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What Lies in BigBasket’s Future?

Posted on Thursday, Jun 14th 2018

The recent acquisition of Flipkart by Walmart has drawn significant attention to the Indian e-commerce market. Forrester estimates that the online retail market in India will grow at 29.2% annually over the next few years to cross $73 billion in 2022. Another report by researcher Crisil estimates that online grocery shopping will be among the fastest growing segments in India. Crisil projects online grocery to grow between 65-70% annually over the next few years to $28 billion by 2020.

BigBasket’s Offerings

Bangalore-based BigBasket was founded in 2011 by Abhinay Choudhari, Hari Menon, VS Sudhakar, VS Ramesh, and Vipul Parekh. Prior to setting up BigBasket, the founders had set up another Indian ecommerce player Fabmart.com and online grocery business called Shop As You Like. After selling Fabmart.com to the Aditya Birla Group, the founders focused attention on the grocery business and came up with BigBasket.

BigBasket’s main value proposition was to provide the Indian consumer the ability to choose from more than 20,000 products in fruits, vegetables, groceries, and toiletries. It allowed consumers to schedule deliveries either on a weekly basis or to make emergency purchases. It even tied up with neighborhood specialty stores to allow them to top-up purchases through express delivery. Today, BigBasket has become the largest online grocer in the country. Its operations are present in 30 cities across India and processes a monthly gross merchandise value of Rs. 200 crores (~$295 million). It plans to increase that rate by 2.5 times by the end of the next year.

To drive growth, BigBasket has also been investing in private labels. Its private labels include Lindberg for chocolates, Fresho for green grocery and bakery, Tasties for snacks, Fresho Signature for cookies, and Happy Chef for gourmet products. It sells its products to more than 1,800 offices, besides hospitals, hotels, and caterers. Currently, its private label line accounts for nearly 34% of its revenues. BigBasket plans to increase that contribution to 45% by 2019.

BigBasket’s Financials

BigBasket has two registered operating entities – its B2B segment, Supermarket Grocery Supplies, and the online grocery portal – Innovative Retail. According to recent results, the Innovative Retail segment saw revenues double from Rs. 563 crore (~$83 million) to Rs 1,176 crore (~176 million) in 2017. The company is yet to turn in profits.

BigBasket is venture funded so far. It has raised $885 million from investors including International Finance Corporation, Alibaba Group, Bessemer Venture Partners, Sands Capital Ventures, Abraaj Group, Brand Capital, Ascent Capital, Helion Venture Partners, Zodius Capital, and LionRock Capital. Its latest round of funding was held earlier this year when it received $300 million from Alibaba Group at a valuation of $900 million.

BigBasket’s Future

Given India’s projected ecommerce growth, it has become a key market that all international etailers are trying to break into. The recent $16 billion Walmart-Flipkart acquisition is an example of how lucrative the industry is. Last year, Amazon announced plans to invest $5 billion in India to grow its presence in the market. Amazon has already secured permission from the Government of India to open food-only outlets that will be integrated with an online platform to sell locally produced food items. Then there is Alibaba. Its investments in PayTM, and now, BigBasket, are clear indicators of its interest in the country. BigBasket’s market leadership in online grocery makes it an attractive acquisition target for all these players, who will bid against one another to gain ownership of the brand. It will depend on the ambition of the founders and the investors whether they will want to resist making a LOT of money quickly, or hold out for even bigger payoffs in the longer term.

Also, like in other areas of online retail, BigBasket also has the option of creating large private label businesses in regular household supply categories that are often purchased on subscription basis.

Very interesting company and opportunity.

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