Hari Menon Curated
Co-founder and CEO, Bigbasket
CURATED BY :
What do you hate of being the most?
I organise myself and my belongings all the time. So, during my hostel days at BITS, Pilani, friends would secretly come into my room and mess things up just to annoy me. They knew I would lose it if things weren’t where they were supposed to be. That is how much I hate being disorganised.
Who was your support system during your struggling days?
It was difficult back then. No one supported me, as they didn’t know where I was heading and it was only my wife who understood and motivated me to move forward.
You are now a successful person. Is there anything left to achieve in life?
Oh yes. I want to be a part of a rock band and play in small pubs, use vocational education for skill development in the country, devise ways of using money to help our country and get rid of my Obsessive Compulsive Disorder. I keep checking whether the lights in my house are switched off before leaving. As a result, I keep delaying things.
What is kind of innovation you are coming up with for customers?
So from innovation stand point, you will see a lot happening on the customer facing side. One of the things you will see is single click check out. So in one click if you are wallet customer your payment will be done and you can quickly check out. We are building a very comprehensive marketing engine which allows all are users within the organization to use the various assets that we have in marketing effectively. There will be a marketing campaign and work closely with partners like HUL and P&G. So automate the entire process so that’s another thing we are looking at. One of the key things which is going to be our driver is that there are 3 important things we are going to focus on going forward and you will see lot of innovation happening on that front. One is that we want to be most preferred employers of blue collar workers in the country. We will make sure that 75 percent of our 16,000 employees are blue collar-delivery boys, warehouse pickers, packers, staff people etc. Second is we want to become the most preferred partner for farmers in India. We already work with about 2,100 farmers and we want to work very closely with them so that preferred choice for a farmer to supply the produce should be BigBasket and third is to become the best customer service or customers oriented company in India. So we will focus on blue collar workers, farmers and customers and in these 3 areas you will see innovation. Fundamentally, our focus is to grow the business much faster than what is grown till now.
Supermarkets typically work with a net profit of 3-4%, does the online model offer you a higher return?
Yes, we are aiming for a GP between 20 – 23% and net profit between 5- 7%. There are a number of reasons we believe this is achievable. For instance, we have our own private label in staples which allows us higher margins. Fruits and Vegetables contributes 20% of the business. Here also the margins are set by us. Besides growing the GP we also have some margin advantages as an online model such as no shrinkage, while the brick and mortar stores have shrinkage as high as 2%. – 4% which goes straight from the bottom line. Also while our logistics costs are high, our costs on rentals are low. Not having stores, further helps us save on cost of utilities – electricity, telephone etc.
Who is you Customer ? How have you reached out to them ?
Our marketing spends have been low. We are largely dependent on word of mouth. In Bangalore and Hyderabad we have been targeting clusters of buildings/ gated societies. We do events, distribute fliers, and convert a couple of people. After that the word spreads. Residents of societies are normally connected on an intranet as a result good news goes viral. For instance someone put us up on the Bangalore IIM Alumni website. So long as we can deliver – going viral is good for business. The bad news is that if we mess up – there is a danger of that going viral too. The only above the line activity we have done is radio which has also worked well for us. At the last count, 80% of our customer was female. Presently we cater to planned buy / party buy/ weekly buy. We don’t cater to impulse. We cannot deliver in 2 hours e.g. if you want something right now. For that you will still need to visit the closest supermarket. But we will get there eventually.
What is the delivery mechanism undertaken by the Bigbasket since it holds the entire supply chain?
The entire supply chain is controlled by BigBasket. We don’t outsource at all. Even Delyver is a fully-owned entity of BigBasket now. For groceries, it’s very important to have instant and safe deliveries, unlike regular couriers. It requires things like cold storage etc. We have chillers and freezers in the delivery vans and we deliver even ice-creams. There is a huge demand for chilled and frozen items today.
What are the biggest challenges in online grocery delivery?
