'Competition Is Never A Threat' - Says Hari Menon, CEO, BigBasket

BW Businessworld's Soumya Gupta interacted with Hari Menon, CEO, Bigbasket to know how BigBasket managed to keep its head above the ground & remain ahead of the rest of the flock, even in troubled times. In an exclusive interview we tried to delve deep into 'what clicked for the brand'. New-age startups are sure to learn some hacks of keeping generating repeat customers. 

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. 

Your comments upon the competitors like PepperTap, and Grofers scaling down and shutting down?
Hyperlocal businesses are highly dependent on their partner's ability to provide for products on time and at consistent quality. With this, control over delivering superior customer experience is lost. And this can never be replaced by deep discounting. 

Share your thoughts on your journey from Fabmart.com to Fabmall to what it is today and 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 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. 

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.

What kind of margins are there in this segment?
This depends on the category you are dealing with, we typically operate at 16 - 18% margins. 

Why do you think there was a funding slowdown in the e-retail sector in the recent past?
This is firstly not a surprise. We did see a huge surge in investment in this sector for a while, and this had to slow down at some point. Secondly, similar bets in the US market did not go that well which then cascaded to India. 

What are the major looming threats and competition in the grocery deliverable market?
We believe that competition is never a threat; it only makes the market more open to innovation, which ultimately leads to providing extraordinary services to the customers. The more number of players the better as it gives more confidence to the customer.

Talk about the USP and marketing strategy that makes it a unique brand from its 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 focus areas at present and market opportunities bigbasket is looking at to win with big data in the near future?
We are focused on growing our organic produce and private labels, which would mean a whole new range for our customers. We are also very excited about our gourmet and imported assortment - where we already have over 2000 products - 104 types of cheese alone!

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. 

What are the future plans on fundraising, expansion or acquisitions for the brand?
We have already raised about $220 million from investors such as Abraaj Group, Bessemer Venture Partners, Helion Venture Partners, Sands Capital, International Finance Corporation, and Zodiac Capital among others. As for as expansion goes, we are now in 30 cities, our focus now is to go deeper into these cities. 

How has Shahrukh Khan's advertising campaigns helped the brand?
Shahrukh Khan's campaigns have helped us immensely. He instantly improved our brand recall and awareness. We also earned a lot of credibility with this association. 

Tell us about the analytics team at Bigbasket consisting of more women employees.
The Analytics team at Bigbasket boasts an 80% women to men ratio. This is a sharp contrast to the traditional technology teams across the industry that attract very few women especially at the top levels. The team at Bigbasket comprises of bright, young women who not only bring high technical skills to the table but also use these to drive key data based business decisions at Bigbasket. Besides storing and leveraging overall data, the team is acting as a research agency for various FMCG brands. 

There are a number of advantages of having women. Firstly, they are organized in their approach to problem solving. Data mining and pulling out answers to business problems is an iterative and sometimes frustrating exercise involving many hypothesis, pruning to get to the right data and the drudgery of running and re-running code or models to get the accurate answers. Women tend to be more systematic in organizing data and using the right data in a huge pile of big data to answer business problems. Secondly, they have the ability to parallel work on multiple problems at the same time which is very critical in fast paced businesses that are constantly evolving and sharpening their business models. Thirdly, they bring in stability to the start-up teams with higher employee retention.

How is Big Data helping Bigbasket to fine tune on the lines of offering and services to customers?
Big data primarily helps in understanding the customer very deeply by drawing associations between not so apparent things. We believe that we have been successful so far, in using data to predict customer behavior and offer services and products that are relevant to her. We will continue to offer more and more personalized services and offerings to our customers.