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Decoding The Product Frameworks That Helped BigBasket Log $1 Bn In GMV

Decoding The Product Frameworks That Helped BigBasket Log $1 Bn In GMV

BigBasket did not have a playbook to follow when it started its journey in 2011 as there was no success story in the online grocery segment at the time and the company was forced to create a product framework

The company has grown steadily over the years and claims to have reached a gross merchandise value of $1 Bn in May 2020. It has also maintained the thin margins of ecommerce by keeping its teams lean and agile

Catering to customer needs is not simple as the target keeps evolving based on the company’s growth, changes in the market and a shift in customer requirements

It was June 2014. Bengaluru, India. The country’s fledgeling online grocer BigBasket’s business was growing at 15% month on month. New product features were ideated and added every morning. And coding was completed by the end of the day. This rapid development was essential to attract more customers, but the downside was scary. Bugs were coming up fast in the technology stack that went unchecked due to tight deadlines. 

The problem finds a mention in the book, Saying No To Jugaad: The Making Of BigBasket, penned by T.N. Hari and M.S. Subramanian (both are currently working for the company). Disturbed by the everyday glitches, Pramod Jajoo, then chief technology officer of BigBasket, called Tejas Vyas to his cabin. Vyas was a young tech leader, working with the organisation at the time.

“In the interest of speed, the quality of architecture had suffered. The quality of documentation was just as bad. When an engineer quit, there was no way to understand why something was architected or configured the way it was. One could not be sure what all would be affected if you tweaked a particular part of the monolith,” the authors noted.

Vyas’s role in cleaning up the technology modules bit by bit in the next two weeks did not go unnoticed in the company. In January 2015, he was made the product manager for supply and logistics and got promoted to director, products, two years later. 

Vyas was no stranger to a technology startup’s challenges when he joined BigBasket. He had earlier set up a food guide company called BiteAMenu where he worked as the chief technology officer. And his knowledge of aligning the tech backbone of a company in tune with user growth came in handy when he started working on the product side of BigBasket. 

For years, he has been in charge, engineering the egrocer’s evolving product framework, a crucial and complicated task as one may rightly assume. The scale has happened. The company is now present in more than 30 cities and eyeing $350-400 Mn in funding at a valuation of $2 Bn or so compared to June 2014, when it was present in three cities and had raised $3 Mn a few months earlier. 

Currently, all businesses worth their salt, from ecommerce giant Amazon to India’s digital Goliath, Jio Platforms, to upstart hyperlocal delivery services, have their eyes on India’s $500 Bn grocery market. But online grocery was a little-explored, dank space in 2011 when BigBasket was set up. Trudging its way through the nascent sector meant the company had to learn by trial and error even though it was set up by five retail veterans — Hari Menon, V.S. Sudhakar, Vipul Parekh, Abhinay Choudhari and V.S. Ramesh — at a time ecommerce was picking up the pace. Interestingly, they were also among the first to join the ecommerce bandwagon in India with fabmart.com. 

Although there is a lot of content on product building, one would not come across too many success stories in the egrocery space even outside India. Most of the peers of BigBasket, which started around the same time, relied on a zero-inventory hyperlocal delivery model where riders would fetch orders from kirana stores and deliver the fare to consumers. But this inconvenienced most users as there was no way of knowing whether the local stores would have all the items ordered by customers. And this used to hurt egrocers’ margins.  

The founders of BigBasket understood the pain point and made a conscious decision to use a mix of inventory and hyperlocal models to optimise on both fronts. This strategy has been retained since. Similarly, the introduction of private food labels such as Fresho, Tasties, BB Royal and HappyChef Gourmet to improve its margins and enhance the customer experience worked well for the company. 

Today, the online grocer has become a giant of sorts. Its revenue touched INR 5,200 Cr in FY2019-20, and the company hit some significant milestones, including $1 Bn in GMV (in May 2020) and 300,000 daily orders amid the pandemic. Also, Tata Digital, the vertical within the Tata Group that focussed on the conglomerate’s super-app ambitions, is reportedly acquiring a 68% stake in BigBasket for $1.3 Bn.

