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How Hari Menon changed India’s traditional grocery shopping

Bigbasket currently has operations in 25 cities with reported revenue of 2000 crores in the FY 2019 and targets a revenue of 6300 crores in the FY 2020.

Much before Flipkart, another start-up attempted to take over the retail industry. The way it was supposed to function was very similar to the way Flipkart works now. However, this start-up was not successful because it was ahead of its time. Even after this failure, Hari Menon, its co-founder did eventually manage to shake up the existing market by bringing Bigbasket, the first online platform that sold groceries, including perishable items.

Hari Menon: From Fabmart to Fabmall to Bigbasket

Hari Menon
Hari Menon

Fabmart was an online platform that Menon and his four partners began in the year 1999, which primarily performed the same functions that Flipkart does today. However, the conditions in India were unfavorable for any online venture. According to Menon, at that time, during the first year of Fabmart, there was only noise but no transactions as it could not generate enough interest. There were many reasons for this, such as, back in those times people were advised not to use their credit cards for online payments as there was no secure digital payment gateway.

The founders
The founders

However, this setback was not enough to stop the founders, and they moved on to Fabmall, a physical version of Fabmart. After the failure of Fabmart, they decided to focus on a new venture called Fabmall. Now, this idea clicked very well, and it gave Menon the time to strategize about the next start-up over the next few years. The fact that also helped them during this time was that internet penetration in the country saw a big boom during this period, allowing for such online businesses to flourish. And thus, in October 2011, Bigbasket was co-founded by Hari Menon, Abhinay Choudhari, V S Sudhakar, Vipul Parekh, and V S Ramesh.

Since the founding of Bigbasket, it has been one of India’s biggest success stories. Bigbasket is India’s most abundant online food and grocery store, with over 18,000 products and 1000 brands. Right from fresh fruits and vegetables, meats, and spices to beverages, and personal care products, Bigbasket sells everything that the kitchen asks to prepare yummy and healthy food. One can easily place an order through Bigbasket mobile app or website.

Struggle to success

Incredibly all this success came after a big struggle. Menon reveals that during the first three years of operations, marketing the new business was only on the basis of word-of-mouth advertising. The steady pace of transactions leads to more significant investments when, finally, they hit the pedal and underwent large scale expansions. Bigbasket currently has operations in 25 cities with plans to reach more cities in the future. Their revenues for successive years give an idea of their remarkable growth. Reported revenue of 178 crores in the 2014 fiscal year increased to 600 crores in 2015, a whopping 2000 crores in the financial year 2019 and targets a revenue of 6300 crores in the financial year 2020.

Bigbasket has proven to be sustainable and devoured the myth that an e-commerce site will not work for FMCG. With a robust business model and negligible discounts, they have grown slowly but steadily. Bigbasket today boasts of over four million registered customers and sales of Rs 150 crore per month. Today, Bigbasket is present in over 25 cities and is shifting focus from further expansion to deeper penetration, of revenue, touching close to Rs 2000 crore. Fruits and vegetables contribute 18 percent, 15 percent is from Bigbasket staples, Branded staples additionally bring in 20 percent and FMCG another 45 percent. The team that comprises of 120 people claims to have expanded to well over eight cities and believe that expansion for more cities in the coming six months.

However, it wasn’t an easy task for these five men as the numbers show. The hard work and struggle behind the venture was something that they eventually had to go through before they achieved this feat. With slow internet speeds, ineffective ways of establishing internet connections and insecure payment options, there was nothing that the e-commerce site could do about. Suppliers failed to trust them and were not as open like they are as of now. Back then, cash on delivery was the only payment method that was available. According to the founders, the mantra was simple, you can raise capital, which they did; but if there is no ecosystem to support the business. It mostly will never survive.

But the team never gave up and strived on building an online store that sold grocery and could spread to every household, considering the market potential in the country. By the year 2011, the ecosystem showed several signs of improvement and development in terms of technology and brought about a digital age. Online transactions had begun taking place now, and this was by far, one of the most significant moments for the start-up and its founders.

Money matters!

When Bigbasket began operations in 2011, they were probably the start-up that raised the highest first round of funding. The core team of Bigbasket was one which had already gone through the business in the past with Fabmart and Fabmall which made it easier for the investors to choose from and it was thus a no brainer for the investors. However, when the team met their VC’s, the primary thing that was asked was to show a model that would prove to be successful. The team used an example of UK’s Ocado, which had seen its fair share of success and used these slides as their first pitch.

The margin in fruits and vegetables for Bigbasket is roughly 35 percent. But starting somewhere small, one can only get about 10 to 12 percent. It was essential because to get the business going the company first needed to gain the trust of its customers and become their first choice in the open market. Without obtaining a particular volume, it’s impossible even to set up a warehouse, and the model that was required to be followed was a just in time model. Sanjeev Aggarwal (the co-founder of Helion Ventures), who is also a board member at Bigbasket, believes that there is a vast market opportunity for online grocery.
Out of the $2 trillion retail markets in India, $300 billion is in grocery. From day one, Bigbasket has focused on fresh produce, one of the most challenging segments to crack. The idea was simple; to provide fresh produce to people as they happen to buy groceries at least 4-5 times a month. And the team felt that this model would make the brand grow steadily in fulfilling this need.