We have a workforce of 14000 people, 75% of whom are blue-collar. Retaining them is the biggest challenge. Scale can solve a lot of problems in this business. In fact, only one thing works in this business, which is scale. Earlier, our vans used to travel longer,say an average of 120 km a day when we started. This was because the density of orders was lower. Now, it is down to 55 km a day because of higher order density. This is how scale helps achieve unit economics.
Several new online grocery startups are resorting to the subscription model. Do you think it will work?
Subscription works well for items such as milk and newspaper. The Indian mindset doesn't subscribe to anything else because we don't pre decide on other things. Rather we plan our day in the morning. In comparison, people in the west are fairly predictable in their eating routine and have predictable lifestyles. Second, subscription based orders can't be subject to too many changes.
What is your passion other than entrepreneurship?
I curse myself for not becoming a professional singer. Once I am done and dusted with BigBasket.com, I will take up singing. Even today we meet once a year at a holiday destination to jam with our instruments. We played was for the BITS Pilani batch-reunion. We have all the instruments at home and often sing 'Hotel California'. Every weekend, I connect my karaoke set to the TV and sing Kishore Kumar's songs for three hours. Singing puts my soul in complete peace. I typically shut the door of my cabin and listen to my favourite songs while working...especially during data-crunching.
Earlier, we had investors putting money into unproven models and allowing them to grow but now investors like Alibaba and SoftBank are putting big money into proven models. Will the money in unproven models come back?
Yes, this is because unit economics is a critical piece. Everybody wants to see profitable scale and you’re right, more and more money will now come into firms that are showing positive unit economics. I don’t think money will start coming back to companies not showing viable business models. It shouldn’t, actually.
The government has also allowed 100 per cent foreign direct investment in food retailing. Will this bring more players and is it a good thing?
Of course, we will see more players. The moment people see groceries are being bought online, they will come in. Grocery is the most difficult category to execute and it’s the most difficult category to get people to switch, as it’s a very dear category for every household. People are not necessarily happy buying groceries, right? It’s a chore but they need to get it done three to four times a month. So, what we see is more and more people are moving to buy online.
In the latest Budget, there’s a thrust on digital and e-highways. How are policies aiding your business?
It’s really helping. The more you drive people to go digital, platforms online really begin flourishing. It really helps us directly because more people go online; it’s not a cash economy anymore because people are starting to pay digitally. Second, the Budget has done so much for farmers and that’s really critical because it’s a very strategic piece for us. When investments in agriculture increase, it helps build our business.
How healthy are your numbers? How often do customers buy from you?
Customers today, on an average, buy about three times from us a month. Our objective is using data analytics and all the tools we are building now to move that to about five times a month. That’s how many times an average customer buys groceries anyway, right? We’ve seen tremendous traction from fruit and vegetables; around 18 per cent of our business comes from these, almost three times higher than physical stores. We are very, very focused on the strategic business that is fruit and vegetables. We have a solid farmer connect programme. We work with 1,800 farmers and this will grow to 3,000 farmers in the next few months. Almost 85 per cent of what we sell comes from farmers. So, that’s a strong strategic piece for us today and our focus is to be the most preferred partner for farmers in India. We’re also building our own private labels across categories.
How will the new capital help you take on the growing competition in the grocery segment, which both Amazon and Flipkart want to be in?
How will it help us take on competition? I don’t know and that’s not our focus. Our focus is on building ourselves and this money will help us achieve a strong growth trajectory. We're at a Rs 2 billion (gross merchandise value of products sold on its platform in a month) run rate. This will move to around Rs 3 bn in August and about Rs 5 bn in March 2019. That’s the whole plan and, fundamentally, this is what the money will get utilised for. I don’t know where the competition will be but we’ll clearly be the leaders in this space by miles. At Rs 2 bn, we’ll be about four times (bigger than) our nearest competition. Everything we do now in terms of enhancement in technology, data analytics and infrastructure will all be geared towards these numbers.
The margins in retail are supposedly low. How do you work on profitability?
How important is profitability in e-commerce and how to keep growth at the same time?