The road map to success was not built in a day. It is a product journey worth looking at as BigBasket has fundamentally changed the way people shop for groceries, from the convenience of home. The key levers lie in its product frameworks, the choice of product metrics and the product team structure. 

Let us explore each of these to understand what worked for BigBasket, what needed to be iterated and the outcomes over the years. 

How A Product Framework Was Created Based On Priority 

A major reason behind BigBasket’s technology issues in the initial years, when most startups focus on fast growth and viable unit economics, was a lack of prioritisation. Having witnessed the consequences, Vyas takes it seriously as he gets daily requests from every team to tweak or build new features and products.  

The focus on prioritisation has led to a fast-evolving product development process that asks at every point what a customer’s needs are in real life. Vyas refers to the paradigm as market-product fit instead of the much-jargonised product-market fit to underline its importance. The reversed nomenclature helps reiterate that the market’s demand is the primary driving force behind a product and not the other way round. 

In a bid to achieve the ‘market-product fit’, the online grocery platform has developed a unique framework called WWWH (who, why, what and how) that decodes the most critical pain point in a market and the best approach to solve it. 

Let us understand this better with an example. 

Say, people in an apartment society constitute the ‘who’; their need for fresh groceries to be delivered at their respective homes is the ‘what’ and their willingness to pay for the service defines the ‘why’, thus highlighting an unfulfilled need in the market. Then there will be different ways of catering to the need (how) as the business chooses from where and how to procure the items ordered and the mode of delivery. 

If each of these hypotheses is correct and the solution designed for each works out, the product’s outcome will be reflected in metrics such as net promoter score (it indicates how favourably users refer the product to others), the number of returning customers and the frequency of their app visits. When the product does not meet a customer’s requirement well, these numbers will visibly drop. 

“In essence, we always try to understand from our customers what they need. It helps us achieve the ‘market-product’ fit by delivering a great solution/experience. Of course, we do many pilots and tests, adapt or change our methods wherever necessary to ensure that customers make a habit of using the product. Once that is achieved, they will remain loyal to you. They will keep coming back,” says Vyas.

Simply put, it is now essential to provide something more than a just good experience – it has to be a habit-forming experience. That is why BigBasket puts customer requirements under two broad categories – needs and wants. It may sound like a Zen concept, but these terms are quite easy to understand from a layman’s perspective. Needs are demands that a customer cannot do without. Wants are not as essential as needs; they do not make or break a deal. For instance, on-time grocery delivery is a ‘need’, but a wide range of brands on the app is a ‘want’.

The product folks at BigBasket have deciphered that the biggest need of a customer ordering groceries online is getting all the products she/he has ordered (imagine planning a pesto pasta lunch but the pesto gets left behind). Also, getting the items on time is equally important – the designated time slot is mostly sacrosanct. 

This is why the company has adopted the WYSIWYG (what you see is what you get) method as its North Star or the guiding metric. The primary value proposition of a delivery company could be faster deliveries. But for Bigbasket, it has to be the assurance that customers will receive everything they have ordered, and the WYSIWYG metric has been developed to measure this function. 

According to Vyas, this percentage is always maintained above 99.6%. Even when  Covid-19 lockdowns disrupted supply chains, the figure hovered around 98%, falling by 1.6 percentage points from the company’s usual threshold of tolerance. However, customers were okay with even 60% of the cart order, as most people were desperate to get whatever they could. 

“If a customer orders X number of items, we will try to deliver all of them. That is the basis of the whole business model at BigBasket and the WYSIWYG metric attached to it. There might be other platforms where people order and WYSIWYG might not be their value proposition. But we believe that customers want all the items they have ordered and optimum order fulfilment remains the most crucial criterion even when they are ordering online,” says Vyas.

