcing process, especially for staples and vegetables, strengthening its delivery network and of course, developing technology infrastructure that could support a scaled-up business. It was a conscious decision to abstain from any promotional and marketing activities until all the pieces in the puzzle fitted in, which took about a year.
A key decision that Menon believes helped Bigbasket remain ahead of the rest of the flock was betting big on fresh produce—fruits and vegetables—and staples, and building private brands around them right from day one.
Private labels are brands owned by retailers, and typically, the profit margins on these are higher than on brands that are owned by other companies. In the case of groceries, the margins could be as high as 30-40%, at least double the margins on other brands.
Today, the company owns brands such as Fresho for vegetables, meat, and idli and dosa batter, and Royal and Popular for staples. Last year, Bigbasket launched Tasties, a private label for coffee and snacks. The company has built a thriving business-to-business vertical with its private brands, selling to restaurants, hotels and caterers. The vertical is expected to account for about one-fourth of Bigbasket’s revenue by March 2017, said Menon.
The company also sells its private brands through about 1,000 neighbourhood stores in eight cities.
“The private labels will propel the next phase of growth for online grocery stores as the margins are really high. For example, say some company has two million customers and says that it will give them some non-standardized article at the same price as a retailer. If a customer believes the quality available with online stores is better and they will enable doorstep delivery at the same price as a local grocer does, a customer will avail it. It is a huge market and these brands to my mind will expedite growth. E-commerce will expedite the process of standardization and branding in India for the grocery segment,” said P.N. Sudarshan, senior director at Deloitte India.
- PN Sudarshan, senior director at Deloitte India
Expansion
Bigbasket launched in Mumbai and Hyderabad around October 2012 after running the business for about a year in Bengaluru, confident of the business model and operational capabilities. It was only in mid-2013 that the company decided that it was time to push the pedal on marketing. It was already making about Rs8.5 crore in revenue by then.
By early 2014, Bigbasket expanded to Chennai, Pune and the National Capital Region, with a warehouse in each city. A popular shopping destination by then, Bigbasket tied up with the Times Group’s Brand Capital to advertise itself and roped in actor Shah Rukh Khan as a brand ambassador in 2015. It expanded further to Kolkata and Ahmedabad, and set its sight on the so-called tier II cities. By the beginning of 2016, it fanned out to 17 tier II cities.
Present
Today, Bigbasket operates 25 warehouses and 63 dark stores (storage facilities). The company claims to have three million repeat customers and is targeting revenue of Rs1,800 crore in fiscal year 2017, more than double of the around Rs750 crore it clocked last fiscal year. To be sure, revenue has been growing steadily, from a meagre Rs3 crore in FY13 to Rs8.5 crore in FY14, before skyrocketing to Rs200 crore in FY15 and Rs750 crore last fiscal year.
During its early years, Bigbasket was banking on the convenience of online shopping more than anything else. But it realized that convenience was not a card it could play for too long.
Then what clicked for the company? It amassed a wide product assortment, including categories such as home and personal care, maintained that quality is sacrosanct, especially in fresh produce, and finally, offered a competitive price.
It also had to ensure customer stickiness. According to Menon, grocery buying has three distinct patterns: planned, bulk purchase at the beginning of every month; weekly purchase that typically revolves around items with a short shelf life such as milk, fruits and vegetables; and specialty store buying. Specialty stores are local stores that garner a very loyal customer base for a particular product or brand, which customers typically refuse to buy from elsewhere such as Karachi Bakery’s biscuits in Hyderabad or Bengaluru’s Iyengar Bakery’s breads. Bigbasket has those kind of niche stores listed under its specialty stores category.
Initially, Bigbasket serviced the first category. Fast forward to 2016, the company has launched a 90-minute express delivery service to cater to the second category, a segment which is being eyed by hyperlocal delivery start-ups including SoftBank and Tiger Global Management-backed Grofers, and started aggregating local specialty stores online to capture the third category of customers.
To be sure, grocery delivery as a segment has been on a rise globally. According to a report by CB Insights in May, grocery delivery start-ups globally raised $436 million in funding until May this year, surpassing food delivery start-ups, which raised $352 million, for the first time since 2012.
Futuristic
Still standing by their original principle of doing things one step at a time, Bigbasket’s future plans are somewhat less exciting, perhaps, when compared with what some competitors have had in the recent past.
Two of its major competitors, Tiger Global Management-backed Grofers, which has raised $165 million so far, and PepperTap, paid the price for aggressive expansion. While Grofers expanded rapidly before closing down about 10 locations between December and January citing poor demand, PepperTap shut shop in April, about seven months after raising $36 million from investors.
Bigbasket had originally planned to expand to 50 cities in total but has now scaled that back to the 25 it currently operates in. “Our expansion has stopped now. We are now not going to expand anymore for some time to come. Now, our whole thing is to go deep into these cities and start making each city work well,” said Menon.