How has the e-commerce industry evolved from the 90s to now?
How do you distress yourself?
How is the learning scope to work in Bigbasket?
What is the dream that you are chasing with Bigbasket?
How Bigbasket is changing the grocery scenario in India?
Why did you build Bigbasket?
What is the biggest challenge for the Indian entrepreneurs?
What is your advice to the startup entrepreneurs?
How did the idea of Green Bigbasket came? Are there any other initiative you are planning to implement in the future for Green Big Basket?
Fundamentally, as a company, we believe in sustainability & are very pro-green. It’s the right way to operate businesses with equal care & concern for the environment as for customers & employees. Bigbasket believes in doing well by doing good and that includes doing good for the environment as well. So Green is a part of our operating DNA. We have so far taken several steps towards this. a. We deliver groceries to our customers in open crates & not plastic bags. Crates is the single largest capex item for us & is actually more difficult to handle rather than just going & delivering in plastics. But we chose to do it the green way from start. b. We follow waste segregation & management in all our facilities. In many cases, it’s mandated by government but even where it is not, we follow it. In Bangalore, we give the wet waste to our farmers who in turn use it for composting & recycling. c. Our packaging in Bangalore for fresh is completely paper. In other cities too, we use biodegradable plastic and corrugated boxes that are recyclable. d. There are 2 places where we have completed successful green projects which will now be rolled out across all our cities. First, we have completed installation & testing of solar energy panels in Bangalore. The rooftop of our warehouse is now covered with solar panels & supplies almost a 5th of our power requirements. We will be rolling that out across the country. In the other case, in Delhi, we have piloted using battery driven e-vehicles in lieu of regular fossil fuel powered vans and will be using those for delivery. There are other things that we do like maintaining greenery around our facilities wherever there is space or using less of paper in our offices & promoting it as a habit on an ongoing basis.
Are there any plans to add a new product category to the business?
Beauty is a business that we are starting to build out now. We think it's a great opportunity and will make for a good business for us. The catgeory will be built into BigBasket itself and we expect it to gain huge traction from the millennials. While private labels will come a little later we will start with all the international and homegrown brands. We are currently selling personal care like all the supermarkets and now we want to offer the entire gamut of makeup products, hair and skin and so on. The range will comprise between 30,000 to 40,000 products. Currently, we have around 28,000 products and another 40,000 of just beauty products will get added.
What will be the number like when it comes to the overall valuation of BigBasket?
A lot of people use the exit run rate mechanism to arrive at the valuation number – basically last month's sale multiplied by 12. If we take that approach then the exit run rate for BigBasket will be close to Rs 6,000 crore. That's because we will do about revenues of Rs 500 crore in the month of March 2019. We wanted to close September at Rs 300 crore but missed it and achieved that number in October. The numbers quoted earlier also don't factor in what we will probably get from Paytm. We recently got integrated and you'll see us live on Paytm as we're both from the Alibaba ecosystem. So if I have to take into account all that's been planned, I think we should be doubling business for the next two – three years.
What are the biggest challenges you have faced while scaling up BigBasket?
One big challenge is we are very people-dependent. Every time we grow, we have to add more people so that’s one issue that’s been there with us and continues to bog us. We’re going to invest in automation in terms of our warehouse and last-mile delivery but we will remain people-dependent for a very, very long time to come.The second issue that we always faced is this fruits and vegetables thing. There’s a huge touch and feel to it. There’s this whole perception that I will get good quality fruits, vegetables, meat and rice which is something we are constantly working on. This is basically for new customers. The other big issue is inertia. You’ve got a smartphone, you’ve got broadband, you are savvy, you earn reasonably well, you have a great job going, you are married. Why haven’t you bought from Bigbasket? The point is that it’s a lot of inertia. That old habit doesn’t die easily in terms of buying grocery, right? Buying a mobile phone online is easier. It’s the same product (that you will see in a physical store too). There’s lots of such issues in grocery because the number of items are large in an order, when I go out I just end up picking up something. Inertia-breaking is the second biggest challenge.
