Can BigBasket find its rapid commercial growth?

Equipped with speed and convenience, Quick Commerce is expanding its dominance in the world of online shopping. Initially questioned for its long-term viability and relevance outside the metro areas, quick commerce has boomed over the past two years, driven by rising demand for fast, on-demand shopping solutions, especially among Generation Z and millennials in urban areas.

While big players like it Flipkart and Amazon are experimenting with fast delivery optionspure-play quick-commerce companies have become increasingly aggressive. Even Swiggy has ventured into this space with its 10-minute food delivery service, Bolt.

Despite skepticism due to global failure of similar models, this segment has seen high growth in the country, with the number of monthly transactions (MTU) increasing by more than 40% in FY24 over the previous fiscal year, according to a RedSeer report.

This is only symbolic of the fact that user behavior is changing, and this statement is supported by RedSeer’s data, which highlights an increase in the frequency of monthly orders from 4.4 in FY21 to almost 6 in FY24. The momentum will only increase in FY25, with market growth of 75-85%, to reach the $6 billion GMV.

To take advantage of this, Tata-owned BigBasket, which disrupted the traditional online grocery market long ago, has completely switched to the fast commerce model. While the company is known for its slotted deliveries, it is now keeping a firm eye on BB Now as the platform’s core focus.

Remarkably, Big Basket launched Quick Commerce in early 2022. At the time, it offered both a fast trade service and a slotted delivery service.

“The quick service department offered delivery within ten minutes, while a scheduled delivery took between two and four hours. The product range also differed significantly with fast trading offering around 8,000 to 10,000 products while around 40,000 were delivered via slot delivery,” BigBasket co-founder Vipul Parekh told Inc42 in an interview.

He added that the company has now decided to merge both services into one offering. “The default option will be fast trade, offering delivery within 10 to 15 minutes, but customers will still have the option to choose delayed delivery if they wish.”

BigBasket’s fast trading pivot

While BigBasket launched its fast commerce service in early 2022, Parkeh said it grew faster than the slotted delivery service. Initially, fast trading represented about 50% of sales, and the company expected that this could account for 60-80% of sales, taking away the charm of staggered deliveries.

According to the co-founder, this would have made the slotted deliveries less impactful to run as a standalone feature. Furthermore, offering both options was confusing for customers, who were unsure which service to choose and on what basis.

“By merging both services into one offering, we have simplified the customer experience and presented a unified solution. This change was driven by two key factors: the market’s shift towards high-speed grocery commerce and the need for a simpler, more streamlined browsing experience for customers,” said Parekh.

As part of its strategic change, BigBasket will not only continue with fast trading but also expand the range of products delivered in 10 minutes.

Previously, only groceries were delivered during that time frame, but now electronics and other categories are also included. The company has also dabbled in general merchandise, fashion and apparel, and jewelry. The company has also started selling iPhone 16 in Bengaluru, Delhi NCR and Mumbai.

However, according to Parekh, the transition from groceries to new categories and from slotted to super-fast deliveries has not been easy. To explain this, he said, the supply chain for electronics, for example, is very different from that for groceries (where purchases are often clustered around discounts, promotions and holidays), while grocery purchases are regular and predictable. Understanding these supply chain differences has been a major challenge for the company.

To address this, BigBasket partnered with category-specific experts such as Chroma for electronics, Tata Cliq for apparel and Titan for jewelry. These partnerships allowed BigBasket to leverage the expertise of companies that already excel in these categories, avoiding the steep learning curve.

Another challenge was building the right customer experience and features for these new categories. For example, electronics purchases often involve EMI options, returns, warranties and bank discounts, which are not as relevant for groceries. To meet these needs, BigBasket had to develop new technology and features, ensuring a seamless experience for customers across all product categories.

How is BigBasket approaching category expansion?

While BigBasket aggressively pursued high-speed commerce two years ago, there was widespread skepticism about the service’s relevance outside major metros. But today, it is clear that affluent customers in Tier II cities also prefer delivery convenience and exhibit similar purchasing patterns.

