“The Grocery Market in India is Big and Lucrative ”

Big Basket, India’s first online grocery store, has steadily built up its brand in the last eight years and achieved sustained growth. Vipul Parekh, co-founder and CMO, on the success of this online venture, in India’s fiercely competitive US$500-600 billion online grocery market.

July 29, 2019

Big Basket, a leading Indian ecommerce firm has backers in Chinese ecommerce giant, Alibaba, South Africa’s Mirae Asset Global Investments and UK state-owned CDC Group

In the next five years, the ecommerce market in India may record growth of 30-40 per cent, with grocery capturing 5 per cent of the US$600 billion market, according to Big Basket

Big Basket says that Big Data has helped ecommerce to ensure product marketability -- catering and stocking what the customer needs, helping improve customer outreach

With a staff strength of 25,000 and presence in 25 cities, Big Basket aims to become the third biggest grocery retailer in India. Bangalore and Hyderabad has emerged as profitable centres

In 2011, the Bengaluru headquartered grocery e-tailer Big Basket was born. Today, it is a leading Indian ecommerce firm, with backers such as Chinese ecommerce giant, Alibaba, South Africa’s Mirae Asset Global Investments and UK government-owned CDC Group. For fiscal 2018, Big Basket’s revenue went up 35 per cent to US$222.3 million, and in March 2019, the online grocery firm’s valuation scaled over US$1 billion to become a unicorn. In a conversation with IndBiz, Vipul Parekh, Co-founder and CMO talks about Big Basket’s journey to success.

What are the differentiators driving Big Basket’s growth?

Our differentiators have been an efficient, process driven supply chain and a thriving private label business. Early on in the business, we realized that to be successful in a largely unorganised but fertile grocery market, we had to build a robust supply chain. That would ensure better quality and on-time delivery to customers, reduce wastage, and give better pricing to farmers and help us to go organic.

Our private label business has been a strategic and significant contributor to our success; one-third of our revenue comes from Big Basket brands

Steering away from the outsourcing model, we eliminated middle-men and worked hard to build a relationship first with large suppliers and directly with farmers. Today, we have strong tie-ups with 10,000 farmers spread across the country, with 30 collection centres and cold storage facilities in farming districts like Hoskote, Agra, Himachal Pradesh, which are manned by trained agronomists. They interact with the farmers, discuss harvest size, the kind of crops to grow, and train them on better farming technologies for far better yields. The farmer too gets an 8-10 % better pricing for their farm products. And, this kind of model helps us to deliver fresh vegetables and staples to our customers under our own brand name. 

Our private label business has been a strategic and significant contributor to our success. In fact, one-third of our revenue comes from Big Basket brands: we buy, manufacture and brand them –like sushi, chocolate, processed food, fresh vegetables etc. The percentage of our fresh sales are higher than any other items on our portal. Building a fresh supply chain in India is a highly complex exercise but we were able to crack the code.

One of the cornerstones of your business model has been the use of disruptive technology?

Yes, we have taken science to retail. With sophisticated inventory algorithms, we are able to forecast a customer’s purchasing patterns from earlier data and understand what produce moves at what rate, the kind of orders customers make, the frequencies and the products suppliers can deliver. We match the supply with demand and ensure we pick the right stock and intelligently manage our SKU’s better, to scale down our wastage to 6-7%. 

Big Data has helped us to ensure product marketability — catering and stocking what the customer needs. While a physical store typically will stock 13,000 products, we have 35,000 products in our warehouses. Due to smart inventory measures, we are able to offer better fill rate (percentage of customer orders satisfied from stock at hand, it is a measure of an inventory’s ability to meet demand) to our customers. 

We’ve used technology like scanning tools to make faster, efficient selections for multiple orders at the warehouses; and map out route optimisation based on delivery locations for our GPS enabled vans to avoid traffic. All these measures helps us to ensure customers get their orders on time. We’ve been fanatical about managing our customer experience, which has resulted in high customer retention. Some of our Bangalore customers have been with us for seven years. 

Can you throw light on your new launches and your policy of constant innovation? 

Recently, Big Basket introduced personal care products such as moisturisers, shampoo and make-up since customers tend to buy these items as well on a monthly basis. It is not diversifying far from groceries. We are constantly innovating, the most recent launch being our new milk delivery subscription service.  Customers order milk and other daily essentials the previous night and we get them delivered the following morning. Called BB Daily, the service already has 20,000 daily subscriptions.

Six months ago, we installed 300 smart vending kiosks, which allows customers to order fresh produce and other FMCG products through the BB instant app. New categories, better ranges are added and we keep innovating to give customers better experience. Our next goal post involves offering deliveries in two hour’s time!

Our Smart Basket, which works on an algorithm, automatically populates a customer’s basket after studying the buying patterns. Typically, a customer spends 19-20 minutes on our site to buy around 20-25 items. So, now, they just have to make a single click.

How are you tackling challenges like competition from other grocery etailers like Amazon and Grofers?

The grocery market size is nearly US$400-500 billion, it is big and lucrative. We’re confident about our position and stay focused on strengthening our brand. Our market share has not gone down despite the entry of new grocery etailers. With the recent round of funding, which gave us unicorn status, we plan to strengthen our new businesses like milk delivery, vending kiosks and migrate to faster deliveries and organic food by strengthening our CapEx. We’ve never resorted to heavy discounts, actually, our products are not the cheapest. It is a myth that the grocery business offers low margins.

Our goal is to become the third biggest grocery retailer in India, and we are on track to get there. With a staff strength of 25,000 people, we are in 25 cities today, with Bangalore and Hyderabad being the profitable centres for us. 

Etail grocery has really picked up with funding coming into this segment in a big way as well. Please comment. 

India is experiencing the second wave in ecommerce—in the first wave, computers, mobiles, tech products got a lot of traction. Today, people have got used to buying online, and experimented with groceries and found it convenient. Online grocery offer better quality, pricing, service and fill rate and all this is driving people online. 

More investors will come if the market gets attractive. In India, banks have never been the primary source of funding for entrepreneurs. So, we need to look at alternative sources like venture capitalists and private capital. In the next five years, the ecommerce market in India is growing and might even reach 30-40 per cent, with grocery capturing 5% of the US$600 billion market, which is big enough.

What is the extent of government support for ecommerce companies?

We find the government very supportive. While strengthening our supply chain, we found the State and Central government doing a lot to make the farmer stronger. The government’s cold chain policy, for example, provides grants and assistance to transport farmer’s products, they are not big sums but it is bolstering the environment and that is useful.

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