Competitive market

It is one thing to have an idea and another to be able to execute it! Other online grocery competitors want to spread all across India to play a monopoly over the business. But the national supply chain would not hold good in the distribution of groceries and having firm control over its operations. Some various plans and strategies need to be laid out and executed. For Bigbasket, it was considerably easier to plan and strategize things because of the capable and experienced team that had been working behind the curtains.

A part of the strategy was that building a localized supply chain is essential for a business like an online grocery store like this. So, for example, if the business has to be launched in five different cities, it is like building five different businesses separately. Therefore, the team behind the start-up decided that starting simultaneously in multiple cities would cause the business to collapse before It can succeed. The focus needed to be mainly on the big metro cities, which had great potential in terms of returns and investors. It would never be an excellent idea to focus on many different tier 1 and tier 2 cities, to be sustainable. The Bigbasket team was concerned that people weren’t buying from them every time, but only once or twice a month.

The Bigbasket team attributed this to the old mindset where people would be unwilling to shift from their regular buying only out of habit. It was never easy to convince the customers to buy online, let alone buying grocery online. There was a strong focus on convenience, but customers were also wary of missing or not getting deliveries on time. It was, therefore, critical for Bigbasket to build trust. The company firmly believed in the policy that if a customer bought twice from Bigbasket in the time period of three to six months, then he/she was their customer.

Bigbasket’s “Cocaine” Model

To retain customers, they built a model known as a “cocaine” model. Each of their customers was classified under trial one, trial two and trial three and silver, gold and platinum. Trial one is based on the first order placed by the customer. After which the second order placed by the same customer moves them to trial two and then to the third trial. Once they have finished three orders, they are then moved onto the silver category, and this is when the team knew that they had retained a customer. The major income is from trial one, two, and three. The retention rate of customers is at 95 percent at platinum. So, to gain more customers, the company provides incentives to promote customers to buy more to avail exciting benefits.

Based on the available data, the main goal is to understand what the customer wants based on the available data. The overall customer retention rate is at 35 percent. Then it was the time to target smaller cities. To grab the attention of residents in smaller cities like Kanpur, Surat, and Vijayawada, they recruited Bollywood star Sharukh khan as a spokesman. Along the way, Bigbasket had to adapt to local conditions continuously. Initially, the plan was to set up one truck to deliver all the products. But the problem arose when delivery boys didn’t want to be seen as drivers because of the mindset of Indian people and the class-conscious mentality of Indian people. Eventually, they decided to hire a particular person for one specific job which had its own problem as parking was scarce in the country, and the driver had to circle around to find space for parking. They also required backup workers on standby because delivery people and packers tend to take time off to celebrate local cultural events.

In general, we see that attracting and keeping customers is a challenge for all e-commerce companies, which is even more significant in a country like India. Shopping can vary from city to city, and getting hold of the trend was vital. The company spent years in devising the right strategies for a variety of customers that they have. There are well over seven hundred people handling customer complaints, and about 95 percent answer the rings within the third ring according to Bigbasket. It shows that the team has been adapting all possible ways to deal with any inconsistencies.

Predominantly, Tech start-ups and founded by young entrepreneurs that have less experience but a lot of passion. This statement holds true all over the world, be it in the Silicon Valley of India. Then there’s Bigbasket, whose founders are veterans of the dotcom bust and mostly north of 50 years. Drawing on their success and failures, they’ve turned their six-year-old start-up into India’s biggest e-grocery and are taking on a host of competitors. In India, groceries account for half of the almost $1 trillion retail markets; Bigbasket uses their experience learned the hard way during the dotcom era and latter-day innovation.

Success doesn’t come easy

Bigbasket faced all sorts of difficulties while growing and on its journey to where it is now. Bigbasket isn’t a dream but a well-planned out businesses that were primarily targeted for the larger cities but eventually made their presence in the smaller cities and towns by onboarding Sharukh Khan as their brand ambassador. Growing slowly and steadily, they have increased their delivery output and invested money in building state of the art warehouses. They plan to become the largest grocery delivery platform not only in India but all across the world.

Much of the company’s success can be attributed to the fact that the company’s core understood the significance of getting the basics right before anything else. The founders had a vast domain of ideas and business when compared to other such start-ups. The company has happy customers because unlike other such companies, they went on to delve deeper in their business and did not hurry to expand it horizontally. They stayed in one place for a long time to learn from their mistakes and then further went on to start operations in other cities. Another vital prospect that we find when we look at Bigbasket is that they began with groceries and remain in groceries itself.

The success story of Bigbasket is a great example and learning curve for all such upcoming start-ups and entrepreneurs. Bigbasket teaches us that the mantra of sticking to one’s roots and evolving from there is still a very successful one!