One of the shiniest gems of India’s bejewelled unicorn crown is the e-commerce giant, which has brought about a significant change in how India buys its groceries. Big Basket joined the coveted unicorn club in 2019, about 8 years after its launch.
Big Basket is an online grocery marketplace or platform that collects groceries from the retailers and delivers it right on the doorsteps of the customers. In this sector, it has to compete with some huge giants like Amazon and other startups like Grofers.
However, it has now become one of India’s largest online supermarkets. Let us now look at further details of this unicorn startup.
How did it start?
If we look at the story of how Big Basket was started, it is a story of many failures before the company finally became a success.
It was in 1999 when Hari Menon, the current CEO of Big Basket, along with his four other friends - Abhinay Choudhari, Vipul Parekh, V S Sudhakar and V S Ramesh, started off with an online retail website known as Fabmart. However, this failed to attract the right amount of customers and had to be discontinued.
After this, they started with yet another venture. Although this time, it was a chain of physical grocery stores. It was known as Fabmall. Fabmall was later merged with another grocery retail chain store known as Trinethra. The stores expanded to cities like Andhra Pradesh, Kerala, Tamil Nadu and Karnataka and had a reach of about 200 stores. After this success, the founders took the decision to sell the entire chain of stores to the Aditya Birla Group.
In December 2011, the five friends finally decided to launch the application of Big Basket.
Business Model of Big Basket
Big Basket is a completely online platform, and it offers a wide range of products to its customers. It has more than 10000 brands and more than 18000 products listed on its website and mobile application. These products include fruits and vegetables, food grains like rice and dal, packaged products, beverages, etc.
The main model that Big Basket initially followed was the Just-in-Time model. This meant that every item was brought against an order, and not only the unpreserved goods but also other items. There was no inventory that was maintained. As the orders came, goods were picked up by the delivery of boys from the retailers and then delivered to the customers.
However, now the company follows a completely different model to the Just-in-Time model. It follows the Inventory Model now. This is followed for almost all products. It involves sourcing the products directly from the manufacturers like HUL, P&G, etc. and other products like perishables, directly from the manufacturers and farmers. These are stocked in their warehouses for delivery.
The sourcing of the products is also done domestically as well as locally. From where the product is procured, it depends on the product itself. Goods like potatoes, onions, apples, etc. are procured from major producing locations or major producers, whereas other items are procured locally from marketplaces or mandis or from local farmers.
If we look at the current scenario of Big Basket, it now processes and delivers almost 20,000 orders per day, where around 2000 team members and employees are involved. It has adopted a hyper-local strategy where it has partnered with around 1800 local grocery stores all over India so that it could enable fast and efficient delivery of goods to the customers. This was done so that the ordered goods could be delivered within just an hour.
Big Basket had also acquired a delivery firm, ‘Delyver’ to make its delivery service even stronger. The co-founders of Delyver are involved in the management of Big Basket, although they function as an independent firm.
Competitors of Big Basket
Being in the grocery delivery sector, Big Basket has to face very tough competition from big giants like Amazon and also other grocery delivery startups like Grofers and Dunzo. Now, with the entry of Jio Mart, the competition is just going to get tougher.
This is a Gurugram based online grocery delivery startup, that was founded in 2013. It is a B2C model that ensures delivery by owning and maintaining a warehouse for its products.
The company had raised its first funding in 2014, which was $500,000. In 2018, it received a funding of approximately $536 million. It has investors like Softbank, Tiger Global and Sequoia Capital. Grofers has a strong presence in many cities across India, considering that it gives a tough competition to Big Basket.
This is a 24x7 startup that aims to deliver anything and everything from medicines and supplies to groceries and food. It operates in major cities of India including Bengaluru, Delhi, Gurugram, Pune, Chennai, Jaipur, Mumbai and Hyderabad.
It aims to provide very quick deliveries and became really popular during the coronavirus induced lockdown. It is also the first startup in India to receive direct funding from Google. Dunzo raised about $45 million from Google, Lightbox Ventures, STC Ventures, etc. This was a Series D funding, and the startup was valued at around $200 million in this round. The total investment that Dunzo has raised till date is around $81 million.
With JioMart on its way, these startups will have to make way for another giant in this sector.
Funding of the Startup
Big Basket has raised funds from different sources and through different stages of funding. In 2019, it raised funds of around $1 billion and became a unicorn, adding to the list of unicorns already present in India.
The company has gone through multiple rounds of funding. Big Basket raised $150 million in a Series F round of funding from Mirae Asset Global Investments, CDC group and the Alibaba group, which helped it in joining the exclusive club of unicorns in India.
This round of funding came after the company managed to raise $300 million in 2018 from investors like Alibaba, Sands Capital, Abraaj Group and International Finance Corporation.
Big Basket and the Online Grocery Store Market
According to a research report by RedSeer Consulting, the online grocery market is expected to be valued at more than $1.2 billion and could exceed the sales value of $3 million. It expects that this sector will grow at around 50% for the next couple of years. Especially now, as because of the Coronavirus pandemic, the demand for such online services has grown tremendously.
When we look at what has been working well for Big Basket, we can see that it has a strong base in the cities where it operates. The company has been working well on its membership plan as well. The name of this plan is BB Star, and about 30-40% of its total consumers are converted through this plan.
However, one challenge that the company faces is the logistics and supply chain. This is one of the major concerns for any online grocery platform. Big Basket sources all the products locally and is present in 26 cities with warehouses. Even then, the supply of perishable goods becomes a challenge for the company.
The Road Ahead
Big Basket has extensive plans for future expansion and growth. According to the CEO, the company aims to break even in all the cities that it operates in.
The company has launched three new businesses: BB Daily, BB Instant and BB Beauty store. The funds raised would be used for operating activities of these businesses. The first two businesses have different applications; however, the last, BB Beauty store operates under the main application of Big Basket. Also, Big Basket has plans to go deeper into the cities in which it already operates. The strategies that it is applying seems to be working well in cities like Kochi and Kolkata, and hence the company is planning to not expand into any more cities for now but to get more orders and expand more into the cities in which it is present.
Considering all these factors and the fact that there is no pressure from investors, it does not seem like Big Basket would go for an IPO very soon. The company, with its expansion plans and strategies is likely to see more investment from private players and more growth in the future.