Big Basket will break-even in all tier-1 cities this fiscal: CEO Hari Menon

Alibaba-backed Big Basket, the country’s top online grocer, expects to break-even at an operational level in top 10 metro cities this fiscal, co-founder and chief executive officer (CEO) Hari Menon told Business Standard.

Big Basket competes with Grofers and grocery arms of Amazon and Flipkart and operates in 26 cities, with 80 per cent of its business coming from top 10 cities. 

“Right now there is a huge focus within the company to become profitable. We look at cities as independent units. Over the next 3-4 months, all our 10 tier I cities will break-even operationally”, said Menon.  

"Operational profitability, in this case, means that revenue from each city will cover all operational costs including discounts and below the line marketing," Menon clarified, adding that it does not include corporate costs and company-level marketing like TV and newspaper ads.

Valued at $1.2 billion, Big Basket is the de-facto market-leader in the segment. It delivers a whooping 1,40,000 orders per day and boasts a collection of 30,000 items (stock keeping units or SKUs) on its store-front.
 

The company closed the previous financial year ending March 2019 with total sales of Rs 3,250 crore, up about 60 per cent from the year before. In the current fiscal, Big Basket is eying Rs 5,300 crore, Menon said. He didn’t comment on bottom-line, but did say that net profitability at a company level is a discussion for the next financial year (FY21).

Big Basket is currently undergoing a transition in business model. The company, so far, had two models- one, where customers could slot deliveries for the next day, and, second, 90-minute express delivery on the same day. It has now merged the two.

“Now, 90 per cent of what you order will get delivered to you in two-three hours. The balance 10 per cent will be delivered later in the day or the next day,” said Menon. 

This is essentially a re-engineering of the supply chain. Larger orders, which require delivery through vans, will be clubbed together, and smaller, less urgent, ones will be distributed amongst bike riders. What goes through a van or a bike is decided by an intelligent algorithm.

The company is opening “dark stores”, quick-service warehouses, closer to customer homes for faster delivery. “We have optimised the business model for lower cost and higher efficiency,” he said. 

In May this year, Big Basket raised $150 million from South Korea’s Mirae Asset Financial Group, UK government-run CDC Group, and existing investor Alibaba, taking its total fund-raise to about $1 billion. The entry of Mirae and CDC Group, two investors that typically invests in mature, often public companies, established Big Basket as a fully-grown corporate.

Indeed, Big Basket now resembles a mature firm, with multiple serve-lines. It is aggressively growing its dairy products subscription business, installing vending machines at apartments and offices, and investing in direct-sourcing channels with farmers.

Launched six months ago, BB Daily allows users to subscribe to daily delivery of milk, bread and such daily essentials. It is clocking as many as 1,40,000 orders a day. “We are also establishing a beauty business, a special online store-front that will have grooming products from all brands", said Menon. 

Over the years, Big Basket has set up over 40 collection centres at farm locations, from where almost 80 per cent of all fruits and vegetables (F&V) sold on Big Basket are sourced. It connects directly with 10,500 farmers. 

The company's F&V business will be approx Rs 1,000 crore in the current fiscal, about 18 per cent of total business and way higher than next competitor. “It is an extremely strategic piece for us,” said Menon.