How did the Shah Rukh Khan campaign help BigBasket ?
Shah Rukh Khan’s endorsement has helped massively. We were conscious that it was going to give us visibility. Today, we are very visible. Now, we got to convert. He (Shah Rukh Khan) can’t make people buy. We have to do it. That’s our focus, that’s what analytics will do.
What are the key decisions that have made Bigbasket what it is today?
We were clear that we wanted to build a company which is extremely strong on processes. This is a very execution-focused business right, and to have high-class execution, we need to build a company which is built on processes and built on technology. These are two things that are absolutely the base of everything we said we would do, which is build strong processes and drive those through technology. We said till this becomes robust and strong—including delivery, perishables, the whole range—we will not market ourselves. We just did this for one year and we called it the year of the back-end. We said we will not go and make noise because it’s such a crucial category. The lady at home is going to trust you only if you deliver five times to her; well, otherwise the trust is not going to come.The other thing we always knew we should bet on and really start from day one is fruits and vegetables as a business, which is perishables. We always knew that we will bet on this category and this category can do two things— either it can make you win or it can make you collapse because quality perception of a grocery store is built on the freshness and quality of your fruits and vegetables, staples and meat. It’s not the detergent and soap that decides the quality. We said that we should do that—if we don’t do it well, we’ll be dead. If we do it well, it’s a great opportunity. So these are the two things that we decided to bet on. One is processes and technology, and second is the fresh produce, fruits and vegetables. We decided to package it and brand it.
How is the ‘Smart Basket’ going to improve the supply chain of fruits and vegetables?
"Smart Basket" feature allows customers to shop quickly. Today with smart basket our customers finish shopping for their grocery needs in less than 3 minutes. We use data intelligently to recommend their frequently bought items. Data comes in handy when it comes to offering a better shopping experience to customers. We use data to understand what the customers are buying; analyze their baskets, frequency of purchase etc. This helps us in improving predictability of what they are buying which intern helps in improving sourcing and procurement of various items.
Tell us about BigBasket’s USP and marketing strategy that distinguish it from competitors.
Bigbasket is successfully operating in 30 Indian cities and has a registered customer base of over 3.1 million. We have over 20,000 products across various categories such as: " Fresh fruits and vegetables " Grocery and staples " Beverages " Bread " Dairy and Egg " Meat " Branded foods " Personal care and household needs A key marketing strategy that helps us remain ahead of the rest in the segment was betting on fresh produce and staples and building private brands around them from the first day. This typically allows for good profit margins than on brands owned by other companies. We have a lot of private labels to our name including Fresho, Royal, and Popular.
What are the biggest challenges that you have faced while scaling up?
There are three specific challenges that are unique to the e-format - 1. People: 70 per cent of our employees are blue collar workers. Getting the right people at the right time is obviously an ongoing problem; in addition retaining them is also becoming a tricky problem. As the catchment dries up, we now go to smaller cities to hire them and provide them with affordable housing in the city of operations. This helps a lot in retention. 2. Perishable items: Sourcing, storing and handling fresh produce is one end of the problem; the other end is that fresh produce comes with an inherent problem of lower shelf life leading to high wastage. I think we are one of the few in the world who are doing this well, with only 3% overall wastage. Our main focus has been on reducing the time between harvest and consumption. We are also very committed to building a sustainable organic F&V and staples ecosystem. 3. Perception: Online grocery is relatively new to the customer - inducing trial especially for perishables is a challenge. We have learnt that offering guarantees such as a no questions asked return guarantee on any product reduces the risk perception in customer's minds and makes it easier to induce trial. The other lesson that we have learnt is that customer's respond to a well-designed product- in the case of grocery delivery this means offering a wide range of products, offering convenient delivery options, offering competitive pricing and providing a consistent user experience.
How did Bigbasket become a front-runner in the grocery delivery segment?
