As Competition Increases, BigBasket Takes The Hyperlocal Way With New Marketplace Model BigBasket to deliver products from hyperlocal stores

By Ritu Kochar

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Big Basket

BigBasket will soon launch its online marketplace business which will be a tie up with hyper local speciality stores. With this new feature, users will be able to place order directly from their nearby grocery store, like bakeries or meat shop, with the product being delivered to them in an hour.

To be launched in Bengaluru first, this service by BigBasket will handle logistics for 400 stores within a radius of 6-km only. Over the few next months, the service will be expanded to other cities as well.

"No matter how much you shop online, 5% of your grocery is bought from speciality stores within the locality that you trust and love. For example, a cake from a favourite bakery," explained Hari Menon, CEO of Big-Basket. The marketplace will offer popular neighbourhood delights from bakeries, flower shops, meat speciality stores and pet outlets.

"With this move, we plan to cover the whole grocery basket," Menon said.

BigBasket's average order size is Rs 1,500 and it expects a gross merchandise value of $300 million (Rs 2,000 crore) for the financial year ending March, states a report in ET.

This step by Big Basket comes as a necessary measure given the competition it has been facing from so-called hyper local grocery delivery firms such as Grofers, PepperTap and ZopNow, among others. Although Big Basket is India's largest online grocery store and it doubled its net sales last year, it also tripled its loss in the year ended 31 March 2015, according to documents available with the Registrar of Companies, as competition intensified in the Internet consumer market.

According to a report in live mint, net sales at BigBasket, owned by Supermarket Grocery Supplies Pvt. Ltd, increased to Rs.170.24 crore from Rs.69.72 crore the year before. It posted a loss of Rs.60.61 crore, compared with Rs.21.60 crore in the previous year. Apart from its website and mobile app, a third of company's sales are from private labels that sell fruits, vegetables, meat and bread under the brand name Fresho and staples under the Popular and Royal brands through 250 neighbourhood stores.

The online grocery market is slowly gaining attention as a potential market with e-commerce giants like Amazon and Flipkart giving it a shot. Last year Amazon launched Amazon Now and Flipakrt came up with Nearby app to deliver groceries, electronics, clothes and other products in Bengaluru. Paytm also launched its One97 for the same purpose. However, Nearby was shut in February 2016 and One97 in June 2015, due to low demands. Despite low margins, what gained interest of these e-commerce giants to add grocery to their list of products is that it ensures repeat purchase and hence, customer loyalty.

Hari Menon, Co-founder, Big Basket, says, "It's a tight business. In hyper local model, margins have to be shared with the kirana stores. You don't know the inventory in the store they are picking up the items from. It is critical for customers to get all the items ordered, and with good quality."

What gives BigBasket an edge over its rivals is their inventory model. Unlike Grofers or Amazon Now that merely delivers the product, BigBasket has its private label which leads to a bigger assortment of products. It allows BigBasket to offer better prices to consumers. "In terms of sales, BigBasket should have grown three-four times this year (FY16). From the consumer point of view, whoever will have a wider assortment of products at a better price will have an edge," said Harminder Sahni, founder and MD of Wazir Advisors, a retail consulting firm. "Others are merely doing delivery, which was anyway happening. But BigBasket can offer a better price as they have private labels." (live mint)

Ritu Kochar

Former Staff, Entrepreneur India

Ritu used to work as a Feature writer for Entrepreneur India.

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