ENTREPRENEURSHIP

Opportunity Evaluation - BigBasket

SUBMITTED TO:
Dr. Amit Kumar Agrawal

SUBMITED BY:

AMIT KUMAR D06

MANISH KUMAR D24
RAKESH TIWARI D40

SYMBIOSIS INSTITUTE OF MANAGEMENT STUDIES (SIMS)

(CONSTIUENT OF SYMBIOSIS INTERNATIONAL UNIVERSITY)

January 2017
The Business Product and Service Idea.

Bigbasket.com is the Indias largest online supermarket which empowers customers to ditch the
traditional drudgery of grocery shopping by visiting local shops by bargaining, worrying about
quality of food produce after a long work day, Bigbasket provides them with an easy and relaxed
way of shopping by browsing at their ease. Bigbasket started off with its operations from Bangalore
in 2011 and now currently have its presence across 18 cities across India, including some tier-2
cities. Under its portfolio, it deals with over 15000 products which includes groceries, fruits and
vegetables, dairy products, kids products, personal products and other wide range of house hold
necessities.

Brief History of the Entrepreneur.

Bigbasket.com was founded in 2011 by Mr. Abhinay Choudhari, Mr. Hari Menon, Mr. Vipul
Parekh, Mr. V S Sudhakar and Mr. V S Ramesh. It was one of the first online businesses in India.
This same team came up with the idea of Fabmart.com in 1999, an online grocery business of
Fabmart. It also had a retail chain known as Fabmall which in 2006 was sold to Aditya Birla group
and was renamed as More.

Mr. V S Sudhakar has vast experience in general management of IT companies at senior level. He
was also the CEO of Planetasia which was the first online service business in India. Mr. Hari
Menon is now the CEO and Head Merchandising at Bigbasket.com. Earlier Hari was the CEO at
India skills. He also served at Planetasia as country head. Mr. Vipul Parekh who serves as Head
of Finance and Marketing at Bigbasket.com is an IIM Bangalore alumni. Earlier he used to work
at Peepul capital as an investment director. He also worked at Wipro InfoTech Group as Business
development head. Mr. Abhinay Choudhari who is the head of new initiative at Bigbasket.com is
an IIM Ahmedabad alumnus has work experience with several IT companies. He also founded
stylecountry.com. Mr. V S Ramesh who is the head of logistics and supply at Bigbasket.com.
Before Fabmall, he looked after the logistics and operations for a large fleet of ships of a shipping
company. He is an engineer graduated from Karnataka University.

1- The trends observed

Bigbasket started as an idea to the existing business by the same team of founders. In 1999, Mr
Sudhakar, Mr Menon, Mr Parekh, Mr Choudhari and Mr Ramesh found one of the first online
business in India Fabmart.com. Two years later they started a grocery business online as part of
Fabmart on getting inspired by UKs Webvan , Tesco and Okado. In spite of the dotcom bubble
Fabmart.com did exceedingly well. Which in few years down the line transformed into a physical
retail store Fabmall, as a chain of grocery supermarkets in South India. The business eventually
sold to Aditya Birla group and is now known as More.

In 2011 the founding team of Fabmart came together and launched Bigbasket.com. Today it is one
of the leading online grocer in India.

As per Mr Hari Menon, the attitude of people towards the online retail has changed a lot since
launch of Fabmart, also the mobile phone connectivity and internet penetration has increased a lot,
the internet enabled mobile has ensured an end user experience is increased and customers are now
more involved. Customers reluctance to do internet based transactions has reduced, also the 24x7
paced life in metros is also a reason behind success of online grocery.

The trends observed by Bigbasket in online grocery space were the lack of products which were
perishable or had a very short shelf life, also the single working executives who lived away from
their home had never done any grocery shopping on their own earlier, so to fill this gap Bigbasket
offered a wide variety and a great range of products, and further innovating it by offering cut fruits
and veggies. Its mobile UI based out of Android and iOS platform allows customers to place order
on their way to work or to home and they can receive their order as per their convenience.
Furthermore, the analytics used by Bigbasket has reduced the order time to within 5 minutes.

2- The problems identified.

The main driving factor behind coming up with the Bigbasket was that the metro citys lifestyle
has changed a lot over the years with rise in population, the traffic has gotten worse and parking
has become worse. The grocery shopping is a routine task that has been carried out in every
household, people drive to local mandi or to a hawker, they battle traffic, face parking issues, they
buy grocery and carry that to their vehicle and then again up some flights or steps to their home,
and this is a task which gets repeated twice or thrice a week.
For the working professionals who already battle time crunch today, doing their grocery seems to
be the smart and the easier choice. Since people are in search of all the opportunities to save their
time to spend for themselves and their energy from doing these chores.

Such peoples are the target customers for the Bigbasket, and it provided them with the platform
where they can place their orders and receive the same at their door step.

3- Gaps identified by the entrepreneur before venturing in the opportunity.

