BigBasket is all set to launch express online grocery delivery
Bengaluru | Mumbai:BigBasket will launch express deliveries, a segment that the online grocery platform has previously experimented with but pulled back from, cofounders Hari Menon and Vipul Parekh said.
Over the next two-three months BigBasket, in which Tata Digital acquired a majority stake recently, plans to introduce a quick-delivery service—typically within an hour—a category which is hotting up with well-capitalised companies like SoftBank Vision Fund-backed Swiggy investing heavily into it.
In the first interview by the BigBasket co-founders after Tata Digital’s $1.2-billion investment, Menon told ET that the company would offer elements of omnichannel and options of native languages on the platform as it closes in on the launch of express delivery.
“We have learned from the past to build this vertical…and will now launch it under the Tata umbrella,” he said on the weekly audio chat show ‘The Rundown by ETtech’ on Twitter Spaces.
Tata Digital, a wholly owned subsidiary of Tata Sons, along with BigBasket has held talks for a possible buyout in the category, people close to the matter indicated.
The two co-founders said these fresh initiatives and changes under the new owner would play out over the next few months at BigBasket, as the salt-to-software Tata Group gets ready to launch its much-anticipated super app later this year under Tata Digital.
“There have been discussions in terms of how to build this whole thing together—whether it’s Tata Digital or the individual brands. There is a lot of alignment in our thinking, and I am feeling very comfortable about it,” Menon said.
While the deal discussions are ongoing, there is clarity that BigBasket will run as an independent business. “That was something we felt good about. Another thing was that we were going to be part of the Tata Digital strategy and would power it in some sense. That gave us comfort and that’s something we needed,” Menon said, while talking about synergies between BigBasket and the Tata Group.
Talking during the audio chat show, Menon said, “We have gone deep into three-four hour deliveries, in fact in most cases it’s two-three hours. Now, it’s (hourly delivery) is what we are going to do next.”
“This time it’s very clear—thanks to our experience, the focus is on setting up dark stores, bringing inventory and warehouse closer to the customer and making sure the cold chain works better and faster and fresh produce can be delivered with ease,” he added.
BigBasket had acquired a small express delivery startup, Delyver, in 2015 but that did not help the e-grocer scale up its hourly deliveries at that time amid the first wave of hyperlocal startups which attracted a bunch of investor capital.
Last month, ET reported that online pharmacy 1mg, where Tata Digital has picked up a majority stake, was working to launch hourly deliveries of medicines starting with the National Capital Region. While hourly delivery of medicines has been a tough one to crack for online players, both BigBasket and 1mg are expected to work closely with each other, as ET reported earlier.
Even as BigBasket makes another push for hourly deliveries, Menon said BB Daily, its subscription-based morning essentials delivery business, is on its path to becoming “the most profitable” business for the company.
“Our average cost of delivery in this business is Rs 5 per order and the average order value is Rs 150-160. So, if you look at the percentage of order value, it’s one of the cheapest home delivery businesses, extremely economical,” said Parekh.
Tata’s bet on BigBasket comes amid heightened interest not only from vertical and horizontal e-commerce players like Amazon and Walmart-owned Flipkart, but from diversified groups like Reliance Industries.
“This has always been a competitive place (with Amazon, Walmart-Flipkart). With Reliance Jio coming, they said you will be in trouble. So, we have been in trouble for a long time—for our entire period of existence—and we continue to lead (in terms of market share),” Parekh said.
He said the market was large. “Nowhere in the world is it going to be dominated by one or two players—it will be three-four players.”
According to data from PGA Labs, the market intelligence unit of Praxis Global Alliance, BigBasket had a 37% share in e-grocery, followed by Amazon (15%), Grofers (13%), Flipkart (11%) and Reliance’s JioMart (4%) in fiscal year ended in March 2021. This report predicted the Indian e-grocery market to touch $22 billion by 2025.
According to industry estimates, India’s online grocery market was estimated to be around $3 billion at the end of 2020.
How did the Tata deal talks begin?
Menon said the first person to have sounded the company about Tata Group Chairman N Chandrasekaran’s interest in BigBasket was former Axis Bank boss Shikha Sharma, in July 2020. “Chandra (as Chandrasekaran is popularly known) had done his homework on our team, and it was very comfortable for both the parties once the talks began,” he recounted during the interview.
Once the first call happened, it was a smooth journey and at no point they had any worries about the majority investment from the Tatas, he said, adding that due to the complex nature of the transaction, it took them longer than initially anticipated to close the deal.
“It was a complex deal as we had many investors who were moving on. There were 30-40 lawyers involved…which means there were 7-8 companies moving on and each had one or two lawyers…hence it takes time.”
Parkeh said it was the most complex transaction he had ever done.
China’s Alibaba, Actis LLP which had acquired several portfolios of Abraaj Group including a stake in BigBasket, Ascent Capital, Zodius and Sands Capital have exited the firm as part of the Tata deal.
“It was probably the largest secondary transaction that has ever happened (here). The total outflow which went out was a little over $1 billion,” he said.
BigBasket, founded by Menon, Parekh, VS Sudhakar, Abhinay Choudhari and VS Ramesh in 2011, was valued at around $1.8 billion. After Tata purchased around 64% in the startup, the company received a primary capital infusion of $200 million from its new parent, taking its valuation to a little over $2 billion.
But were the founders satisfied with the valuation ascribed by Tata? “We never optimised for valuation. We have been very clear on it. Obviously, you want the right value, but that’s not what we optimised for. We have always felt bloated valuations, you know, comes back and puts a lot of pressure on you and that’s something we wanted to make sure that we play that game very well and Vipul has been instrumental in that,” Menon said. “We are very happy where we are.”
Parekh said the company still had a long way to go. “I don’t see any reason—with the foundation we have—why we can’t build one of the most valuable Internet platforms in the country,” he said.
BigBasket plans to go for an initial public offering but not in the immediate future, the founder said. ET had previously reported that the e-grocer would launch an IPO in the next two years.