BigBasket is an online grocery retailer founded in 2011 that had grown to a user base of 1 lakh by 2013. It broke even in Bangalore in 2014. The online grocery market potential in India was estimated to be Rs. 3200 crore in 2019 and Rs. 6300 crore in 2020. BigBasket uses a mixed business model of inventory and hyperlocal delivery. It focuses on supply chain management through strategies like minimizing perishable stock, in-house logistics, and a hub and spoke warehouse model. BigBasket faces challenges of thin margins and customer unwillingness to pay delivery fees that online grocery retailers aim to overcome.

1. BigBasket Case
Supply Chain Management
By – Nitin Sinha (013)

2. BigBasket (Case Overview)
● Founded in 2011 and by 2013 had a user
base of 1 Lakh, increasing by 20% y-o-y
Issues faced by Online Grocery Businesses
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through WOM
Broke even in Bangalore in 2014
Target Group
○ Tech Savvy Men
○ Working Women
○ Women involved in weekly/party
purchases
Market Potential was Rs 3200 Cr in
2019 and expected to be Rs 6300 Cr in
2020
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Capital Intensive
Since perishables were supplied, a same
day or next day delivery was required
City-specific model had to be followed
More investments were required in:
○ Warehouses & Distribution Centres
○ Logistics for Home Delivery Services
○ Managing Technology

3. Growing investment in logistics and e-commerce; To invest nearly $2 billion in logistics
and warehouses estimated by 2020
Growth Drivers: E-commerce and Online Grocery Retail
Advancements in technology adoption: the increasing proliferation of devices such as
smartphones and tablets, and access to the internet through broadband, 3G/4G
Growing use of credit/debit cards for cashless transactions
Growth in purchasing power in cities beyond metros
Growth of mobile e-commerce

4. Growth Drivers: E-commerce and Online Grocery Retail
Availability of much wider product range (including long tail and Direct Imports) compared to what
is available at brick and mortar retailers
Competitive prices compared to brick and mortar retail driven by disintermediation and
reduced inventory and real estate costs
Increased usage of online classified sites, with more consumers buying and selling second-
hand goods
Convenience factors- speed, easy transactions, variety and attractive pricing

5. Business Model of Big Basket
Mixed Business Model: Inventory + Hyperlocal
● BigBasket started with an inventory based business model wherein the company has it's own inventory
and manages it based on everyday demand.
● Recently, BigBasket has entered into the marketplace business, providing the delivery of orders
placed with hyperlocal speciality stores such as bakeries and meat shops in less than an hour
● For this business, BigBasket will handle logistics only for stores within a 6-km radius. The company will
launch this service in Bengaluru with about 400 stores and expand to other cities overtime.
● The team, to ensure customer stickiness, has built a ‘Cocaine’ model. The customers are classified
under trial one, two and three, and silver, gold and platinum. Trial one refers to the first order, the
second order moves to trial two and trial three is the third order. On the fourth order, the customer
moves to silver, and this is when the team knows they have got a customer.

6. Supply Chain Strategy
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Minimising the Risk of Perishability: Fruits and Vegetables are procured only on order, except for
those with a longer shelf life like onions and potatoes. This reduced their loss of stock by 3-4 %.
In-house logistics: Bigbasket has its own fleet and warehouses, giving them better control and
better margins
Focussed on weekly purchasers rather than impulse buyers to combat wafer-thin margins so that
the minimum order size exceeded a particular level.
Apart from regular groceries, Big-Basket offered high-margin products to buyers, such as pet
food; Focussed on private-label brands such as Fresho for vegetables, meat and Royal & Popular
for staples, thereby earning higher profit-margins. The company has built a thriving business-to-
business vertical with its private brands, selling to restaurants, hotels and caterers. The vertical is
expected to account for about one-fourth of BigBasket’s annual revenue.