Mr. K.Ganesh found the opportunity in the huge retail market of India which is close to $500
billion dollars but is prominently un-organized. Out of the $500 billion 70%, i.e. $360 billion is
food and grocery. This food and grocery space is forecasted to grow to $500 billion by 2020. The
online grocery space is just a miniscule part of it and is just scratching the surface with a overall
market of $150 million and is expected to reach $10 billion by 2020. The firm has kept his hold
when all of its competitor in the similar space have closed shop for one reason or another. Even
big companies like Reliance, Ola and Snapdeal failed in this domain, so what makes Big basket
stand out in comparison to others would be there business model with their deep understanding of
the grocery business and correct gap identification and adapting according to it.

The Gaps that founders of Big Basket found are: -

Found gap in serviceability of local grocers to the aspirations and need of a fast-moving
young working population of India, as Metro lifestyle is not same as it was 10 years before
The stressful, long stretched office hours followed by time consuming heavy metro city
traffics leaves no flesh and blood to shop household essentials for these working-class
generation. People are exploiting all opportunities to save their valuable time and energy
from tiring household works. Such people with high disposable income and self-pampering
attitude are important for online grocery companies, as these are the potential customers.
Grocery, still an un-organized sector even after 69 years of Independence.
Over $500 billion yearly market, of which food and grocery accounts for roughly 70%.
India is the 6th largest grocery market with a year on year growth rate of 19% for e-grocery
market.
 Once people get accustomed to shopping grocery online, online grocery space will get
consolidated with few players which will charge premium for their services.
Segmenting and targeting the most profitable customers.
Value package- Cross selling through packaging profitable and non-profitable items in a
way to compensate loss from less profitable items.
Easy to sort items- through automation or manual enabling customers to decrease order
time, providing them with e-commerce type user interface.
Lack of facilities in Tier-2 cities
Built supply chain to control cost, quality and inventory
Grew private labels business to contribute more margins as grocery business was a low
margin business and profits were the issues that most of its competitors were closing down
Sourcing directly from farmers, to better their bottom line results and provide as much
variety as possible with the best of quality.

4- Personal characteristics of the entrepreneur

The personal characteristics of the entrepreneurs behind Big Basket in a market where everyone
else has struggled is first the experience of having a serial entrepreneur. The founders after selling
their first startup Tutor Vista to UK-based Pearsons for 700 crore in 2011, started Growth Story,
a platform which scouts for ideas and promotes as well as enables entrepreneurs to become
successful. They also launched Portea Medical and online jewellery platform Bluestone in
successive years.

Unlike other competitors, Ganesh knew that only getting shopkeepers on the platform and
developing products is not enough but you need people with deep domain knowledge of grocery.

So he handpicked a team of entrepreneurs who have launched Fabmall and Fabmart to run big
basket and convinced the other founders for the same. In the initial days, BigBasket got its products
from METRO Cash & Carry and HyperCity. It gave Big Basket some scale, but only 60% of the
order basket was filled.

It was then that the founders thought to build the supply chain, get the products into warehouses,
ensure that fill rates (the fraction of customer demand that is met through immediate stock
availability, without back orders) go up. Only then, the business could be sustained. They kept
inventory and followed a asset heavy model from their early days while others thought of it as cost
while BigBasket thought of it as asset. They went to farmers and procured directly from them,
which saved the cost of middlemen and increased their margins.

Financial projections to maintain the growth strategy: -

The new investing strategy should consist of a mix of debt and PE funds, for the next 3 years
(2017-20) followed by an IPO in the 4th Year (2020-21)

2017-18

Infrastructure Development 110cr (Capital Expenditure) + 25cr (transportation) + 15cr

(Depreciation) should be financed by debt from banks, as they have assets for pledging.
Use of the Series D investment for financing promotional activity.

2018-19

Infrastructure Development 124cr (Capital Expenditure) + 36cr (transportation) + 20cr

(Depreciation) financed by debt & running expenses from that years revenue.

2019-20

Till this year as they have planned they would have operations in 135 cities. So
Infrastructure spending's if any would be done till FY2018-19. The main expenditures
would be sustained by their revenues. But their subsidiary logistics will need money to the
tune of 50 cr that can be again debt financed.

2020-21

This year the company should aim for IPO of Rs.1000 atleast, as going according to present
estimates of a revenue of 5000 cr

2021-22 Using the proceedings from IPO for further expansion, mostly in-organic

5- Potential competitor of entrepreneur (In terms of Porter 5 Force model)

Online grocery is not a new idea in the west, but in in south East Asia and India it is relatively
new. The market is still new and that means a lot of competition for the market share. Retail
industry in India is about $520 million of which grocery is $350 million. That means nearly 60%.
In last 2-3 years e-grocery shops have seen a 19% growth rate which is expected to increase in
coming year as more and more people are now using internet and demonetization also acted as a
push for growth of such companies.

