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| Edited By: Ashish K Tiwari |Source: DNA |Updated: Nov 21, 2018, 06:25 AM IST
Alibaba-backed online retailer of food and grocery products BigBasket, which is owned by Supermarket Grocery Supplies Pvt Ltd, will be focussing on going much deeper in the 25-odd cities it currently operates in. Hari Menon, co-founder and chief executive officer, BigBasket.com, in conversation with Ashish K Tiwari speaks about the company's business, competitive scenario, new channels and product categories that brand BigBasket will sport in the near future. Edited excerpts...
We have doubled revenues and are looking at significant growth this year as well. Last year we closed revenues at Rs 2,000 crore and are expecting to cross Rs 3,500 crore. The number sounds really nice but its just a fraction compared to the overall size of food and grocery market that's pegged at between $500 and $600 billion. Just about 3% of it is modern trade and there is a huge untapped opportunity to be looked at. For us, the growth going forward will be equally good as we are opening up some new channels of distribution. We have a very traditional and real approach of looking at the growth numbers hence figures for the new channles / businesses have not been factored in the overall growth numbers. We are yet to learn and see how things pan out from a unit economics perspective. The reason for doing all this is to acquire new customers and grow the subscription business that's currently at 10 million and we'll double this number as well next year.
It's a little over a year for Amazon and less than a year for Flipkart. Their entry has only opened up the market a lot faster. There is a lot of noise in the marketplace and everybody is talking/ advertising about it thereby building consumer awareness about the ease of buying/ transacting online for fruits, vegetables and staples. Consumers look at a complete basket to shop for and once you have managed to build that stickiness it will be very difficult for some one else to acquire the same set of customers and divert them to another online platform.
A lot of people use the exit run rate mechanism to arrive at the valuation number – basically last month's sale multiplied by 12. If we take that approach then the exit run rate for BigBasket will be close to Rs 6,000 crore. That's because we will do about revenues of Rs 500 crore in the month of March 2019. We wanted to close September at Rs 300 crore but missed it and achieved that number in October. The numbers quoted earlier also don't factor in what we will probably get from Paytm. We recently got integrated and you'll see us live on Paytm as we're both from the Alibaba ecosystem. So if I have to take into account all that's been planned, I think we should be doubling business for the next two – three years.
I think acceptability from the customers is very crucial for the development of this business. The difference huge when we compare BigBasket launch in 2011 with Fabmart in 1999 – both businesses were launched by the same set of founders. It was more noise than business then and people were scared to use credit card for transacting online as we were selling music, books and so on. There were dial-up lines and one could have a cup of coffee and come back by the time the page loaded on the desktop screen. Customers got frustrated and by end of 2000 we quickly pivoted and launched the physical store format under Fabmall. That journey really took long in terms of customer acquisition but that was not the case in 2011 with BigBasket. The ecosystem was ready and that's so critical for a start-up like ours. The timing was right and customer adoption was the biggest thing to scale operations.
The monthly average is about Rs 1,500. It has reached a point and kind of stabilised now thus giving us the required unit economics. It will now grow in smaller numbers. So that being constant, everything else needs to double to actually the targeted growth in the coming years. The doubling of numbers is very good for grocery business but then it gets compared to other e-commerce businesses like the food tech that's probably growing three to four times. The likes of Zomato, Swiggy etc are spending a lot of money and there is aggressive competition in that space as well. More importantly, scaling up that business is easier because it's a lot less infra driven and is a very logistics driven operation of picking from a restaurant and delivering it to a customer.
In my business to scale, I have to put up large warehouses and a whole lot of other infrastructure to support the scale. I don't want to call it a bottleneck or a constraint but that's precisely what stops us from growing four times. Adoption of grocery is not going to be as easy as adoption of food delivery, you've always being buying and eating masala dosa and now you can get it delivered at home. In case of fruits, vegetables and staples the change is much harder from a mindset perspective. People develop a comfort level with physical stores and will prefer to go to their regular store. In fact, customers even get upset of the store operator changes the planogram because the idea is to finish all the shopping at the earliest.
Fresh, i.e. fruits and vegetables only, is doing exceedingly well for us and it is 18% of sales by value. This category is just about 5% in physical stores and our numbers are very encouraging. We packaged it well and did a lot of stuff initially to make it click with our customers. So two years, ago it reached a particular level and that's when we decided to up the game in the FMCG segment with the idea of getting to the same levels of modern trade.
Yes, three of them actually. One is a company that makes unmanned vending machines. We are putting these in apartment complexes. Over the next three years, about 6,000 such vending machines offering fruits and vegetables, biscuits, noodles, samosas and other snacking items etc. will be installed in top 10 tier-I cities that we are operational in. Each machine cost about Rs 1.5 lakh or so. We have already started in Bangalore and will soon be launching it in the Mumbai market.
The second and third acquisition i.e. RainCan in Pune and MorningCart in Bangalore is for the milk subscription business. It basically deals with early morning delivery of milk and non-milk products. It's a huge opportunity and a big business for us. The latter is more exciting actually as we have already built the supply chain to deliver fresh fruits, vegetables, bread, dairy, eggs etc. and one can even subscribe for it. It's the cheapest and a very low cost delivery mechanism because one needs to go in one building and deliver across all the flats. On a standalone basis itself, it can quickly become a Rs 1,000 crore business for us.
No, we are not launching any physical stores. I think people are confusing the introduction of vending machine/ kiosks with physical stores. We are a pureplay online retailer.
Beauty is a business that we are starting to build out now. We think it's a great opportunity and will make for a good business for us. The catgeory will be built into BigBasket itself and we expect it to gain huge traction from the millennials. While private labels will come a little later we will start with all the international and homegrown brands. We are currently selling personal care like all the supermarkets and now we want to offer the entire gamut of makeup products, hair and skin and so on. The range will comprise between 30,000 to 40,000 products. Currently, we have around 28,000 products and another 40,000 of just beauty products will get added.