7. Supply Chain Strategy
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Use of technology for front-end customers and back-end operations: Uses a real-time analytics
software that makes sourcing almost automatic; tracking of delivery vans using GPS; giving
customers an option to pay by credit card.
Gradual elimination of intermediaries: Use of a special sourcing route for perishables; obtaining
vegetables and fruits just a few hours before the delivery was to be made directly from the farms
called the “farm-to-home”
philosophy.
Hub and spoke model for efficient and fast delivery with warehouses in each city of operation; Has
recently introduced a 60 minute express delivery targeting weekly purchase that typically revolves
around items with a short shelf life such as milk, fruits and vegetables

8. Big Basket’s Supply Chain Model for each City
Suppliers Warehouse
Hub 1
Hub 2
Hub 3
Customers

9. Online Grocery Chains - General Business
Models
There are mainly 3 kinds of business models when it comes to online grocery:
1. Inventory based model: The company has it's own inventory and manages it based on everyday
demand. Big basket started with this model.
2. Hyperlocal: In this model, the hyperlocal receives the order and buys items from store based
retailers, collects them in one place and delivers it to the consumer. Companies like Grofers,
ZopNow use this model.
3. Mixed Model: Companies use a bit of both of the above mentioned models. However, in order to
maintain the costs, the inventory is generally relatively smaller in size as compared to companies
that have adopted the inventory based model.

10. Pros and Cons of Online Grocery Model
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Model Pros Cons
Inventory Based Model ● Consumers know which products are
available
● More suitable for monthly orders
● Requires least manpower
● Capital Intensive Model. Cold storage is required
● Since the model is inventory based, unavailability
of a certain product may lead to loss of customer
Hyperlocal ● Similar to marketplace model, hence no
extra cost of inventory management.
● No wastage of unsold inventory as
purchase of products is purely demand
driven
● The retailer can provide any brand or
product as long as they can source it from
another store-based retailer
● Not suitable for big orders as running around and
curating all the items, packaging and delivering is
a cumbersome task
● The retailer cannot confirm at the time of order
placement if they can provide a certain product or
not since they have to go and check post taking
the order
Mixed Model ● The retailer can provide any brand or
product as long as they can source it from
another store-based retailer
● Lower inventory management costs as size
of inventory is small
● Procurement management is more costly as the
retailer needs to invest in both, good inventory
management and delivery staff who can buy and
curate products based on demand

11. Challenges faced by online grocery
.
1. Customer’s unwillingness to pay delivery charges.
2. Difficulty to penetrate in small towns
3. Thin gross margins
4. Focusing on horizontal expansion instead of vertical
5. Homemakers are not tech savvy!
6. Are online grocery startups offering a Complete Solution?
7. Freshness of fruits and vegetables
8. Customer Loyalty

12. Big Basket v/s Others (Performance
Comparison)
Parameters (2019) BigBasket Grofers
User Base 10 Million (Regt User) 4 million (Regtd User)
Avg. Order Size $21.65 $21.20
Business Model Inventory based Hyperlocal based
Delivery Type Same/ Next Day Same/ Next Day
SKUs 32,000 >27,500
Estimated
Revenues
3200 Crore 2500 Crores

13. Competitive Scenario
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Ola and Paytm shut their grocery delivery
businesses in March and June 2015,
respectively. Flipkart followed suit in February
this year. Amazon launched its own service in
Bangalore in February through a separate app
called Amazon Now. It hasn’t yet taken the
industry by storm. Local Banya , one of the
direct competitors, also discontinued
operations.
Grofers, arguably the closest rival to
BigBasket, had to heavily scale back
operations, while PepperTap shut down.

14. BigBasket’s USP
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A culture where employees think like grocers who have gone online and not just techies who
happen to sell grocery
The company considers technology as a key enabler but supply chain as the major area of focus in
the online grocery business
Single-minded focus on quality of fruits and vegetables helped BigBasket to earn a reputation.
Despite funding, Bigbasket is capping its expansion to 25 cities to focus on backend execution and
improve unit economics

15. Covid challenges faced by Big Basket
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With the lockdown in place, BB were down to 30,000 orders a day from
150,000 orders in usual business days.
Shortage of manpower. Every morning they set capacity (delivery targets)
based on the number of people reporting to work.
They quickly introduced community selling and asked apartment
complexes to put orders together for their residents.
Not putting larger range of products out there, it puts pressure on
distribution centre.

16. Thank You