Some opportunities knock twice. Friends, colleagues and entrepreneurs — V S Sudhakar, Hari Menon, Vipul Parekh and V S Ramesh will testify to this.
More than a decade ago, they once partnered, along with others, an online grocery store. The idea was ahead of its time and they had to pivot toward a more profitable format of a physical store.
Today, in a different world where India is no longer inhibited about shopping online, Sudhakar, Menon, Pakekh and Ramesh are not only reliving a dream, but also making it bigger and better. In December 2011, the four got together with Abhinay Choudhari to set up Bigbasket.com, a Bangalore-based online food and grocery store. It’s not the only one in the category but it has quite a story to tell.
Crash and boom
Back in 1999, the quartet along with K Vaitheeswaran and Sundeep Thakran set up Fabmart.com to sell books and music CDs online. This made way for Fabmall.com that included groceries on its offer list.
Although a brilliant and pioneering idea, it was coming undone by lack of consumer faith and familiarity with transacting business online. This was also the era of the dotcom crash.
“We decided to shift focus to Fabmall, the physical retail store. Merging with the Hyderabad-based supermarket chain Trinethra along the way, we built a retail chain of nearly 250-300 stores across South India,” says Parekh. With business booming and posting “a `200 crore turnover”, Fabmall attracted the attention of Aditya Birla Group which bought them over, in 2007, for about USD 100 million and renamed it More.
Rewind and play
For the four entrepreneurs to come a full circle with running an online grocery store is a matter of happenstance. Says Parekh, “We are all involved in other ventures and were advising Abhinay who was interested in starting a grocery portal for Whitefield. We realised that we might as well jump into the fray with Abhinav. After all, we knew the business well.
“Also, start-ups are very addictive — they are exciting and energising. Of course, you need courage in good doses too, the uncertainties of business can be unnerving.” So, as it turned out, an online store was an itch that they had to scratch.
The group’s combined market credibility and experience quickly drew in investors and suppliers. Operations started off with a 10 million dollar funding from Ascent Captial. And thankfully, this time, customer response didn’t lag behind.
Says Parekh, who heads finance and marketing, “A sizable portion of the market has gone online now. And it is so fertile that where fresh produce was once 8 per cent of the customer’s basket, today it is 20. It was presumed that people would still be hesitant to buy fruits and vegetables online. Our experience has shown us otherwise. This is a testimony to today’s lifestyle and its demands. Online grocery retail is a one-billion-dollar opportunity in Bangalore alone.”
Steady climb
Within a year of operations, the online store gained enough confidence to expand business to Mumbai and Hyderabad.
Says Parekh, “Hyderabad is a natural choice since we are well-versed with the ground realities there. Mumbai is a testing ground — it is a tough market because costs are high and space is at a premium. Also, it has a time-tested, highly organised neighbourhood market system in place.
"Getting through this challenge is important for us before we step into unknown territories."
BigBasket's headquarters in Domlur houses a call centre catering to orders from three cities. These average about 2,000 a day - in Bangalore most come from Whitefield. “Currently, we are able to honour 99 per cent of the deliveries,” says Parekh.
What’s working
The start-up sees its only competition in a physical store and has spelled out its strategies accordingly. Says Menon, CEO, "Three things are vital to us — same-day deliveries (a tough code to crack), offering a choice wider than a store to buy from and ensuring freshness of produce."
The team has kept a tight grip on performance by owning its fleet of delivery vehicles and setting up its own warehouse in Whitefield.
Says Menon, “We have not outsourced any element of the warehouse since it is an integral component of our business and requires specialised skills and technology to operate it efficiently.” In four months, the business will be moving to a warehouse four times its current size. Says Parekh, “A regular customer uses our services at least 35 to 40 times a year. This is despite the fact that we don't offer the cheapest prices and there are other options to shop from. So, it comes down to offering a consistent, quality service. I can tell you this, a start-up like this is not for beginners, you really need to have spent years understanding the field,” says Parekh.
Online blitz
Brand loyalty is a raw nerve as far as online retail in India is concerned. Says Parekh, “An ads blitzkrieg alone can’t build a loyal customer base. But that’s what’s happening, currently. The marketing and promotion spends are very high, goods are heavily discounted and the service doesn’t match expectations. How long can one operate on losses? Eventually, I see nearly 80 per cent of these sites (online retail) folding up,” says Parekh.
The road ahead Gourmet foods, organic and frozen products, these are on BigBasket's delivery wish list.
Says Menon, "We intend to expand to another two cities within six months and then move into top 10 cities over the next one year." The founders are confident of it all. Says Parekh, “We think we can build a significantly large business with substantial value over the next 4-5 years. We are three years away from being direct competitors to our own old avatar.” A takeover, all over again, is ruled out for the moment.