The challenge is acquisition of new customers: BigBasket CEO Hari Menon

Subscription-based services will fuel the e-grocer's cross-platform push

Online grocer BigBasket is on an expansion spree. With the acquisition of Morning Cart and RainCan, it has got into new segments — microdelivery and physical/omnichannel commerce. The e-grocer has also acquired a controlling stake in kwik24, which operates cloud connected, unmanned vending machines. The addition of new businesses will see BigBasket try its hand at subscription-based services, offering consumers products such as milk, vegetables and fruits. The company is hopeful of leveraging its proximity to potential buyers and tap its large distribution network comprising 20 distribution centres and 60 dark stores to fulfil orders on time. Operating in 25 cities, the e-grocer boasts of 10 million registered customers and serves 1,00,000 orders per day.

Hari Menon, chief executive officer and co-founder, BigBasket, says, “As we get into new businesses, the plan is to make the existing network and systems work more efficiently. Tweaking the network every now and then to support new launches is hard. More orders from a city-zone will result in economies of scale for us. Higher order concentration will imply that our delivery vans will travel shorter distances and that will bring down our logistics costs.”
 

BIG BASKET

At present, Morning Cart and RainCan peddle subscription-based milk. BigBasket is keen on expanding the product offerings using their service network. It hopes to cover fruits and vegetables, staples, bread and eggs, puja essentials, and childcare products such as diapers. The team has gone ahead with a soft launch of the new subscription service, bbdaily, in Bengaluru and Pune with 20,000 orders per day. The goal is to roll out the service in eight other metro cities over the next three months or so.

Rutu Mody Kamdar, founder and director, Jigsaw Brand Consultants, says with the new acquisitions, BigBasket is fulfiling its promise of going omnichannel. However, she is sceptical regarding the uptake and future of the offering. She points out that Indian households are not known for their stickiness and loyalty when it comes to buying essential items. Unlike in the West, a majority of Indian consumers do not buy perishable items in bulk and are known to buy provisions weekly, if not daily. Also, most buyers like to touch and feel the fruits and vegetables they buy to determine their freshness. 
 

“What needs to be seen is whether they will be able to scale up the subscription-based service model or not. It is a proposition that could be powerful for a certain segment of buyers. How well the service will do is going to be a function of influencing customer habits and effecting a shift in their buying behaviour,” says Kamdar.

Challenges notwithstanding, BigBasket is confident of making its new subscription-based service a hit.

Hari Menon Chief executive officer & co-founder, BigBasket

Menon says the company will continue to use its current hub and spoke model to deliver perishable items to customers. From its regional warehouses, the products will be transported to dark stores located in a specific zone and goods will be directly delivered to the customers’ doorstep in delivery vans.
 

For bbInstant service, BigBasket is hoping to tie up with housing complexes that have a minimum of 300 apartments. In the case of milk, it is working with the existing network of local delivery men and directly with companies like Amul, Nilgiris and Heritage.

As part of its bb Instant service, the company is installing unmanned vending machines. Customers can order fresh produce like fruits and vegetables, and other fast-moving consumer goods using the bb Instant app. They can pick products from the nearest vending machine. To offer this service, BigBasket is looking for appropriate locations such as club houses in apartment complexes. So far, it has installed 100 smart unmanned vending machines at 50 locations 

in Bengaluru.

Each vending machine has three chambers — hot, ambient, and chilled. Each machine is currently configured to offer 24 products such as juices, beverages and hot snacks. Each location is equipped with two vending machines and are capable of offering as many as 48 products. Depending on demand in a particular area, the BigBasket dark stores will refill vending machines three to five times a day. The average ticket size stands at Rs250 per order. And each of its customers is making purchases a little over three times over a week.

In the micro-delivery space, BigBasket will compete with incumbents such as DailyNinja, Milkbasket and Doodhwala. According to industry experts, there are quite a few things going for BigBasket, which has considerable name recall. “For the e-grocer, it’s not a question of acceptance. As a branded player, it will get an easy entry into apartments. It also stands to benefit from the existing network of vendors. Players such as  Swiggy and Scootsy have made inroads into the microdelivery segment. For BigBasket, the challenge will be to organise an unorganised market,” explains Kamdar.

Menon of BigBasket says the task is cut out for the company. Allocation and utilisation of resources is not going to be difficult. The challenge is acquisition of new customers and mastering the skill of door-to-door selling. Finding the right location to place a vending machines is also going to be a tough task. With the infrastructure in place, BigBasket aims to double its sales from Rs20 billion in 2017-18 to Rs40 billion by March 2018-19.