The Business Model behind BigBasket's Success

Image Credit: Big Basket

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As India’s largest online supermarket, BigBasket is changing how urban Indians shop for their groceries and daily essentials. As of May 2019, BigBasket had over 10 million registered customers and was fulfilling almost 1 lakh orders per day across 25 cities. Backed by the likes of giants like Alibaba, this $2.2 billion start-up unicorn’s journey to the top has been nothing short of spectacular!

Journey to the Top

The founders of BigBasket experimented with the concept of an online marketplace way back in 1999 when they launched Fabmart. But due to the lack of online infrastructure and the subsequent dot-com bubble burst in 2000, things did not work out. They were acquired by IndiaPlaza in 2006, and it was the e-commerce experience of IndiaPlaza’s founders in all these years, which led to BigBasket’s roaring success in the Indian market.

Decoding the Business Model

While it initially started as a hyperlocal delivery service, BigBasket has come a long way. Apart from shifting to a more scalable business model, it has also ventured into newer spaces to derive maximum value out of its customers. Wondering how? Well, it’s time to discuss business.

1. Switch to Inventory Model

BigBasket started its operations using the marketplace model- it partnered with kirana stores across cities and used to deliver from those stores to households, based on customer orders. 

But as the customer base increased and economies of scale happened, they moved to an inventory-led model for most of its products. In this model, the company directly purchases products from suppliers like HUL, P&G, farmers, and mills in bulk and stores them in their warehouses. This has increased their profit margins and reduced their dependence on retailers.  Additionally, it allows them competitive pricing of their products, which local grocers cannot afford due to small inventory holdings.

2. Private Label Products

They also came up with their private-label products like Fresho, Happy Chef Gourmet, and Royal Organic- over which they enjoy substantial profit margins. It helps them to compensate for the wafer-thin margins of other products.

3. BBDaily 

The company has started subscription-based daily deliveries of milk and groceries in 10 major cities. BBDaily is poised to have a huge potential and would increase the reliance of customers on BigBasket while reducing their acquisition cost. Wider product variety also means that the average spend per customer will increase.

4. Exceptional Customer Service  

The customer is the most important part of any business. BigBasket ensures it goes the extra mile to please its customers by offering lucrative discounts, on-time deliveries, and bundling techniques.  And in a world where people are pressed for time, BigBasket has the option of 90-minute delivery apart from standard delivery options. Even the standard delivery time has been reduced to 4 hours instead of next-day delivery for superior customer experience (pre COVID-19 crisis).

While problems like low profitability and intense competition are present, BigBasket continues to flourish, witnessing a 3x annual growth in FY19 thanks to its strong supply chain network and exceptional customer service. And given India’s massive $650 billion retail market, sky is the limit for this company!

Written By - Garima Singh