And one of the methods the company has identified as key to achieving this goal is analytics. With analytics, which are constantly being built upon in-house, the company’s aim is to populate a customer’s basket based on their most recent and frequent purchases, alert them if they have not added something they usually buy in case they have forgotten it and inform them if an item they normally buy is about to run out. To that effect, it already has a feature called Smart Basket. Other key focus areas in the days ahead include the fruits and vegetables supply chain and organic and private labels.
While Bigbasket has no acquisition or fundraising plans, it does expect to start making announcements about profitability between now and next March. The company has so far raised at least $220 million from investors such as the Abraaj Group, Bessemer Venture Partners, Helion Venture Partners, Sands Capital, International Finance Corporation and Zodius Capital among others, making it the most well-funded online grocery start-up in the country.
And even though the likes of Amazon have already entered the e-grocery space, throwing up questions around Bigbasket’s future, Menon remains unfazed.
“The Indian retail market is about $550 billion and 70% is grocery. It is such a large-sized market that it is very difficult for one player to play. The more players that come, the better it is for the market because it opens up faster and customers become a lot more confident. That is what you are going to see,” said Menon.
According to industry experts, an inventory model helps online stores extract significantly higher margins as it buys directly from brands and manufacturers. On the contrary, hyperlocal delivery start-ups such as Grofers accept orders on an app, collect items from nearby stores and delivers them, often at a discounted price.
Consequently, these firms operate on wafer-thin margins as they charge the local shops a small percentage of the overall order value, anything between 2% and 10%, and lose money on every order because of discounts and offers in an attempt to attract customers.
“In the inventory model, quality is better addressed but delivery is typically faster in a hyperlocal model. The nature of the product, whether it is standardized or non-standardized, dictates which is a better model. For instance, if it is milk, which is standardized, hyperlocal may be a better model because delivery is faster. But if somebody wants to buy some expensive cheese, they would be more quality-conscious. So, the nature of the product, immediacy of the requirement, the price-quality association plays a determinant. Some products will fly more on hyperlocal and some other products on the inventory model. For non-standardized and expensive products, where consumers are looking for quality, inventory model makes sense, while for standardized products, hyperlocal model works,” said Deloitte’s Sudarshan.
A challenge for Bigbasket, though, has been employee retention. Of its 12,000 employees, almost 70% are blue-collar workers. The company has formed a trust that supports workers’ families and ensures there are no extra working hours, said Menon. Still, every time the company expands, its workforce grows too and that continues to be a problem area.
“One of the key decisions of making us who we are today is starting fresh from day one. That has paid off and paid off well for us as we’ve gone along. The second good thing that we’ve done is making sure this business model, which has all three ways a customer buys, is brought in,” added Menon.
BigBasket targets Rs 2,000-cr revenue in 2016-17
Grocery e-tailer plans to increase number of farmers in centres from 1,100 to 3,000 by Mar
Apurva Venkat, Business Standard | September 8, 2016
Grocery e-tailer BigBasket plans to triple its revenue to nearly Rs 2,000 crore this year as it deepens its services in the 25 odd cities it has established a presence in nationwide.
BigBasket had reported Rs 600 crore revenue in fiscal 2015, three times the Rs 178 crore it made in the previous fiscal.
The company also plans to increase active farmers in collection centres from 1,100 to 3,000 by March 2017, for which the company plans to invest Rs 1 crore in training and enrolment.
The grocery e-tailer, which has raised $243 million so far, says it is currently growing at 10% on a monthly basis. The company raised its latest round of funding of $150 million in March this year from a consortium led by Dubai-based Abraaj Group. It counts among its investors firms such as Sands Capital Management Llc, International Finance Corp. (IFC), World Bank,Helion Ventures Partners Llc, Bessemer Venture Partners Lp and Ascent Capital Llc .
The average ticket size for the company is Rs. 1500 out of which F&V is Rs. 450, Hari Menon co-founder and chief executive of BigBasket said.
The company delivers over 1 million orders per month and 70% of the total orders have F&V.
Menon says that their focus is on focused on scaling our operations and going deeper in the cities we have launched.
"We have also taken our private label growth as a serious key initiative. We are also seeing a trend of a growing share of wallet from our customers. Our current run rate is about 40000 orders a day with an average ticket size of Rs.1500, " says Menon.
Menon says the company's customer satisfaction can keep all competition, be it Amazon or old box retailers, at bay.
"The factor that distinguishes us from the other players in the industry and results in better customer satisfaction is our focus on customer facing metrics, " says Menon.
He claimed that BigBasket has a more than 99.5% record in in-time delivery and a more than 99% fill rate of the products ordered by customers.
