BigBasket clocks $1.1 billion gross sales as pandemic fuels online grocery – The Economic Times

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SynopsisThat Tata-owned BigBasket is only the second vertical e-commerce player in India to achieve the milestone indicates the high-growth potential that online grocery has.

Bengaluru:Online grocery startup BigBasket clocked gross sales of $1.1 billion, or Rs8,000 crore, in financial year 2021, becoming only the second vertical e-commerce player in India to do so after online fashion retailer Myntra.

Horizontal e-tailers like Flipkart and Amazon India, who sell all types of goods, have previously crossed the billion-dollar sales mark.

That BigBasket, now majority owned by Tata Group, has reached this milestone indicates the high growth that online grocery platforms have witnessed since the coronavirus outbreak last year. The pandemic has advanced growth and expansion estimates of these platforms by at least one year.

Now, the Bengaluru-based e-grocer is doubling down on the growth momentum and is expecting to garner gross sales of around $125 million, or Rs 910 crore, by the end of May, which is higher than July last year, when its sales had peaked.

“May has been terrific. In the full financial year of 2021, we grew by around 80% compared to an annual growth of 40-45% before the pandemic. Currently, we are seeing higher sales than last year’s peak in July and it would be around 40% higher compared to March 2021 (before the second Covid-19 wave),” Hari Menon, co-founder and chief executive officer of BigBasket, told ET.

Based on the current sales trajectory, Menon said the firm is aiming to clock gross sales of around $1.6-$1.7 billion, or Rs 12,000 crore, in the ongoing financial year as the average order size has also increased.

What’s driving the surge?

The current wave of the pandemic has taken a toll on discretionary spends, but consumers are increasingly shopping for essentials online as they remain indoors.

Consultancy firm Kearney expects the online grocery space to clock an annual growth rate of 40-50% this year. According to multiple industry reports, e-grocery was worth $2.5-$3 billion in 2020.

“Last year was big for everyone. Consumer brands have registered a growth of two times on e-commerce platforms than before. BigBasket, being the online grocery leader, benefited the most as consumers moved their purchases online after the country went into lockdown. If it had to happen in any year, it would be 2020,” said Arpit Mathur, partner at Kearney.

He estimated rival Grofers to be around 60-70% of BigBasket’s size.

Grofers declined to comment.

While existing buyers continue to buy grocery online, traditional offline customers are creating additional growth across platforms.

The surge has also led to longer delivery timelines, at least in markets like Bengaluru where the wait times are at least 3-4 days to get online orders delivered.

BigBasket is currently issuing tokens before an order is placed.

On average, platforms including BigBasket are taking longer to deliver, though the situation seems to be better in cities like Mumbai or Delhi.

“This is a temporary issue and not a structural one. This time, delivery staff and warehouse managers have also gotten infected (with the virus) impacting platforms like BigBasket. What many consumer brands are doing is to prioritise large-size units instead of single units and focusing on bulk (packets) pushing up average order size,” Mathur said.

There has been an increase in the average order size on BigBasket, Menon said, as people buy more to stock up in advance. Typically, these orders are Rs 1,200-Rs 1,700 in size.

Food delivery platform Swiggy’s hyperlocal grocery delivery service Instamart saw average order size go up by 30-40% recently, a source close to the company said.

Since starting the service in August last year, it has grown nine times, the person added.

Swiggy declined to comment.

Instamart has ‘dark stores’ across various locations in a city from where it promises a 45-minute delivery. The same has turned into delivery times of 1-1.5 hours in cities like Bengaluru.

Dunzo, another hyperlocal delivery startup backed by Google, said its fastest-growing category—consumables—witnessed users transacting more than two times per week. Dunzo said it was focusing on micro-fulfilment centres to have a better grip on its supply chain and delivery timelines.

“To do this, we’re harnessing the power of our micro-fulfilment centres to act on the urgency of this demand and deliver the top 1,500 SKUs (stock keeping units) at under 20 minutes per delivery. With micro-fulfilment centres, we aim to have a stronger hold on supply chains and continue to improve on the promise of faster deliveries,” a Dunzo spokesperson said.

Horizontal online retailers like Flipkart and Amazon India are also aggressively expanding their operations to meet increased demand for essentials, even as many states restrict the sale of non-essentials due to the ongoing lockdowns.

Last week, Flipkart said it was ramping up its fulfilment centre capacity to serve around 73,000 grocery orders per day as against 64,000 orders currently. “We also plan to further step up our supply chain infrastructure for Grocery to add over 8 lakh square feet of space through five new fulfilment centres over next three months,” a Flipkart spokesperson said.

Amazon India also said it was working to serve orders of essential goods and was in touch with state governments to allow delivery of all goods.

Is the growth sustainable?

BigBasket’s Menon thinks so.

He said every year after the peak month of sales some consumers would go back to the old ways of buying essentials. “The number of new users acquired is still very high compared to those who leave after some time.”

For now, consumption demand remains strong.

BigBasket’s order volume has grown by 24-25%, a lower rate than its value growth, signalling an increase in order size.

Before the pandemic, BigBasket used to clock about 250,000 orders per day and that shot up to 350,000 in the middle of last year, including micro-delivery of morning essentials through subscription-based service BBDaily.

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