What Is BigBasket’s Business Model?

BigBasket is one of India’s largest online grocery platforms

Backed by the likes of Alibaba, BigBasket now also runs subscription-based services
besides on-demand deliveries

How exactly does BigBasket ensure steady supply of products, fruits and vegetables
for its growing audience? 

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.