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BigBasket begins operations in Kolkata

Abhishek Law Kolkata | Updated on January 19, 2018 Published on January 21, 2016

Hari Menon, co-founder and CEO

Banks on expansion in smaller cities, new revenue streams to achieve target

Bengaluru-based online supermarket, bigbasket.com, is looking to hit the $1-billion (₹6,000 crore) turnover mark by 2018, banking mostly on its expansion across Tier-II cities and new revenue streams.

It also targets a five-fold jump in turnover this fiscal. In FY14, it reported a turnover of ₹220 crore, and is now targeting ₹1,000 crore by March.

According to Hari Menon, co-founder and CEO, bigbasket.com, for Tier-II cities expansion, the company is banking on its portfolio of brands and variety of offerings (some 15,000 SKUs across brands and private labels), including gourmet ones, to spruce up demand.

The strategy is similar to what apparel e-tailers have done — bringing in brands generally not available in Tier-II locations thereby making them aspirational. Now e-tailers claim 50 per cent demand to be from such locations.

“Tier-II foray for us should be different. Convenience of ordering cannot be the catchword there. For us, it will be making available those SKUs which are generally not present in these smaller towns and cities,” Menon told BusinessLine.

Interestingly, bigbasket’s foray comes at a time when the segment is facing some hiccups, especially in Tier-II locations. Many hyper-local players have already scaled down operations in such areas.

Tier-II foray

The online supermarket, that operates on an inventory-led model— that is it stocks its own products across warehouses — is looking to enter 12 more cities by February.

These include Patna, Surat, Jaipur, Chandigarh, Ludhiana, Nagpur, Visakhapatnam, Indore, Bhopal, Kanpur, Panjim, Ernakulam and Mangalore.

It has a presence in Lucknow, Delhi, Hyderabad, Mumbai, Bengaluru, Vijaywada (including Guntur), Chennai, Coimbatore, Madurai, Mysore, Pune, Nasik, Baroda and Ahmedabad. Kolkata, is the 15th city, and operations began from Thursday.

“Typically it takes 24 months and a capex, including operating losses, of ₹6 crore to break-even in a city. On a company level, we intend to break-even by 2018. Turnover by that time should be $1 billion,” he said. At present, only Bengaluru operations of the company are profitable.

Revenue models

bigbasket is also banking on two new revenue models that it has recently introduced for the Tier-I cities. These include a hub-and-spoke model (for top-ups and emergency purchases called one hour express delivery) and speciality services (bringing on-board a local favourite shop); apart from catering to regular orders (planned monthly purchases).

While 70 per cent of the orders placed are expected to be “planned purchases” (through app or Web site), 25 per cent are emergency ones. Only 5 per cent are speciality services.

“Over a period of time, we might look at introducing some of these models in Tier-II towns. But, business in these towns must settle down first,” he said.

Investments would involve setting up warehouses across all cities. Capex involved in setting up each warehouse, where the spaces are obtained on lease, is to the tune of ₹3-3.5 crore.

Published on January 21, 2016
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