GROUP 3 || RM BATCH 2

Q1. Will value propositions offered by BB permanently change the shopping habits of consumers and help reaping long
term benefits?
Value Propositions Offered By Value Propositions Of are backed By

● ● Technology Upgradation ● Internet Penetration

Best Quality at Competitive Prices
● ●
Hassle-free Grocery Purchase Experience
● ● Retail Domain Knowledge Experts
Orders accepted: 24*7 on all days
● 4 delivery slots to choose from as per convenience
● Free delivery over purchases above worth minimum
order value
● Provision of wider range of SKUs for multiple
brands (One-Stop-Shop)
● Availability of unique offerings: cut-&-peeled,
gourmet, organic
● Provisions to book hassle-free repeat purchases &
save shopping lists
● Provision of nutritional facts & product details for
wholesome experience
● ‘Farm-To-Home’ concept for perishables delivery
● Payment through credit cards, acceptance of
Sodexo coupons
● Delivery guarantee in estimated time & 1 day
delivery service offerings
● Customer assistance from 7am-10pm with the help
of executives
Logistics Sophistication ● Venture Funding
Translation of Value propositions into long term benefits depends on:
● Maintenance of gross margin (comparatively lower for purely
online grocery retailers)
● Maintenance of market leadership position along with
consistent compounded annual growth rate
● Increase in average order bill value
● Expansion of Hub-&-spoke delivery services across Metros and
Tier-I cities
● Increase in percentage of repeat customers
● Maintenance of lower customer acquisition costs with
maximum referrals through positive WOM
● Threats posed by growth of hybrid grocery models (Competitors
like Future Group with online & offline Big Bazaar )
● Threats posed by currently less efficient purely online grocery
retailers like AaramShop
Q2. What are customer segmentation strategies of online grocery stores like BB?

Barriers to grocery shopping:

● Struggle of finding parking space
● Wander long store aisles
● High checkout times
● Carrying heavy grocery bags back to cars & unloading them again at home

Keeping in mind the above problems Big-Basket’s target customer segment is the GEN Y population.

Some other characteristics of target group are:

● Customers searching for “Online Grocery” on the internet
● Tech Savvy price sensitive customers
● Middle class working age group
● Double Income post graduates who have willingness to pay for the offered convenience
● Planned shoppers - to achieve min bill value
Q3. Explain the value chain of BB and how does it manage its margins?
● BB initially started with just in time philosophy, i.e. after getting orders from the customers, they would pick orders
from organized brick and mortar stores and delivered them to customers. Once, a particular level of orders is
reached, they would invest and open their own warehouses. This allowed them better control over the delivery as
well as better margins.
● After building a warehouse, they would procure initially from wholesalers like METRO Cash & Carry.
● Then, they started eliminating all the intermediaries in the value chain of grocery retail and started procuring
directly from companies. This led to an increase in gross margins by 20 to 23 percent.
● In order to gain higher profit margins, they launched private label brands. They formed tie-ups with suppliers who
picked rice, pulses and spices from mandis and packed them on their behalf. Then in order to eliminate vendors
and to get better margins, they started procuring directly from mandis. This improved the margins by 20-25
percent.
● They also had a “farm to home” philosophy, where they procured fruits and vegetables directly from farmers.
Although, fruits and vegetables had a shorter shelf life, they had a good margin of around 16 percent.
● BB also offered high margin products such as pet food, which wasn’t available in a traditional grocery store and
margins in this segment were around 30 percent.
● When compared to a traditional or modern retailer, BB’s overall margins were 3-4 percentage points more. This
was because since it was only in online format and they had to incur logistic costs only, and was saving on costs
such as rent, utilities, staff etc.
4. Discuss the profitability of BB in light of resources, capabilities, investors and critics?

There are many capabilities of big basket in the long run:

● It will be very easy to access with its design
● Quick browsing can be done through the app that is
created
● Receipt for the order will be given immediately
● Shopping can be done anytime
● They have high Margins
Following observations can be made from the adjacent
The profitability of big basket are as follows: table:
❏ Big Basket offers 25 warehouse which gives them good ● Lower COGS for online grocery model
● Lesser operating costs
profit ● Higher overall net profit potential
❏ 63 storage facilities.
❏ The company claims to have 3 million repeat customer All these indicate towards high profitability of BB.
and its targeting revenue of 1900 crore

High no. of user base for BB

adds to the profitability
despite having comparable
Average order value
Q5. How online grocery stores are expected to perform globally? Why is India different from
other markets?
● They are expecting a growth of 2.9% in grocery sales and market is expected to grow to 150 billion by
2017 and 334 billion by 2022.
● It has a mature market in Korea and China, a very small growth is expected whereas it somewhere in
the middle for USA and still have a better chance to grow. Europe also has potential to grow but India
will come out on the top when we talk about future growth prospects.
● BigBasket has been implementing a Hyper-local strategy, wherein, it has joined hands with more
than 1,800 neighbourhood grocery stores across India to deliver goods within an hour.
● Looking for the current scenario – BigBasket now processes almost 20,000 orders a day, with the
involvement of 2000 team members. Earlier they had acquired a hyper-local delivery startup
‘Deliver’, to further strengthen its delivery service.This acquisition has helped BigBasket in their
Express Delivery model, to delivery groceries in one hour.
● The reason India is different from other markets is due to it's wierd supply chain and also the fact
that more 85% of the retail is done to unorganized retail.