EXCLUSIVE: BigBasket’s co-founder talks about hyperlocal businesses and profitability

BigBasket is India’s largest online supermarket and in the dwindling hyperlocal business, it is one of the two players really making an impact.

With a big etailer like Amazon Now starting in India, BigBasket faces a lot of competition but it seems to be going strong and how; with over 3.1 mn registered customers, 20,000 products from over 1000 brands and presence in 30 cities across the country including Bangalore, Hyderabad, Mumbai, Pune, Chennai & Delhi-NCR, with plans to expand to other cities.

Business Insider caught up with Vipul Parekh, Co-Founder, and Chief Finance Officer, BigBasket to commemorate the company completing five years in this volatile space.
The Hyperlocal enigma
When asked of the sector, Mr. Parekh said,”Hyperlocal is essentially not a grocery business. It’s a delivery business, what that means is it could be fresh produce today and a mobile phone tomorrow. What that essentially means is that the customer is willing to pay for that delivery home and convenience, not for the product itself.”
BigBasket's online food store offers a variety of products across various categories: Fresh Fruits & Vegetables, Grocery & Staples, Beverages, Bread, Dairy & Egg products, Branded Foods, Meat, Personal Care and Household products.
He added, “We are a grocery retailer which gives you the product and also gives you the option to get it delivered. The retailers control the entire supply chain from the production to delivery. We decide the kind of customer experience we want to offer and that’s why we are currently operating at 99.5% fill rate and 99% on time delivery.

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Freshness business
Mr. Parekh believes that BigBasket could be India’s biggest grocery brand in the next 3-4 years. “We hope to treble revenues to Rs 2,000 crore by March 17. The kind of growth we have seen is phenomenal. Grocery is a business that will always have high, daily demand. The customers have shown faith in ordering online as We went from 419 orders a day in December 2011 to 50000 orders a day in December 2016.”
For BigBasket, Fruits & Vegetables contributes to over 18% of the total business. Direct sourcing has increased margins by 6-7% and farmer incomes by 10-15%. “For the biggest retailers, the percentage is almost half for this category. The future of staples is online.”


Private labels and the quest for profitability
Parekh gives credit to the company’s own label for revenues, ”We are currently seeing a 35% contribution coming from our private labels. This is largely driven by our fresh produce and staples brands - Fresho & BB Royal/ BB Popular respectively. We have diversified our private labels into several categories such as - dips, bread, cookies, premium chocolates, ready to eats, baby wipes and much more. We are hoping to see our private label grow to 40% next year.”

Closing in the (Pepper)tap
Hyperlocal businesses are highly dependent on their partner’s ability to provide for products on time and at a consistent quality. Also, margins are limited as they need to be shared with the retail partner.
Parekh says,”We weren’t happy when the competition shut shop as that meant we would have to spend more money on marketing. Our business model is geared towards control on depth in the supply chain (Fresh from farmers, national sourcing, direct supplies with large brands, etc) which provides higher margins and better quality.”
When businesses give you lemons customers, you better make lemonade.