Online grocer BigBasket’s net losses trebled to Rs 60 crore in the year to March 2015 while revenues more than doubled to Rs 170 crore. In FY14, the e-tailer, which follows an inventory-led model, had posted a loss of Rs 21.60 crore on the back of revenues of Rs 70 crore, according to the filings with the Registrar of Companies.
The e-retailer is understood to be targeting a presence in 50 cities with a monthly revenue run rate of $1 billion in 2016; currently it operates in eight cities and the revenue run rate in August was $100 million. While grocery constitutes the biggest chunk of the Indian retail market at 48%, analysts believe this is a tall ask. “We believe this tenfold increase in revenue within a year could be hard to achieve primarily as customers in smaller towns may not easily shift from their local retailer and building localised offerings — incorporating local tastes — may take time,” Kotak Institutional Equities wrote in a recent report.
The size of the Indian grocery market is pegged at Rs 20 lakh crore. The opportunity for organised (including online) grocery retailers is seen at Rs 3.4 lakh crore based on the needs of cities with a population of 1 million-plus. However, with thousands of mom-and-pop stores as also organised players like Spencer’s, Reliance Fresh and Food Bazaar in the segment, competition is already keen and only increasing with Amazon entering the space.
BigBasket, which maintains its stocks and supply chain competes with a Grofers, which follows an inventory-less or aggregator model, tying up with existing shops to supply to consumers. Analysts believe that while the inventory-led model appears to have a better margin profile at the current levels of scale — 10,000-20,000 orders a day — should the scale rise tenfold, the inventory-less model could deliver better margins since the biggest cost — delivery — could fall dramatically.
In October last year, BigBasket closed $18-million in funding from Sands Capital Management and about $50 million in August from existing investor Bessemer Ventures. It has raised $120 million so far, and plans to raise another $150 million over the next two years. “We would like to remain the market leader in this segment, and we welcome competition as it would help in opening up the markets faster,” BigBasket’s CEO Hari Menon had told FE earlier. The company is eyeing a $1-billion valuation over the next 18 months. The company is also faced with a challenge in retaining the blue-collar workforce, a segment in which it is facing 10-15% attrition.