What Is BigBasket’s Business Model?

BigBasket has changed how many Indians get their daily groceries and home essentials. On the face of it, BigBasket seems like an app-based supermarket, but the business model runs deeper than simply listing products from other sellers. Over the years, BigBasket has made changes in its operations to not only support the marketplace model, but also enter into the private label territory, daily deliveries based on subscriptions.

To know how BigBasket is changing how city-dwelling Indians shop for food items and grocery, it’s important to step back and take a quick snapshot of how it is trying to replicate some of the hallmarks of the traditional grocery-buying experience for Indians.

Changing How Indians Buy Grocery

There was a time when Indians only bought their vegetables and fruits directly at the public market or through handcarts — this meant that customers often formed a bond with the sellers over time, which resulted in variable pricing for each customer depending on how close they are to the vendors. BigBasket standardised this experience and gives consistent pricing for all items in a given city.

When it comes to milk, eggs, bread and other such staples, daily deliveries are a norm in much of India. BigBasket replicated this model with its BBDaily service.

With the introduction of supermarkets, the convenience factor meant customers in cities gravitated to the wider selection of products. BigBasket figured this out quickly and added a lot more things than just fruits and vegetables to its platform. The convenience and familiarity of buying things online increased multifold with the introduction of technology, ecommerce and app-based shopping. In the major cities, consumers — with their ultra-busy lives and erratic schedules — have turned to grocery delivery en masse.

And finally as competition has increased, the company has managed to add private labels, bring local specialty shops to its platform to offer a more bespoke experience than any of its other competitors.

BigBasket’s Journey To The Top

Despite being in intense competition with rival giants such as Amazon, Grofers, Flipkart and a slew of local supermarkets that have gone digital, BigBasket has held its position as a leader in the grocery delivery space, and finds itself in the coveted unicorn club with a valuation of over $1.2 Bn.

BigBasket was launched in 2011 by VS Sudhakar, Menon, Vipul Parekh, V S Ramesh and Abhinay Choudhari. As of May 2019, it claimed to have over 10 Mn registered customers and was processing 1 Lakh orders per day across 25 Indian cities.

The Bengaluru-based company recently closed a $150 Mn Series F funding round from Chinese ecommerce major Alibaba, South Korea’s Mirae Asset Global Investments and the UK government-backed CDC Group.

With this round, the total funding raised by BigBasket had reached $1.02 Bn across 14 funding rounds from investors such as Alibaba, Helion Venture Partners, Bessemer Venture Partners, Abraaj Group, LionRock Capital and others.

How BigBasket Fine-Tuned Its Business Model

For consumers, BigBasket is a delivery platform but as a business it is spread out into everything from procurement to supply chain and logistics as well as in consumer services through subscription-based delivery and also somewhat into the foodtech category thanks to some local shops selling specialty items.

The Alibaba-backed grocery giant has so far relied on an asset-light model, which means it does not own retail outlets and uses warehouses for fulfillment. It partners with third-party vendors, wholesalers and resellers, and also sells some goods under its private labels.

In recent months, the company has tried to add in more assets in the form of more efficient delivery fleet. BigBasket announced plans to turn towards e-mobility for its last-mile delivery operations across metros. The company said it currently has 150 e-vans and 50 e-bikes. It aims to increase this to 1000 vans and 2000 bikes within the next one year.

The company said it has worked with multiple e-van OEMs like Gayam Motors and Euler Motors and certified them for their operations. It is now progressively introducing e-bikes from brands including Hero, Okinawa, Li-on, and Greaves Cotton in its operations.

While private labels may be called a key differentiator in terms of inventory and allows BigBasket a lot of price flexibility, its primary focus is on the technology stack that powers the end-to-end operations from procurement, distribution, supply, delivery, payments and returns.

BigBasket has two sides to its operations, the first, a buying side for the farm produce, personal care products, and second, management of the stock in its warehouses in the cities where it has a presence.

The second focus of the company is on managing the supply of fresh and perishable goods such as meat, vegetables and fruits for which it ties up directly with the suppliers, grocery stores, dark stores (which only cater to online delivery services) for the inventory building.

In Tier 1 cities, BigBasket has an option of a 90-minute delivery, apart from their standard delivery-slot options. The company recently merged the two delivery options to fulfill delivery in a total of four hours in the face of rising competition from the likes of Grofers, Flipkart, Swiggy, Amazon and Milkbasket. Reliance is also likely to debut online grocery delivery with its ecommerce service later this year.

For this, it has revamped its warehousing operations. As the hyperlocal delivery battle intensifies, BigBasket has rejigged its operational model to make all deliveries under four hours. In the earlier model, it used to offer two delivery options including 90-minute delivery and next day scheduled delivery.

With the four-hour delivery plan, BigBasket will reportedly help the company make sure that users get ample product choices, which was not possible in the earlier 90-minute delivery option. These warehouses are supposedly three times larger than the dark stores that BigBasket has been.