Big aim for BigBasket as it eyes break-even across top 10 cities in FY20

Online grocer may close FY20 with Rs 5,300 cr in sales, says CEO Hari Menon

Online grocer BigBasket is expecting to break even at an operational level in the top 10 metro cities this financial year. The Alibaba-backed company, which competes with Grofers and the grocery arms of Amazon and Flipkart, operates in 26 cities, though 80 per cent of its revenues come from the top 10 metros.

“Right now there is huge focus within the company to become profitable,” Hari Menon, co-founder and chief executive officer of BigBasket, told Business Standard. “We look at cities as independent units. Over the next three-four months, all our 10 tier-I cities will break even operationally.” Those include Delhi, Mumbai, Bengaluru, Chennai, Hyderabad, and Kolkata.

By operational profitability, Menon said the company expects the revenue generated from each city to cover all operational costs, including discounts and below-the-line marketing. It won’t include the corporate costs and expenses towards company-level marketing, such as television and newspaper advertising.

BigBasket, valued at $1.2 billion, is by far the market leader in the segment. It delivers a whopping 140,000 orders per day and boasts a collection of 30,000 items (stock-keeping units) on its store front.

The company closed the previous financial year ended March 2019, with total sales of Rs 3,250 crore — up about 60 per cent from the year before. In the current financial year, BigBasket is eyeing Rs 5,300 crore in revenue, said Menon.

On profitability at the company level, Menon said the company would start discussions in 2020-21. He said BigBasket is currently undergoing a transition in its business model, “which will bring us to profitability”.

“We have optimised the business model for lower cost and higher efficiency” Hari menon, BigBasket CEO

The company presently follows two delivery models — one, where customers could slot deliveries for the next day; second, is a 90-minute express delivery of goods delivered on the same day. It has now merged the two. “Now, 90 per cent of what you order will get delivered in two-three hours. The balance 10 per cent will be delivered later in the day or the following day,” said Menon.

This is essentially a re-engineering of the supply chain. Larger orders, which require delivery through vans, will be clubbed together, and smaller non-essential ones items will distributed by bike riders. The company is using an intelligent algorithm to select the items that can be delivered in a van or on a bike.

The company is opening ‘dark stores’, quick-service warehouses, closer to customer homes for optimal delivery. “We have optimised the business model for lower cost and higher efficiency,” he added.

In May this year, BigBasket raised $150 million from South Korea’s Mirae Asset Financial Group, the UK government-run CDC Group, and existing investor Alibaba, taking its total fundraise to about $1 billion. Both Mirae and CDC Group typically invest in mature and often publicly traded companies.

Meanwhile, BigBasket is aggressively growing its dairy products subscription business BB Daily, installing vending machines at apartments and offices, and investing in direct-sourcing channels with farmers.

Launched six months ago, BB Daily offers users to subscribe to daily delivery of milk, bread, and daily essentials. It is clocking as many as 140,000 orders a day. “We are also establishing a beauty business, a special online store-front that will have grooming products from all brands,” said Menon.

Over the years, BigBasket has set up over 40 collection centres at farm locations, from where it sources almost 80 per cent of all the fruit and vegetables (F&V) that are sold on its platform. It connects directly with 10,500 farmers.

The company is expecting the F&V to become a Rs 1,000-core business in the current financial year, roughly around 18 per cent of total business. “It is an extremely strategic piece for us,” said Menon.

The basket grows

• In May, BigBasket raised  $150 million from various firms

• In a new model, it is offering 2-hour delivery for 90% of cart items

• The company is opening new service lines BB Daily and BB Instant

• Food and vegetables also a focus area; expects Rs 1,000 crore from vertical in FY20 

• Valued at $1.2 billion, Big Basket is the largest e-grocery player