IE: Can you brief the Big Basket story?
Balakumar T K (TKB): Big Basket has been at the forefront of online grocery delivery for over a decade. We pioneered with express delivery as early as 2015-16. We used to deliver within 90-180 minutes. However, it was ahead of its time then. The consumer was not inclined to such service and so it lacked volume. We eventually integrated it with scheduled deliveries and offered 15-16 delivery slots in a day. We did exceptionally well for 5-6 years and that is when instant delivery market started. Despite a slightly delayed entry compared to some competitors, this decision was grounded in a commitment to perfecting the product offering. By prioritising the development of a robust app and backend infrastructure, Big Basket ensured a seamless user experience and optimal operational performance. Continuous iteration and refinement based on customer feedback and market dynamics have been central to the success of this strategy, resulting in impressive growth and operational profitability for a significant portion of Big Basket’s stores. This journey, which began in the early 2000s, has seen remarkable expansion and evolution, with a focus on maximising asset utilisation and improving bottom-line margins for sustained financial strength.
IE: Does unit economics work in favour of quick deliveries?
TKB: Quick commerce undoubtedly places additional strain on financials due to its premium nature, both from the perspective of customers and in terms of operational efforts. Delivering orders within 10 to 15 minutes requires significant logistical preparation and infrastructure investment, particularly in establishing proximity to customers. This becomes challenging especially in urban centers with higher rental costs. However, despite these hurdles, we’ve identified a “sweet spot,” with 70 of our stores achieving positive contribution margins in March, out of our total of over 300 stores. Achieving threshold volumes is critical for success, and startups have the advantage of refining productivity over time through strategic planning and operational efficiency improvements. By aligning with customer preferences and persistently pursuing bottom-line goals, we’ve successfully adapted to meet the demands of quick commerce.
IE: How does technology enable you in this?
TKB: For the users, our aim is always to ensure a seamless experience, facilitating ease of use and aiding customers in making quick purchasing decisions. All the work happens in the backend where meticulous planning goes into organising our stores and the variety of products available for purchase. It involves decisions such as the total number of items to stock, which specific items to prioritise and the different variants to offer. This aspect of our operations is a testament to our strengths, honed over years of experience in the industry. Our approach, is known internally as the Maximum Base Quantity (MBQ) model. It is powered by a robust analytics engine that enables us to delve deep into consumer behaviour patterns. For instance, in an area like Guindy in Chennai, where we may have served approximately 10,000 households over the past year, we closely analyse purchasing habits to discern which products are popular and which are not. Based on this analysis, we tailor our assortment strategy to cater to the specific preferences of each store’s customer base. However, this does not mean merely offering what customers typically buy; instead, we continuously innovate and experiment with new products to stay ahead of evolving consumer demands.
Once the rider has collected the order, an internal software called Router provides the delivery personnel with route maps to the customer’s doorstep, allowing us to monitor their movement and track the time taken for delivery. All this data is fed into our data warehouse for continuous analysis of the average travel time per order, which helps us determine operational costs and optimise rider allocation. By leveraging this application, we can communicate the expected time of arrival (ETA) to customers and measure our performance against it.
Over time, we have enhanced our app’s functionality, moving from a generic delivery timeframe to a more dynamic and customer-specific ETA estimation. Today, our app provides real-time ETA predictions based on factors like weather conditions and rider availability, ensuring a more accurate and reliable delivery experience.
We firmly believe in delivering on our promises and strive to leverage all available technological tools to uphold this principle. Additionally, we understand the importance of remaining competitive in the market. This requires us to balance customer expectations with market realities, ensuring that our delivery promises are both relevant and achievable.
IE: How does quick commerce work in India unlike in other parts of the world?
TKB: A couple of years ago, during a visit to London my daughter-in-law placed an order one evening. Despite the basket value being around £14, she had to pay £5 for delivery, which surprised me. It seemed quite expensive, but we needed it urgently and it was very cold outside. Reflecting on this, I believe such high delivery charges might not sit well with most Indians. However, the key factor that makes it viable is likely the volume of orders. It’s a function of the population density and the widespread adoption of such services. This higher volume of orders helps offset the delivery costs, making the service financially sustainable.
IE: It’s estimated that 50 per cent of emissions on a product’s journey, from the warehouse to the customer, is at its last leg. Could you elaborate on the initiatives Big Basket is undertaking to make the last-mile delivery more environmentally friendly?
TKB: We’ve been actively involved in this endeavour for at least seven years now. I recall when Mahindra introduced their electric vans, we were among the first to partner with them. Initially, we faced challenges where a vehicle would stop unexpectedly. However, we’ve made significant progress since then. Currently, around 30 per cent of our last-mile vehicles are electric, comprising vans or bikes. With the introduction of q-commerce, we aim to raise this figure to at least 60 per cent in the coming years. The ecosystem has vastly improved compared to four or five years ago, with better availability of charging stations and improved battery technology.
This transition to electric vehicles aligns with our commitment to environmental sustainability and at the same time offers potential for cost optimisation. For achieving 100 per cent electric last-mile delivery, numerous factors need to align, including government support, subsidies, and the development of the charging infrastructure. Realistically, I anticipate this transition to take anywhere from three to five years.
IE: What are some major challenges in q-commerce
TKB: Firstly, the competitive landscape is intensifying, necessitating continuous elevation of our standards to maintain a distinctive edge. This entails not only enhancing customer experience but also bolstering our position vis-à-vis competitors.
Secondly, there’s mounting pressure on productivity. Simply pushing people harder isn’t a sustainable solution; rather, we must explore innovative tools and technological advancements to drive efficiency across the board. This includes streamlining processes, optimising warehouse operations and enhancing last-mile delivery capabilities.
Thirdly, maintaining product excellence is imperative. Ensuring that our offerings, whether through our app or the quality of our products, consistently meet and exceed customer expectations is vital for sustaining trust and loyalty.
Lastly, our people remain integral to our success. Recruiting and retaining talent, particularly from diverse backgrounds, demands ongoing efforts to instill a sense of pride and purpose in working for us. This involves not just attracting individuals but also fostering a supportive and inclusive workplace culture that empowers them to contribute meaningfully.
In all these challenges, technology emerges as a pivotal enabler. From driving sales growth to optimising costs and enhancing employee engagement, leveraging technology effectively is essential for achieving our overarching objectives.
IE: Brief on your current operations and future plans.
TKB: In terms of our financial performance, we achieved a top line of around Rs 12,000 crore last fiscal year, with a notable 15 per cent growth compared to the previous year. Importantly, we saw significant improvements in our bottom line. For our B2C business, including BBnow, we managed to achieve near parity at the operating level. While BBnow, being a newer venture, operated at a negative margin, our more established businesses like the subscription service showed positive results.
Currently, our slotted business constitutes the largest portion of our revenue, accounting for approximately 55-60 per cent. BB now contributes around 30 per cent of our revenue, while the subscription service represents a smaller portion. Despite its smaller footprint, the subscription service still makes a substantial contribution, especially in the specific geographies where we operate. Our approach with the subscription service is to focus on depth and coverage in select urban areas rather than spreading thinly across entire cities.
We have approximately 450 dark stores and our expansion plans for the current fiscal year, focuses primarily on increasing our presence in tier 2 areas by adding about 60 per cent more stores than what we have now. Our footprint in tier 1 areas is already substantial and we anticipate replacing some existing stores with larger ones to accommodate growing demand.