Decoding The Product Frameworks That Helped BigBasket Log $1 Bn In GMV

Aligning Product Function With Growing Customer Needs

Catering to customers’ needs will never be an easy task as it is an evolving target. As a company grows and the market changes, customers’ earlier requirements may change or new users may have different needs. It means BigBasket has to identify the shift in customer requirements at different stages of growth. Besides, the company has to create a product team structure that can stay lean even when it grows (more on this later).

How does BigBasket engage with customers as their requirements and expectations shift? The company has identified three distinct user groups and worked on suitable strategies. The first phase (0-1) saw customers who had just come in for the convenience of ordering groceries online and getting it home-delivered. Even when the company and its user base grew, this group of users wanted much more on the convenience front such as better packaging or faster delivery instead of price advantage. The focus was not on superior UI/UX but on users’ needs such as accepting returns at the time of delivery if the customer was not happy with the item. 

Then came the second phase (1-10), and this time, customers were mainly concerned about the quality of the groceries and the number of choices on the app. These users tested the waters to see if the groceries ordered online have the same freshness and variety that they get at a physical marketplace. In this phase, BigBasket’s priority was to evolve its supply chain and inventory infrastructure to ensure the same product quality one would find when shopping at a real bazaar.  

By the time the third set of customers (10-100) came in, the market had already evolved. At this point, users checked if the pricing was better or the delivery was faster than what its peers offered. In 2015, the company realised that customers from the company’s early days were not spending more on the platform as they bought from outside a lot of things they needed urgently. So, BB Express service was introduced for 90-minute delivery. 

To increase its value proposition for loyal customers, the online grocer has created a premium membership called BB Star that offers exclusive delivery slots and special deals, including discounts and cashbacks. According to Vyas, it had a huge impact on order value, and the retention rate of subscription members is 1.6-1.7 times higher than non-subscription users. 

“As you are exclusively focussed on driving growth and onboarding customers in the 0-1 phase, you can address many of the core needs of early customers. You may not solve everything, but you can make the customer reasonably happy to take the product forward. The 1-10 phase is a tricky one as your business is at the mid-level, and you have to deal with a lot more customers who have different expectations. It was the first time we had to make some hard decisions regarding prioritisation and said no to a few things. But it becomes a lot harder in the 10-100 phase. Hence, the mantra is to build less and solve impactful problems,” says Vyas.

Decoding The Product Frameworks That Helped BigBasket Log $1 Bn In GMV

Interestingly, the three-phase customer engagement does not happen just because there are a lot more customers who seek different things. A deeper people problem is also involved here. In the initial days of a tech startup, a core product team is closely attuned to the company’s objectives and can zero in on the priorities quickly. But as the company grows and more product managers, engineers and product designers come into the fold, it is essential to establish guidelines or litmus tests of prioritisation for the team.

“With more people, your efficiency comes down exponentially. If two people solve the same problem, you do not get two times more efficient but around 1.5 times. Similarly, when four people come in, you get 2.2x efficiency. Unfortunately, that is the reality, and that is how the world works, not just BigBasket alone. And we had to keep it in mind when working on prioritisation,” says Vyas, the online grocer’s product head.

For instance, in the early days, a one-person product team would architect the product, take it to engineering, get it developed, launch it and iterate it based on feedback. Everything is done single-handedly. When two people are thinking about the same problem, there is an added element of communication between them, thus increasing the resolution time. Most importantly, each person may perceive the priorities differently. This is where frameworks like WWWH and WYSIWYG come into play so that new product people have ready models to tell them which problem must be dealt with without any delay. 

Although BigBasket has grown steadily over the years and claims to have reached a gross merchandise value (GMV) of $1 Bn, the company has kept the thin margins of ecommerce intact by keeping its teams lean. Even today, the company’s product team consists of 20 product managers despite the new categories and geographies it has ventured into.

Of course, the clarity of product frameworks has helped in keeping the team lean. But the way its product team has been structured is equally significant. In most tech startups these days, product managers are considered the CEO of a product or a feature and lead a squad of designers, engineers and field experts to deliver business outcomes.  

Not so in the case of BigBasket. 