We believe that a combination of customer focus, operations excellence and advanced technology sets us apart from the rest. The real testimony is in our delivery model which is inventory led. It's very difficult to work in this segment if you don't have the visibility to inventory. You need to ensure that you're meeting large orders of customers. We currently operate at 99.5 per cent fill rate and 99 per cent on time delivery. We offer three differentiated delivery models (all inventory - led), which are actually aligned with our customer buying preferences. Model 1: Full service model: Customers typically have a planned buy. Planned buys are normally the large buys that customer does. Average number of items that a planned buy basket has is 26 items/ products. And in the beginning of the month it can go up to 50-60 items, depending upon the size of the family. This business cannot be delivered on two-wheelers because the orders are large in size. This is basically the first part of our model which we are doing currently. Model 2: One hour express delivery: Second thing a customer does is two things: buy 1.emergency items such as milk, bread/dairy 2. Top up items such as fruits, vegetables and meats, we will deliver such products in one hour. We offer this service in 8 metro cities. Model 3: Specialty Store: Customers tend to prefer to buy certain products from a local shop or a particular brand. For example a lot of people say, "I will buy bread only from X Bakery." So, what we want to do is create a marketplace for specialty stores. If you are coming from a particular pin code, you would be shown stores only from that area. This is also currently available in all our metro cities.
Share your thoughts on your journey from Fabmart.com to Fabmall to what Bigbasket is today. How did the brand diversify so much?
The journey has been phenomenally rewarding. We are the pioneers of e-grocery and had originally started in 1999 under the brand name FabMart. We sold products across many categories online -music, books, jewelry and of course groceries. Grocery was slow to take off online. We had also set up an elaborate supply chain for the same, so the grocery offer was taken offline and we set up Fabmall stores. In 2004, we merged with the Hyderabad based Trinethra grocery chain and launched 204 offline physical grocery stores in south alone. We were then acquired by Aditya Birla Group in 2006, and the physical store format is better known as 'More' today. In December 2011, we were reborn as 'Bigbasket.com', in Bangalore. Today we are present in over 17 cities, with over 20,000 products, over 3.1 mn registered customers 40,000 orders a day and the rest as they say is history!
How has Bigbasket managed to keep its business model simple and survive the age of aggressive expansion?
We had defined our business model very clearly right from the beginning. Our business model is largely based on delivering superior customer experience which we define as - on time delivery, delivering each product ordered and maintaining high quality standards for all the products delivered. This clarity translated into improving our processes over a period of time. We were also very conservative with our expansion strategy - we took our time and we only expanded to services and cities where we were confident of delivering superior customer experience.
What are the challenges you have faced while expanding to other territories?
We have actually now overcome all major challenges as we have been into the business for more than 3 years. We have fine-tuned all our processes and everything is very smooth. This is a very complex category and so is the supply chain part. The supply chain is very local and we have to do it city by city. We can’t pick a product from Bangalore and deliver it to Delhi. So, we have cracked that and we have things in place. But still there are issues like seasonality and hence you have to make sure that you buy at the right time so the quality doesn’t suffer. There are challenges of buying items. As we are growing rapidly, we have to make sure we recruit the right people, train them and deploy them. A customer shops with us anywhere about two and half times with us in a month. We currently do about 22,000 orders a day, and cannot take a risk with that. For them, everything has to be smooth.
What are the grocery-buying patterns of customers today?
