Betting on the basket

By Shonali Advani 

Last June, when the e-commerce sentiment in India was high, five individuals decided to make a dash for it. Their proposition, though, wasn’t fashion or white goods, but groceries: a category four of them had ambitiously attempted in 1999 when they co-founded India’s first online store FabMart.com, much ahead of market readiness. However, this time when Hari Menon (50), Vipul Parekh (48), VS Ramesh (55), and VS Sudhakar (51), the team behind erstwhile FabMart.com (now Indiaplaza.in) reunited to launch an e-grocery store, they knew the opportunity and timing was ripe for success. Bengaluru-based BigBasket.com launched in December 2011 after raking in a fifth founding team member Abhinay Choudhari (41) and his 12-month-old startup ShopasULike.com, also an e-grocery store running as a pilot in Whitefield, Bengaluru. “We got a platform, processes, a team of 20, and some supplier relationships,” Menon, CEO and Head-Merchandising, BigBasket.com says explaining the partnership, which didn’t involve any exchange of money. By February 2012, they raised Rs. 50 crore ($10 million) from PE fund Ascent Capital, sufficient for three-four years and to take business to Bengaluru, Mumbai, Delhi, Chennai and Hyderabad. “This is an atypical investment for us. We are looking at this as organized retail rather than e-commerce,” Raj Kondur, Partner, PE fund Ascent Capital says. Stocking up
In six-odd months since inception, business at the e-store has grown quite fast, thanks to the vast experience and deep domain knowledge of the founders. It currently services 400 orders a day (Bengaluru only), backed by an inventory of 7,000 stock keeping units (SKUs) split across 129 categories. At an operational level, it works on a hub and spoke model. The firm’s own warehouse to stock products will be operational from August 2012, by which time it hopes to have 10,000 SKUs. Till now, the startup has been sourcing goods daily which are sent to its three sorting centers in Whitefield, Yeshwantpur and Bannerghatta that together cover all four zones in the city. Here, orders are segregated to be delivered to customers in company-owned vehicles. “We buy FMCG products from Metro cash and carry, fruits and vegetables are sourced from Safal and our own suppliers in Hoskote. For staples too, which we stock, we’ve set up our own supply chain,” says Menon. In case of unavailability, BigBasket.com buys directly from the market. “We want to work on getting fill rates right at the moment,” he says. Post-August 2012, BigBasket.com will go deeper into the supply-chain as it starts sourcing directly from companies and mills. “This will change margin dynamics,” affirms Kondur. For the long term, the firm plans to increase warehouse space to 30,000 square feet capable of stocking 15,000 SKUs. “This is a complex category and execution-intensive, requiring both retail and technology experience, a combination that’s hard to find. This team has 100 years of experience between founders,” says K Ganesh, serial entrepreneur and co-promoter BigBasket.com. Double challenge
So far, Menon says, they are challenged on two fronts. The first and most pressing is to get fill rates right, which currently stand at 90-95 percent for BigBasket.com. “Consumers are expecting to get a 100 percent fill rate and that puts pressure on us. People buy online for convenience and even if one item is short, they don’t mind purchasing everything offline,” he highlights. Second is the problem of suggesting alternatives for stock-outs and at present, BigBasket.com’s platform doesn’t have the intelligence to do so. For the time being, it’s tackling the issue by mentally preparing customers before delivery. Not surprisingly, the company has invested heavily in technology, especially for back-end logistics. A routing software helps them divide the number of orders serviced by each van, which are fitted with GPRS systems to monitor movement in real-time. “Delivery boys carry tablets where customers punch in PIN numbers to confirm receipt of order,” says Choudhari, Head, Customer Experience. There’s no minimum order value and they charge Rs. 20 as delivery charges for orders up to Rs. 1,000. Anything above this is delivered free. Customers have the option of four time slots for delivery. “We hope to touch 1,000 orders a day by November 2012,” Menon says. Customer demographics
For 36-year-old Amrita Paul, her first tryst with online shopping was on ShopasULike.com, in end-2010, and she has continued as a customer even after it rebranded as BigBasket.com. “I’ve encountered stock-outs only twice and the team’s always been quick to suggest alternatives or take an order for the next day. They take great care in selection of vegetables and fruits, which arrive well-packed,” says a satisfied Paul. Adds Harmeet Kaur who shops weekly: “They specially sourced a particular brand of ketchup I requested for.”Broadly, its customer demographics are reasonably affluent, dual working households that purchase anywhere between Rs. 1,000-5,000 worth of groceries every month. “There’s no great market for us in tier II or III cities yet,” affirms Choudhari. “In Bengaluru, we’re finding it difficult to break the market in categories like staples, where traditional households prefer going to kirana stores they have a long-standing relationship with,” Menon admits. While its marketing efforts have been minimal, the firm has been working around doling out free products, like rice, with the aim of converting such customers. The startup is also targeting B2B clients and has already acquired five thus far. Now keen to expand its footprint further, BigBasket.com has picked Navi Mumbai and Hyderabad as new markets to enter, initially, and has already appointed respective heads to oversee operations. “We chose one big city and one small in the south. Bengaluru’s model can be copy-pasted in Hyderabad or Chennai as these markets are similar. Mumbai and Delhi are tough animals,” Menon notes. Ganesh foresees challenges in last mile delivery as they scale to other cities, but Menon is optimistic given their investment in technology, a big differentiator, in addition to the founders’ deep understanding of the domain. “When I go to 3,000 orders a day, I need to build processes supported by technology to fulfil the demand,” he says.  Smementor@moneycontrol.com