BigBasket
In this episode we talk about Big Basket (https://www.bigbasket.com/).
Overview
Big Basket is a ecommerce startup founded in 2011 in Bangalore, India by Abhinay, Hari, Vipul, VS Ramesh, VS Sudhakar. Their main business idea is to allow customers to buy groceries online and get it delivered to doorstep.
Funding
As of this writing, they are in Series F and a recent round was raised via Debt Financing.
Debt Financing: When a firm raises money for working capital or capital expenditures by selling debt instruments to individuals and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid.
Business model
Based on publicly available information, their business model is like a typical eCommerce company where they become a middleman to take care of the supply chain management of connecting farmer / grocery shops with end customers ordering groceries from their homes.
They may operate their inventory in two ways:
- They may maintain their own storage capacity for products which do not expire such as pulses, grams etc. So, when customer orders from their website, they might check if the product is first in their inventory, if it exists, they can send it to customer directly.
- They may purchase from 3rd party groceries stores (like the stores which are there at end of a street or bulk supplier) and deliver it to a customer. This works well for fresh groceries.
In either of these modes of inventory management, they would need to run efficient planning algrothims in their website to check if an order comes in from customer, the items requested can be from both stored or 3rd party inventory. This needs to be routed to nearest delivery person and they would need to pick up that grocery and deliver to end customer. All these interactions need to happen within minutes automatically within minutes without human intervention so that it scales to many customers.
How can they make money?
- Since they buy in bulk and store a particular product in their inventory, they might have got them at a discounted price which they sell to the customer at a little higher price thereby making profit on purchase of each item.
- They add a delivery charge on each purchase delivery which probably includes the cost incurred to pay the person making the delivery.
- Eventually when a lot of customers start buying from the website, maybe they can ask sellers to bid for a lower price for deliveries. The incentive here for the sellers is that they get access to more customers in a single platform.
Competitors
As of this writing, there are multiple competitors like JioMart, Grofers, Dunzo, Ninjacart and may others. Who gets the most market share in this billion dollar grocery delivery TAM in India is interesting to watch.
Our thoughts
As a customer, this is an awesome service in times like a pandemic where we want grocery to be delivered without contact and risk of going to a crowded grocery store is avoided. In normal times as well, the convenience offered to get fresh product to our doorstep is great. Clearly there is a product-market fit.
However, since the grocery delivery space deals with supply chain / operations, the company needs to keep their finances frugal since operations in the real world (inventory management, delivery person salaries etc.) are lossy and margins can be low. If they can operate their company with the low margins and yet make profit in a cost sensitive market like India, they would emerge successful.