Bigbasket’s quick commerce order value in small cities matches metro average

“We see that quick commerce is playing out as well as it is in tier-1 cities today. We have an average order value of about ₹500, which is holding up quite well even beyond the metros," Menon said. He said the tier-2 markets are starting to mimic tier-1 in most aspects of the business.

While these are early days for the company in tier-3 markets, it is getting a good response as more customers who have used e-commerce platforms shift to quick commerce for more instant purchases. Over the past year, Bigbasket has placed greater focus on its quick commerce arm, BB Now, the last of its three main businesses that is yet to become profitable.

Also Read: How BigBasket is playing catch-up with Q-commerce

“We will have about 25,000 stock keeping units (SKUs) and we are setting up more dark stores," Menon said. An SKU refers to an identifier that contains information about a product. Dark stores are retail facilities that are used as warehouses and are not open to the public.

Bigbasket has three verticals—Bigbasket for slotted deliveries of household essentials, quick commerce service BB Now, which started in April 2022, and BB Daily for the delivery of milk, eggs and bread. The slotted delivery option caters to customers who have not taken to quick commerce.

“We do a fairly significant amount of business from the slotted delivery arm," Menon said, adding that the unit contributes about ₹600-700 crore per month. BB Daily, its subscription-based grocery delivery service, clocks about ₹150 crore, while BB Now contributes about ₹350 crore, he estimated.

Bigbasket’s operating revenue grew to ₹10,062 crore in FY24 from ₹9,468.5 crore in the previous year and its loss narrowed to ₹1,415 crore from ₹1,785 crore.

Tough market

While the company’s entry into the quick commerce market was late, Menon said it was a conscious choice because the company was initially not too sure about the economics of the business and if customers really needed to get groceries delivered in under 10 minutes.

Online grocery has proved a tough market to crack even for the bigger giants, but quick commerce has emerged as a key engine of growth because of its convenience and habit-forming nature. However, the competition is fierce, forcing companies to burn through cash to hold on to their customers.

“Quick commerce has been a hard and complex business to undertake in terms of physical infrastructure and the kind of software play that needs to happen on the supply chain," said Vishal Gupta, a partner at Bessemer Venture, an investor in Bigbasket. “But it also appears to be that the other marketplaces will lose market share on core SKUs if they do not pivot or add a quick commerce offering as consumers show an increasing preference for instant purchases."

Maintaining a tight lid on costs is crucial for profitability as quick commerce companies such as Swiggy (Instamart), Zepto and Zomato (Blinkit) grapple with high cash-burn rates. Growth, in effect, comes on the back of significant losses.

Also Read: Inside BigBasket’s plan for profitability

Few companies have succeeded in championing this capital-intensive delivery model globally. However, India may benefit from being more densely populated, which makes last-mile operations more efficient, Gupta added. The key to monetising such a business also involves setting up stores in high-density areas, where you get greater throughput, Menon said.

Unlike its rivals, Bigbasket has an edge - the company leverages the same dark stores and infrastructure for all three divisions. Over the past year, it has set up smaller stores, tweaked its technology stack and retrained the workforce to deliver items in under 15 minutes.

Bigbasket has also tied up with other affiliates of the Tata Group such as Croma to sell electronics and 1Mg to sell pharma products online and boost its average order value. With its entry into quick commerce, Tata companies may be able to attract a greater chunk of young internet customers.

Bigbasket acquired 12-15% of its new customers last year via its partnership with the group’s Tata Neu app. The partnership gave the online grocer access to customers from Tata Neu’s footprint across categories such as fashion and electronics.

Menon anticipates the overall business will become profitable in the next 6-9 months with growth of 25-30% in the current year. In February, the grocery startup said its target for overall profitability has been pushed to early 2025.

“While we are working on ramping up our quick commerce division, it is taking time to become profitable because it is a very new business," he said.

Intensifying competition

In February, co-founder Vipul Parekh detailed plans to open 400-500 physical stores across the top 10 metro cities in India over the next three years to cater to offline modes of shopping. But Bigbasket has put this plan on hold as it looks to focus on BB Now.

With Amazon, Flipkart’s Minutes and Reliance Retail entering the quick commerce space, competition is set to intensify. India, one of the fastest-growing grocery markets globally, is expected to become an $850 billion market by 2025, RedSeer Strategy Consultants estimated. 

In FY24, the average number of monthly transacting quick commerce users grew by over 40%, driven by increasing demand for convenient, on-demand shopping solutions and habit formation.

Also Read: The rise of quick commerce has left us with a bagful of questions

Menon reckoned opportunities exist for 2-3 more players to enter the market, although it will come with challenges.

“There will be a scramble for properties for dark stores and certainly for bikers (delivery)," he said, adding that these issues should get solved because it opens the job market to a larger pool of people.

Bigbasket was founded in 2011 by Menon, Parekh, Abhinay Choudhari, VS Sudhakar and VS Ramesh. Ten years later, Tata Digital Ltd, a unit of Tata Sons, acquired a majority stake in the company, although Bigbasket continues to operate as an independent entity.