The online retail market in India is expected to grow 250 per cent to touch Rs 1.8 trillion by 2020 fiscal. Over the next three years, the e-retail industry is expected to continue its strong run, growing over 2.5 times to $28 billion (Rs 1.8 trillion) by fiscal 2020, the global analytics firm Crisil has said. And among this, online grocery will be the fastest-growing segment (around 65-70 per cent CAGR between fiscals 2017 and 2020) in e-retail and almost quadruple over the next 3 years to Rs 100 billion in terms of revenues.
Meanwhile, the stage is being set for a big battle in the US $1billion FMCG space. While established players like Amazon and Grofers are strengthening their positions, the recent acquisition of Flipkart by Walmart has also served to create a ripple effect in the F&G segment.
bigbasket which currently holds 37-40 percent share in the grocery delivery industry, followed by Amazon, Grofers and Flipkart, has started bracing itself to face competition – which is expected to intensify soon.
Hari Menon, Co-Founder and CEO, bigbasket says, “Despite a huge opportunity, the FMCG segment is still under-served as far as online grocery delivery is concerned in India. There are just a few players in the market. As more and more players will enter the segment and already present players will strengthen their presence, more customers will start shifting to online grocery buying. So, yes, competition is expected to intensify.”
One of the main reasons that makes grocery an attractive segment online is the fact that firms have a massive opportunity for building a loyal customer base. The cost of acquiring customers and servicing them comes down over time, since the customer lifecycle is high. The main trial in the segment is shifting consumers from traditional buying habits to online purchasing.
Menon says, “One of the major challenges that we face today is to get people to move out of their comfort zone – leave their traditional buying habits and to move into a new way of buying. Since grocery is very dear to people, getting consumers to shift mediums is a tough task to say the least. bigbasket has managed this well so far since we deliver fresh and fast and serve our customers well.”
“We have 8 million customers today and are growing very rapidly. However, this is still a very small number compared to the number of people who actually buy grocery in the market. I feel if more players step into the game, more people will shift to online grocery buying. And when more people will move online, it will benefit everybody. Hence, competition is good and healthy.”
The Biggest Share of the Pie
Despite ever-growing competition in the FMCG space, bigbasket is confident of maintaining its fair share in the market.
According to Menon, “One of the biggest differentiators is that we are a grocery-focussed player and so we will do everything it takes to actually to make a good job of it. Our expertise is in fresh produce. We have very strong team that we have invested in, and strong processes. We are using technology, cold-chain to deliver fresh produce to the customer in the best possible manner.”
Menon explains that the online medium is closest to ‘farm-to-fork’ because it comes from the farmer directly to bigbasket’s processing centres and from there goes directly to the customer.
“The produce does not sit anywhere in the middle,” he says.
Building a Strong Supply Chain
To conquer the FMCG space, bigbasket recently announced that it is planning to spend up to Rs 500 crore to strengthen its technology, customer service and back-end farmer supply chain as it looks to more than double its customer base to 20 million by 2020.
“These past few years we have settled down and got our back-end in place. We have a well-oiled system, from delivering on time, accuracy in delivery, and accuracy of stock levels,” Menon states.
“We are focusing significantly on strengthening this programme, which is called Farmer Connect. Presently we are working with 1,800 farmers, and we will bring about 5,000 farmers within our fold in a year’s time. We ensure farmers get better prices and are paid on time. About 85 percent of our produce comes directly from farmers and we are going to just increase this number,” he explains.
“We also work closely with hotels, and restaurants as well as nearly 2,000 kirana stores and so, we want to deepen our engagement with farmers for supply,” he adds.
Towards this, the brand has made sure all their hubs – 26 warehouses in 30 cities – are close to farming locations.
Treading the Path of Profitability
In 2017, bigbasket became operationally profitable in two cities – Bengaluru and Hyderabad. In the next few months, three more cities including Kolkata, Chennai and Ahmedabad will be operationally profitable ad according to Menon, they are now focusing on making sure every city they are present in breaks-even over the next few months on a standalone basis.
“This will enable the company to then allocate its resources towards media spending and other activities to achieve growth targets,” he explains, adding, “However, we will continue investing in marketing till we have enough customers.”
What the Future Holds
bigbasket has been growing Year-on-Year. First year, the brand clocked the turnover close to about Rs 30 crore and since then it has grown to become Rs 1,410 crore by 2017. In 2018, the brand has already crossed the Rs 2,000 crore mark.
“I think the next thing for us is to just keep growing because we have got our backend in place, we have got a very strong team, we have got most of our processes in place. And we will keep enhancing that as we move ahead,” says Menon.
He further adds, “We are present in 30 cities, we are not expanding anymore. Our expansion is over. We are now going to consolidate and grow bigger in the cities we are in. So, no expansion of cities, no expansion of channels.”
The brand is looking to grow deeper and becoming a billion-dollar company by 2020.
Partnering with Sri Sri Tattva
Sri Sri Tattva, one of India’s leading health and wellness FMCG firm, announced a comprehensive strategic partnership with bigbasket.com at India Food Forum 2018 in January. The partnership announcement has enabled Sri Sri Tattva’s products to reach customers across India with unprecedented precision and effectiveness through the online major’s robust delivery network.
On the occasion of announcement at India Food Forum 2018, Tej Katpitia, Chief Executive Officer, Sri Sri Tattva said, “Sri Sri Tattva has always endeavored to ensure that quality products reach the maximum number of consumers across India and also across the globe. It is truly proud moment for us to announce that we will be tying up with bigbasket.”
Hari Menon had said then, “We believe that this relationship is very strategic for us. The reason being that what we see in the food space – be it online or offline – that it is a conscious move by the consumers to look at health as something very important. We are trying to see how to create organic products in the same price range as regular vegetables and we believe that we will achieve this soon. We want to give this movement a huge push through our channel.”
“This particular partnership is going to be very crucial for us. bigbasket has been popular channel in the groceries section from quite a long time. We are also concentrating on healthy food from quite a time for our consumers and of course this is one vision which bigbasket also has. I really feel that when value resonates, and the foundation and intentions are strong, then any sort of partnership would certainly see a lot of success and we are extremely excited on this,” added Arvind Varchaswi, MD, Sri Sri Tattva.