Product managers (PMs) in BigBasket are also given ownership of products and features, but they do not have a squadron to command. Instead, PMs are expected to work in a T-shaped manner, which means they have in-depth knowledge of one functional area (the vertical arm of the ‘T’) and the ability to glue in requirements from other functional areas (the horizontal part of the ‘T’). 

For example, if improving ETA (expected time of arrival) communication is the required outcome, a product manager, with expertise in last-mile delivery, will have to co-ordinate with other domains such as engineering, customer app and warehouses to achieve this goal.  

“We have internally figured out this is the most efficient model. It is even optimised in terms of motivation so that a PM thinks holistically to get the desired outcome and works with individual services which will play a part in delivering those outcomes,” says Vyas. 

Decoding The Product Frameworks That Helped BigBasket Log $1 Bn In GMV

Building A Product To Create Customer Habit

Just like other tech startups, the product function at BigBasket has its task cut out: Keep the customers hooked to the product. The wallet feature, introduced in March 2012 just months after the company’s website was launched, actually combined the convenience of online shopping and the age-old tradition of offline buying. 

When customers buy from their neighbourhood kirana stores or vegetable sellers at the corner of a bylane, shopkeepers often tell them the change will be adjusted at the next purchase (this is a two-way thing as customers also pay less than the amount due). The practice triggers a stickiness of sorts, prompting customers to return to the same outlet the next time they need to buy something. The wallet feature on BigBasket’s website and the app does the same. 

The company has put in place a closed wallet that can be loaded with cash for hassle-free transactions (money gets deducted automatically as soon as a purchase is made). Refunds can also come in here in case of order cancellation, product return or non-availability of booked items, and the balance can be used for the next transaction. Better still, if one’s veggies weigh more than the estimated cost, the order still goes through, and the pending amount can be paid when the person shops next.

The effort to mimic the physical store in as many ways as possible also lies at the core of BigBasket’s continuous foray into non-food products. The first non-food category, beauty, to be precise, found a place in the initial days of operations, but the company has been cautious about adding categories. 

Many ecommerce websites quickly add categories to diversify and add value to the cart. But Vyas says it is important to understand customer requirements and why they favour a particular category. Getting third-party suppliers and listing them on the app or the website could be easy, but there is more to it. 

“Typically, when one goes to a supermarket, some of these categories are on the second floor or third floor. As the founders have come from a retail background, they understand that these retail categories may not drive people to come to a store. But they add to the entire shopping experience,” says Vyas.

That does not mean all product decisions at BigBasket happen in a top-down manner. Both customer feedback and inputs from different business units form an important part of the conversation around which product features are built or iterated. A product manager who owns a particular functionality always has a planned road map, designed to look at the tech architecture, customers’ requirements and long-term business objectives. 

Besides, big-picture thinking is always there. For instance, going deep into Tier 2 and Tier 3 geographies is a priority for all ecommerce businesses, and BigBasket is no different. Last year, cofounder Hari Menon said that the online grocery platform was present in 26 cities, but 80% of its revenue came from the top 10 metros. 

That business equation changed as Covid lockdowns started in March and large-scale migration from big cities took place. As a result, BigBasket saw Tier 2 business grow 56% in the next month even as its metro business grew 35%. The fact that BigBasket hit the billion-dollar GMV mark during this period owes it to the preparation that had been set in motion from Day 1.

The company is not resting on its laurels, though. The Covid-19 pandemic has brought many first-time internet users to the online grocery space for their daily essentials, and it presents a huge opportunity for the likes of BigBasket. It also means the company will have to reconfigure its user interface and value proposition to retain this new set of customers, even in a post-pandemic scenario. The online grocery major is already looking to add a vernacular language component to its app to make purchases hassle-free for the Bharat audience. 

“We are actively looking at how they would like to shop with us using their mother tongue. But we do not want to launch the vernacular part in a hurry as no player has gotten this right. We are doing a lot of experiments to get the model and the feature right before rolling it out. After all, a simple translation does not attract people; it is about the entire experience,” says Vyas. 

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