BigBasket, which currently operates in 40 cities, has around 400 dark stores across India and is adding 30-40 stores every month to meet the demand.

According to Parekh, fast commerce will become increasingly relevant as grocery shopping quickly evolves into fast commerce. “Unless someone has very specialized needs, almost all grocery deliveries will soon be through high-speed platforms,” he said.

Moreover, more and more categories – beyond groceries – are shifting towards fast commerce, especially for fast-moving products. Whether it’s electronics, fashion or general merchandise, items with high demand and rapid turnover are increasingly delivered within minutes.

“For example, during the iPhone launch, we sold a significant number of phones within a few days. Customers didn’t even want to wait until the next day; they wanted their new devices immediately. This trend will extend to other fast-moving consumer durables such as accessories, mobile phone cases, chargers and earphones,” Parekh said.

However, he said not all categories will shift completely. Larger, more specialized products, such as high-end electronics or major appliances, are unlikely to make the transition to high-speed trading. But smaller, fast-moving items within these categories will, Parekh said.

In fashion, basics such as basic shoes, T-shirts and shorts are likely to become available quickly, while more specialized or high-end fashion items will not.

Going forward, BigBasket plans to expand into categories like toys and general merchandise, besides fashion, while also seeing a growing trend in seasonal items.

“When we decide which new categories to prioritize, we take three factors into account: the size and weight of the product, the speed of the product and customer demand. If a product has a slow speed or is not naturally associated with fast trading, we can avoid it. We also assess the feasibility of selling higher value products within this model as this may not always make financial sense,” said Parekh.

Bottom line: Can BigBasket be the quick trade winner?

While BigBasket aims to be one of the largest players in high-speed trading, Zomato-owned Blinkit had a market share of 40-45% as of July, according to a recent report by brokerage firm UBS. Also, Instamart has a market share of 20-25%, followed by Zepto and BigBasket with 15-20% and 10-15% market share respectively.

Moreover, the online grocery chain saw its operating revenues rise just 6% to INR 7,884.5 Cr in FY24, compared to INR 7,439.7 Cr in FY23. BigBasket generated INR 7,609.6 Cr in revenue from the sale of merchandised products including home and grocery items. On the other hand, it narrowed its loss by 17% to INR 1,267.2 Cr in the year by controlling costs.

However, it seems that team BigBasket has planned its strategy to achieve greater financial sustainability. According to Parekh, fast trading is really about the amount of revenue that can be generated per dark store.

“If your dark store generates minimal revenue, it automatically becomes profitable and starts generating profits. This is just like any other brick and mortar retail business. For example, let’s say we have 50 stores in Bengaluru. If all 50 stores cross a certain revenue threshold, depending on your cost and margin profile, you automatically become profitable for Bengaluru. I think the same applies to fast trading,” said Parekh.

So where lies the problem?

The main problem lies in the fact that a fast trading platform can end up spending too much on marketing, in which case customer acquisition costs become very high, making it difficult to remain profitable.

BigBasket has a large, established customer base that it can tap into due to its long-standing presence. Furthermore, the partnership with Tata Neu and the wider Tata Group will bring in a significant number of Tata customers, who will also become BigBasket customers, keeping acquisition costs low.

BigBasket indeed has an edge in the fast-trade segment because, unlike newer players like Blinkit or Dunzo, it has been in the grocery and F&B delivery space for quite some time, says Karan Taurani of Elara Capital.

Although BigBasket has shifted its focus from traditional deliveries to fast commerce, they have not yet developed a unique selling proposition (USP) that sets them apart from the competition. Currently, their product range and customer experience are average or lagging behind their peers, Taurani said.

As the race for fast deliveries heats up, it will be intriguing to see how BigBasket gains ground in the fast commerce space and challenges established players like Blinkit, Swiggy Instamart and Zepto.

(Edited by Shishir Parasher)