Consumers buy grocery basically in three ways. They have a planned buy. Grocery is the only item for which you have a list. You will decide what to buy during the week and then buy over the weekend. This is the category we have been in since we have started. Planned buys are normally the large buys that customer does. Average number of items that a planned buy basket has is 26 items/ products. And in the beginning of the month it can go up to 50-60 items, depending upon the size of the family. This business cannot be delivered on two-wheelers because they are large. It is not possible for us to send two-wheelers because then we will have to send some 15 two-wheelers to a house to complete an order. This is basically the first part of our model which we are doing currently. Second thing a customer does is buy emergency items or things like fruits, vegetables and meats, which typically because of low shelf price, is bought more often in a month. It means that such items get over before the month end. Earlier, we were not offering this top-up service but now we do. We will deliver such products in one hour. We have just started this service in Gurgaon and will soon launch it PAN India. We are going to be in 8 tier-one cities, we are in 6 already and will open up in Ahmedabad and Kolkata. This is our tier-one strategy. Third thing is that there are certain items for which a customer goes to a specific store to buy them. For example a lot of people say, “I will buy bread only from Mahindra Bakery.” So, what we want to do is create a marketplace for specialty stores. If you are coming from a particular pin code, you would be shown stores only from that area. All our models are actually inventory-led. We never go and pick up from neighbourhood stores. Financially, commercially, economically this model doesn’t work for us because of margins, quality etc. You get dependent on someone else’s quality, availability and the same margin will now get shared between two people. For these reasons, we have decided to control the entire supply chain.
Why have you decided to stop expanding?
In the grocery business one cannot expand horizontally as there are many elements involved in formulating the supply chain. We should also remember that the 25 cities where we are present in have good internet penetration. My business does not work in places where there is lower internet penetration.
What are Big Basket’s focus areas?
We are building out the business. We are through with our expansion in 25 cities — eight tier-1 cities and 17 tier-2 ones — and have decided not to expand. Instead, we will go deep into each city to create minimum critical mass. We want to bring tier-1 cities up to scale as these are behaving very similarly with convenience being the common driving factor for consumers. We will look at the tier-2 locations later as consumer behaviour varies with each city. Our delivery mechanism too requires focus and if we are able to deliver small volumes in 90 minutes, that will help our unit economics. The third big focus area is speciality stores. The focus is now really on execution.
What percentage of your products come directly from the farmers?
Sixty percent of the fruits and vegetables we sell come directly from the farmers, and this percentage is set to go up to 80 percent soon. We have certain products like onions, oranges and apples, which come from a central place. Our onions come from Nashik, our potatoes come from Agra, our oranges come from Nagpur and our apples come from Shimla. These our single-point collection centres for the entire country. We call them ‘national sourcing centres’. These sourcing centres have a lot more holding capacity then collection centres. In total, we have 60 national sourcing centres and collection centres put together, and they are set to increase to 80 in the near future.
What are your major challenges?
One thing that has not changed in all these years is the inefficiencies in the supply chain. But that is a universal challenge. There are other challenges which are specific to our online format. In the online space, people expect 100 percent satisfaction. If even one item is short they crib that they have to now go to the market, whereas if they were buying offline they could look for substitutes or go to another store.Earlier, sometimes the picker picked and packed the wrong product. However, this has now been addressed. We have invested in special scanners which record the order and if the picker scans the wrong product the scanner shows the error. Presently when we send goods, the delivery boy is taken straight into the kitchen. This has its own requirements. To minimise the time spent, the uniform for the delivery boys is sandals since these are easy to slip out and slip in. It also saves the danger of smelly socks. The delivery is done in open cartons, not plastic packets. But still the process takes time and the delivery boy is held up till the process is completed. We now want to tell the customer that they should trust us on account of our sophisticated systems. If there is a problem that arises, call us and we will give a refund. The purpose is to save time for the delivery boys.
What are the changes taking place in the online grocery space?
There are two types of models in the online grocery space: You either own the inventory or you use an on-demand, hyper-local model, where once the order is placed, contact is made with the supplier and the product is sourced. The on-demand model will see a change. The more control you have in this space, the better you can deliver. If you do this through an outsourced partner, there will be some issues. Also, if you own the inventory, your gross margins will be better, rather than sharing with a partner. There are certain items for which a customer goes to a specific store to buy them. For example, a lot of people say, “I will buy bread only from ABC Bakery.” So, what we want to do is create a marketplace for specialty stores. If you are coming from a particular pin code, you would be shown stores only from that area.All our models are actually inventory-led. We never go and pick up from neighbourhood stores. Financially, commercially, economically this model doesn’t work for us because of margins, quality, etc. You get dependent on someone else’s quality, availability and the same margin will now get shared between two people. For these reasons, we have decided to control the entire supply chain.
