A bigger basket: Hari Menon needs serious money to stay in the game

Online grocer BigBasket recently made headlines for being in talks with the Tata Group to sell a majority stake in the company for around $1 billion. If the deal goes through, BigBasket could become a part of the Tata group. In its journey, the unicorn has seen a frugal existence. It had a humble beginning nine years ago in a small office in the Domlur area of Bengaluru with five people on board — V S Sudhakar, Hari Menon, Vipul Parekh, Abhinay Choudhari and V S Ramesh, who had earlier started one of the first online businesses in India, Fabmart.com.
 

From the worry that the building might collapse any day and with rats running above the ceiling, which was “music to their ears to keep them awake and going,” Menon and his team have come a long way. The Alibaba-backed company is currently recording about 20 million orders per month and recently reached the milestone of $1 billion run-rate in annual revenues.
 

Today, it has a corporate head office that houses over 500 employees of the 25,000 workforce, about 70 per cent of which are blue-collared employees — delivery boys, warehouse pickers, packers, stackers, fruits and vegetables segregators, loaders and unloaders. 
 

“I spent a lot of time with the employees, especially the blue-collar workforce whom we call associates. Second, I spend a lot of time with our farmers and then customers,” says Menon, co-founder and CEO of the company. Menon’s three mantras are happiness of blue-collar workers, happiness of farmers and happiness of customers. “If I get these three right, my business can’t go wrong.”
 

The problem with a large blue-collar staff is that attrition on account of poaching may not be a major worry, but absenteeism is very high. For example, if there is an election or a festival, they go back to their villages. Workforce is critical for the company and even if 10-15 people are absent, sales could suffer. So BigBasket runs a lot of rewards and recognition programmes throughout the month to keep them motivated.
 

The company also works closely with the farmers and over 80 per cent of BigBasket’s fruit and vegetables sales are directly procured from them. It runs a programme called Farmer Connect under which it collects the produce directly and the payment is sent to their bank accounts.
 

“If a farmer in our network decides to sell his produce to somebody, he should tell them I love working with BigBasket and I will first supply them. That is what we want to achieve,” says Menon.
 

Menon also believes that a customer is never wrong. He has put out his email ID in the public domain and several customers write to him directly. The moment Menon gets home from office in the evening, he starts looking at customers’ mails and begins addressing them directly or through his customer service team. 
 

An early riser who begins his day with morning walk and yoga, Menon is also pushing his company on the environment-friendly road. While its last-mile delivery fleet is turning electric, all its warehouses have gone solar. The company is also targeting to move the entire business to organic in the next 3-5 years. “Our goal is to see if we can supply traditional (organic) fruits and vegetables and staples at the same price without charging a premium,” explains Menon.
 

Currently operating in 24 cities, BigBasket has put a hold on its expansion strategy. With grocery providing such huge scope, the company is betting on the idea of going deeper into each market instead of spreading and thinning out. “The moment you are spreading yourself thinner, you are not capturing each market completely,” says Menon.
 

The online grocery business has been a slow starter in India but Covid-19-induced tailwinds and participation from conglomerates are likely to accelerate growth. According to a Redseer report, from the overall 0.3 per cent, the segment could touch 2.3 per cent of the overall food and grocery market by 2024, which would make it a $18 billion market growing at a CAGR of 57 per cent.
 

With the pandemic putting e-commerce at the forefront, BigBasket is seeing an 84 per cent increase in the number of new customers accompanied by 50 per cent higher retention rates over pre-Covid levels. Apart from immunity boosting categories such as fresh fruits, indulgence categories such as chocolates, cup noodles and savoury snacks registered 50 to 140 per cent growth over February.
 

Still, with marquee players such as Amazon, Walmart and Reliance making serious bets in the grocery space, and lack of visibility in terms of investments from large investors, experts point out the company will need serious money to stay in the game. If the start-up becomes part of the Tata group’s investment basket, it may be well placed to take on the challenge.