The company also offers multiple delivery options such as Full Service Delivery and Express Delivery, where an order is delivered within 90 minutes. Another factor that Menon believes helps BigBasket remain differentiated from its competition is their BB special- a speciality marketplace, where customers can order local specialities in meats, bakery, sweets and savouries.
The company along with grocery is also present in segments of cut fruits and vegetables, happy Chef "Heat and Eat" and "Ready to Cook" range of meals and meal kits. It also has a large range of in house brands in bakery, cookies, jams, honey, Fryums, idli and dosa Batter etc. (
BigBasket’s secret to handling 35,000 orders a day, where even Amazon fumbles
Nivedita Bhattacharjee, TechInAsia | May 9, 2016
It is a weekday afternoon, just after lunch hour. The sprawling 80,000 square feet distribution center in Bangalore is a beehive of activity, and you may be forgiven for thinking you’ve landed in the middle of a full fledged supermarket. Except, you haven’t.
A thousand employees are busy accepting orders, filling them in, unloading and loading delivery vans, cleaning baskets, weighing and sizing fruits and vegetables, chopping them up (ever ordered cut veggies?) and even weeding out chillies, okras, and limes that do not make the cut. There is a chart listing weight and size measurements that the vegetables must adhere to.
This is the nerve center of BigBasket’s operations in Bangalore – its biggest market in India. The grocery delivery app manages about 35,000 orders every day across the country.
In India, managing that scale in a little over five years is something of a task.
Densely populated cities and unregulated traffic have proved attractive for web grocers in Asia, who offer the convenience of doorstep delivery and a wide range of products that local neighborhood stores often don’t have access to.
But while China’s online grocery market – already the world’s largest – is set to be worth almost US$180 billion by 2020, India has proven a tough nut to crack.
A large chunk of Indians, mostly urban and working, are sold on the promise of easy delivery and a means to avoid the country’s crazy traffic, but there is still a huge population that likes to look and feel their vegetables before paying for them.
Moreover, local kirana shops – mom-and-pop stores – that sell everything from soap bars to notebooks to your particular variety of rice, have developed a long-standing relationship with shoppers over generations. They accept orders over the phone, deliver free of charge, and even extend credit.
Add on the problems of managing perishable inventory, gauging customer interests, assuring on-time delivery, and managing margins while at it, and the pressure has stumped everyone from Flipkart, Paytm, and Ola, to a bunch of smaller startups, most of which either scaled back, closed operations, or simply shut shop.
Ola and Paytm shut their grocery delivery businesses in March and June last year, respectively. Flipkart followed suit in February this year. Amazon launched its own service in Bangalore in February through a separate app called Amazon Now. It hasn’t yet taken the industry by storm.
Grofers, arguably the closest rival to BigBasket, had to heavily scale back operations, while PepperTap shut down.
The big secret
In the midst of the noise, BigBasket kept up its growth spree.
Over the past few months, the company has entered new markets, has made plans to increase its distribution center footprints, and even introduced a new “express” delivery that promises delivery of basic needs (rice, lentils, cooking oil) within 60 minutes.
That was in part a reaction to Grofers’ 90 minute delivery promise, but investors have noticed BigBasket’s scaling abilities.
In March the startup raised funding worth US$150 million led by UAE-based Abraaj Group.
Ask the company how it manages when others stumble, and the answer boils down to a culture where employees look at themselves as grocery people gone online, instead of being techies who happen to sell groceries.
“Our CEO, Hari, knows how much yield a particular variety of rice offers, which lentil can be stored in what conditions, and what kind of distribution is needed for which food. We are essentially grocers,” says D.V. Giri, head of merchandising at BigBasket.
There may be something to that theory. The company was set up in December 2011 by Hari Menon, Vipul Parekh, VS Ramesh, VS Sudhakar, and Abhinay Choudhari, most of whom worked in the supermarket industry for years, and leveraged those connections to set the business up.
In comparison, most other rivals have been set up by techies, often armed with exemplary degrees in business administration, but who are newbies in the industry.
Hari reckons that is the edge and secret to BigBasket’s success.
The company operates in 23 cities currently, building an online supermarket back-end complete with warehouses, piles of stock, a private label and fleets of delivery vans.
The other thing that works for the company is owning its own private label. Bigbasket has an overall margin of 25 percent, including consumer goods, fruits, and vegetables. While that is consistent with industry norms, the startup gets an opportunity to make better margins because it sells a higher percentage of fruits and vegetables under its own label. Those command margins upwards of 35 percent, Hari said.
Tech as an enabler
For a technology startup, BigBasket is also surprisingly non tech heavy.
In the Bangalore center, there are only two people manning incoming orders on workstations at a time. That is about 12,000 orders a day. About 15 trained workers physically sift through orders of fruits and vegetables to OK them for dispatch.