Today, consumers are spoilt for choice. With so many options to buy, what is Bigbasket’s value proposition?
When it comes to groceries, it is not a price game. We are not discount players, and nor are the grocery shops. I think e-commerce companies should focus on building a long term sustainable model and stop depending on discounts for attracting consumers. Though buying customers is important in the beginning, continuing that as a business model is not sustainable. Also, discounting doesn’t work in food, because customers become skeptical about the quality of the product. It is a subconscious thought process. Our value proposition is convenience. Customers can order items from the comfort of their homes and have it delivered to them. Also, the entire supply chain is controlled by Bigbasket. We don’t outsource at all. That ensures quality. For grocery, it’s very important to have instant and safe deliveries unlike regular couriers. It requires things like cold storage, etc. We have chillers and freezers in the delivery vans and we deliver even ice creams. There is a huge demand of chilled and frozen items today.Of course, some people are set in their ways when it comes to shopping offline. Habits take time to change. However, the success of e-commerce players has shown that customers are open to try new things and gradually adapt to change if it makes their life easier.
What were the key decisions undertaken by Bigbasket to be what it is today?
We were clear that we wanted to build a company that is extremely strong on processes. This is a very execution-focused business right, and to have high-class execution, we needed to build a company that is built on processes and built on technology. These are two things that are absolutely the base of everything we said we would do, which is building strong processes and drive those through technology. We said till this becomes robust and strong—including delivery, perishables, the whole range—we will not market ourselves. We just did this for one year and we called it the year of the back-end. We said we will not go and make noise because it’s such a crucial category. The lady at home is going to trust you only if you deliver five times to her; well, otherwise the trust is not going to come. The other thing we always knew we should bet on and really start from day one is fruits and vegetables as a business, which is perishables. We always knew that we will bet on this category and this category can do two things— either it can make you win or it can make you collapse because quality perception of a grocery store is built on the freshness and quality of your fruits and vegetables, staples and meat. It’s not the detergent and soap that decides the quality. We said that we should do that—if we don’t do it well, we’ll be dead. If we do it well, it’s a great opportunity. So these are the two things that we decided to bet on. One is processes and technology, and second is the fresh produce, fruits and vegetables. We decided to package it and brand it.
What are the biggest challenges you have faced while scaling up Bigbasket?
One big challenge is we are very people-dependent. Every time we grow, we have to add more people so that’s one issue that’s been there with us and continues to bog us. We’re going to invest in automation in terms of our warehouse and last-mile delivery but we will remain people-dependent for a very, very long time to come.The second issue that we always faced is this fruits and vegetables thing. There’s a huge touch and feel to it. There’s this whole perception that I will get good quality fruits, vegetables, meat and rice which is something we are constantly working on. This is basically for new customers.The other big issue is inertia. You’ve got a smartphone, you’ve got broadband, you are savvy, you earn reasonably well, you have a great job going, you are married. Why haven’t you bought from Bigbasket? The point is that it’s a lot of inertia. That old habit doesn’t die easily in terms of buying grocery, right? Buying a mobile phone online is easier. It’s the same product (that you will see in a physical store too). There’s lots of such issues in grocery because the number of items are large in an order, when I go out I just end up picking up something. Inertia-breaking is the second biggest challenge.
Why did you choose to enter grocery, given that it is a low margin segment?
People think this is a low-margin business. It’s not. It’s a myth. This is a business that can generate gross margins of about 20-23%. The next best is apparel. Electronics and mobile phones are single-digit margins. The issue is if you are inefficient in this business, if you don’t handle the perishable business well, you will end up with a lot of dump and wastage. We have across our chain a wastage of about 2-3%, whereas a lot of people have wastage that runs at about 10-12%. Private label margin will run anywhere between 30% and 40%.