BigBasket raises its game

The online grocer eyes $1-bn revenue by 2018; enters Gujarat market, wants to be present in 28 cities by February 2016

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Barely five months after it roped in Shah Rukh Khan as its brand ambassador, for an undisclosed sum; and launched a high decibel campaign on television, digital and print media, the online grocery store, is upping the ante yet again. BigBasket entered the Gujarat market today, says it is close to securing Rs 800 crore for its expansion plans and is targeting to be among the top three grocery players in the country over the next three years.

"We clocked a turnover of about Rs 210 crore in FY15, and hope to end the current fiscal with a turnover of around Rs 1,000 crore. The target is to have revenues of $1 billion by 2018 March, and be among the top three grocery players in the country including the offline players as well," said Hari Menon, co-founder and chief executive officer of BigBasket.

THE BIG LEAP

• Rs 1,300-crore funding sought (Rs 536 crore raised so far in multiple rounds)
• Rs 1,000-crore turnover targeted for FY16 from Rs 210 crore in FY15
• To raise gross margins on sales to 24% from 22% currently
• Sales from its private labels to go up to 40% of turnover over 6-8 months, from 32% currently

BigBasket, started in 2011 out of Bengaluru, and within a year set up operations in Mumbai and Hyderabad. It has raised $80 million (Rs 536 crore) in multiple rounds of funding so far. Its current revenue is about Rs 210 crore which it expects to take to Rs 1,000 crore by the end of fiscal 2016. How will it make that leap?

According to Menon, the company is focusing on its margins. Current gross margins were around 22 per cent, he said, and the company was working to take it up to 24 per cent. It is also convinced that there is a big opportunity in Indian online grocery retail - the penetration of e-commerce in India's retail industry (valued at $550 billion) is just about 0.4 per cent, Menon says. Grocery accounts for around $350 billion of the overall retail in the country. "In mature markets like the US and China, the penetration is much higher at 10-11 per cent, and hence there is enough room for growth," Menon claimed.

Given the proliferation of online grocery delivery stores in the country today this is not going to be easy. Among the other online grocery stores that have launched aggressive campaigns in recent months are Grofers and PepperTap apart from several that have sprouted in local neighbourhoods. While many may read this as a sign of a thriving marketplace, the closure of some of the big brands such as LocalBanya, which shut shop in October this year, also sends out a note of caution. To survive in the business, it is not enough to bag high profile endorsers and investors.

BigBasket says that it currently has a customer base of around 800,000 and about 1.5 million registered users. The mobile application is downloaded by over one million users every month and the average visits per customer stands at around 2.6 per month the company says. As a part of its plans to expand footprint, it aims to be in 28 cities by February next year that would include 20 tier II cities. It is already present in the tier I cities of Bengaluru, Mumbai, Hyderabad, Pune, NCR and entered Ahmedabad today.

It would start Kolkata operations in about a fortnight.

The second leg of expansion would come from the tier II cities like Surat, Vadodara, Mysore, Madurai, Vijayawada, Nasik, Patna, Bhopal, Indore etc.

Getting Shah Rukh Khan on board was also part of its strategy to establish its brand nationally. Speaking at the time of the launch of the campaign, Vipul Parekh, co-founder of BigBasket had said in an interview to a national business daily, "We have selected SRK because of his universal appeal, which cuts across age, gender and geography. For a mass market national brand like BigBasket, that was very important since we appeal to an equally wide audience,"

Hari Menon points out, there is not much difference in customer behaviour when it comes to grocery shopping amongst tier I and tier II cities. Not only does this make brand communication simple, it also helps manage the logistics better. BigBasket works with a model that combines local as well as national sourcing. "Some items like potatoes, onions, oranges, apples are sourced nationally from the major producing hubs. Some items are sourced locally from 'mandis' and also local farmers," Menon said. Bigbasket is setting up 16 collection centers close to farming centers across the country; it already has six up and running. Contribution of vegetables and fruits to its overall sales is around 20 per cent, which is higher than that of a physical grocery store (around 6 per cent), claimed Menon.

BigBasket also sells grocery items like tea, coffee, rice etc under its own private label, which now contributes to around 32 per cent of sales. Menon sees this going up to around 40 per cent in the next six to eight months. Quite clearly, if the company is to keep its promise, it will have to hit the campaign trail with Shah Rukh Khan, again.