There are hitches, too. The company’s social media feed registers complaints about missing or delayed orders, and customers told Tech in Asia there have been instances where delivery boys have brought in the occasional stinking meat during summers, or have come armed with non working card machines, leading to confusion regarding payments.
Most of those interviewed, however, said the company resolved their issues if they complained (company policy is to take back an order that does not satisfy a customer, and refund the money).
Technology is used to track orders, update delivery details, manage inventory batches, and maintain the website and its apps, but does not find heavy use in its distribution centers.
One of the prime reasons, of course, is that it is hard to work 40 tons of fruits and vegetables each day without depending on human interference.
“It’s not a mobile phone, each potato has a different size. This business is not all about technology. Tech is a key enabler, but the big part is the supply chain,” chief executive Hari Menon tells Tech in Asia.
“The complexities are very high. If you can’t run the business well, you lose money, and not just through discounts. The perishables will rot,” Hari explains.
Old school equals money
Hari also comes across as someone acutely old school in his business practices, preferring stability over startup whistles and bangs – and that reflects through the company.
Knowing that his business is built on dealing with unsexy blocks like talking to farmers and distributors, managing rice, lentil, and meat supplies, he is building a team that is made up of people who appreciate that work.
For the top jobs, BigBasket hires from rival grocery chains, and not necessarily those online. The team is filled with executives who have worked with supermarket chains in India, or Walmart, or other grocers.
Head of merchandising D.V. Giri has worked with the Associated Chamber of Commerce & Industry, as well as two of the country’s leading supermarkets before joining BigBasket.
There is also a pulling back from chasing growth – an outlier in an industry where most companies go overboard with expansion and are then forced to scale back.
Despite funds, BigBasket is planning to cap its expansion at 25 cities – that is 2 more to go – to focus on backend execution and improve unit economics, Hari says.
“We do not run the business without looking at self sustainability. It is a very complex business, so we have to be conscious of the backend. We will be net profitable in 2018,” he says.
Bengaluru-based online grocery firm Bigbasket is set to create an organic revolution in India
Aparajita Choudhury, YourStory | February 4, 2016
“Within retail sector, I represent a new-age E-commerce space that is food and grocery, which is one of the most difficult businesses from an execution standpoint,” said Hari Menon, CEO and Co-founder of Bigbasket, at Invest Karnataka 2016.
Founded in December 2011, Bigbasket is one of the largest online food and grocery companies with operation in 18 cities across India. By 2016, it is planning to expand its operations to another eight cities. The Bengaluru-based online grocery startup deals with over 15,000 products comprising groceries, fruits and vegetables, dairy products, personal products, kid products, and wide range of household products.
The number of Internet users in India is expected to reach half a billion by 2020, and 1,044 billion households are expected to purchase food and grocery online. Currently, 144 million households buy more than Rs 5,000 worth of food and groceries per month. The overall online business is expected to reach $20 billion by 2020.
He said,
Speaking about the contribution of online grocery in the entire retail industry, Hari stated that the online grocery market in India contributes less than one per cent, which is expected to grow to about two to three per cent by 2018.
Bigbasket expects to achieve breakeven in the next two years and increase revenue to $2 billion from the current Rs 1,000 crore (about USD 150 million) on the back of expansion of network.
Farm to fork
According to Hari, 20 per cent of the value of Bigbasket comes from fruits and vegetables and this is about three times higher than what a physical chain does. A physical chain typically contributes about six to seven per cent. He added “For us, fruits and vegetables are the largest margin drivers.”
He said,
Bigbasket has raised $50 million from existing investors led by Bessemer Venture Partners, which it has utilised in expansion into new markets and introduce new services. Earlier, it has raised Rs 200 crore led by Helion Ventures and Zodius.
Invest in Karnataka
Bigbasket source 40 per cent of the fruits and vegetables from Karnataka and 30 per cent of them is actually sourced from farmers. In a bid to go deeper into the supply chain, the company is setting up collection centres in the different farming places of Karnataka.
Can Bigbasket create an organic revolution in the country?
In India, the demand of organic products is very high but there is a huge demand-supply gap. Hari mentioned that Bigbasket is getting limited supplies from the partners they are working with. Therefore, Bigbasket is planning to set up 70–80 collection centres only for organic fruits and vegetables. Currently, farmers are facing the problem of yielding which has led to low production of organic farming.
“We are very keen to submit proposals to the government to set up testing labs especially in the organic space. What a customer looks for in organic is certification. Currently certification processes is a huge struggle and we do not want to go to international agencies. We are currently working with PGS (Participatory Guarantee System). We are expecting an extended shelf life through cold chain and standardisation of organic product through certification process. We believe organic products have a long way to go and we would to like to invest in that,” said Hari.
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