In India, major online grocery shops are that are competing are Natures basket, Grofers,
Bigbasket.com, Zop now, mera grocer and Aaram shop. Indians believe in dekho phir kharido.
But these online companies are definitely changing these values and every year their market
presence is getting stronger and stronger. A change in consumer behavior definitely has come
because of these online companies. Moreover, they are getting good funding which enables these
companies to give heavy discount and increase consumer base.

Online business is indeed very lucrative and these companies have got huge funding.
Bigbasket.com which is the oldest one (2011) has its presence not only in metro or tier 1 cities bit
also in tier 2 cities such as Nagpur, Indore etc. Pepper tap the youngest of all got a funding of $51.2
in the starting only. Others like Grofers which came in 2013 got a funding of $165 million. The
competition is very stiff. One moment a company gets a huge funding and all thinks that finally
there is a leader. But very next week a competitor gets even larger funding. The question is why
is it happening so? Answer is change inn lifestyle of people in India. Disposable income in India
has increased manifold. India now ranks 7 in disposable income. Pension has also increased. With
increase in income the ability to try out new things has also increased. So, people are actually
trying online grocery shps and the discount that they get there is an additional push. Plus, the busy
lifestyle of people in cities is another reason why the demand of online grocery has increased.
People dont want to waste their time in buying groceries.

PORTER 5 MODEL
Competitive Rivalry HIGH

Competition is very stuff. Every other day a new competitor is coming up as there is a lot of
potential to earn profit. All new comers have heavy funding backing them. Other big players like
Snap deal, Flipkart, Amazon fresh etc in E commerce have also entered in grocery. Amazon has
gone one step further and now has come up with a new model call Amazon go.

Customer Power -HIGH

In this business, customer is everything. Only a few companies are charging for delivery. (Only
Big Basket charges for an order less than Rs 1000). Companies are trying their best to give best
value and best shopping experience and at the same time saving the customers time. With increase
in number of options available customer surely is the king.

Supplier Power (LOW)

When the power lies with the customer, pressure surely is on the suppliers of products to keep up
with the expectations of customers or say BYE to market.

Threat of New Entrants (MEDIUM)

Online grocery has become a highly magnetic industry. Success stories of Bigbasket, Grofers will
definitely attract new entrants. Market is still in early stage. But the good things for old companies
in this industry is they have created a brand for themselves and a new entrant now will find it a bit
difficult to mark itself in the industry. A new entrant needs to come up with some more innovation
and attractive offers.

Threat of substitution - MEDIUM TO HIGH

Customers are not brand loyal these days. They will substitute given any good offer. They also
might switch to offline grocery shops which are tried and trusted.

The value which an entrepreneur delivering to various stakeholders:

Bigbasket.com offers over 18000 products from over 1000 brands right from packaged meat, rice,
dal, personal care product, beverage, fresh fruits and vegetables etc. Bigbasket promises to deliver
fresh and handpicked products only. They also promise to deliver on time and on the same day.
Customers can also have an option to choose the time at which they want their product to be
delivered. Just in case Bigbasket is unable to deliver to time they promise to discount 10% from
the total bill. In case customer feels that the quality has been compromised customer can return
the same and no questions will be asked. Again if the product ordered in not available
Bigbasket.com will refund 50% of that items value. Bigbasket delivers anywhere in Ahmedabad-
Gandhinagar, Lucknow-Kanpur, Pune, Mumbai, Chandigarh, Hyderabad, Bangalore, Chennai,
Noida, Delhi, Coimbatore, Mysore, Patna, Nagpur, Patna, Indore. One can pay by cash, through
Sodexo, debit/credit card. This shows how much Bigbasket.com cares for his customers. They also
have an express delivery option where in one can get the product within 2 hours of ordering just
by giving few extra money.
Bigbasket.com also provides a wonderful amazing work experience to its employees. Not much is
given on work culture but glassdoor reviews says a lot about open work culture and there was
negative reviews. Also, salaries given are on the higher side as compared to other industries. For
example, a software engineer gets more then what another gets in an IT company. Clearly an
indication how much company cares for its human capital.

Bigbasket raised Rs 200 crore given by Zodius Capital and Helion Ventures in 2014. Bigbasket
acquired Delyver in 2015. Delyver is a Bengaluru based delivery startup. Later in the same year
Bigbasket again received $50 million. With every passing quarter Bigbaskets performance went
on improving. Company in 2016 claimed that its revenue has increased 5 times over last 1.5 years.
Bigbasket own brand products account for 33% revenue which shows how well company is in a
position to expand its own products in near future. Bigbasket in 2016 again got funded, this time
by $150 million by Abraaj group.

References:

https://yourstory.com/2016/03/bigbasket-funding-abraaj-group/
https://yourstory.com/2017/01/brring/
http://www.exploringstartups.com/future-of-online-grocery-startups-in-india/
https://yourstory.com/2016/02/invest-karnataka-bigbasket/
Turnitin Report: