BigBasket, an inventory-led online grocery store, which mopped up $150 million from Abraaj Group, Sands Capital and lFC in March, is going slow on expansion preferring instead to penetrate deeper into its existing markets. In FY15, BigBasket reported total loss of R60 crore on revenues of R170 crore. Vipul Mittal, who oversees the fruits and vegetables chain, tells Hita Gupta fruits and vegetables contribute 18-20% of the top line or about R20 crore per month.
What is the idea behind launching Farmer Connect?
Buying from farmers directly makes sense because it removes the gap between harvesting and customer and hence improves the quality of the products. E-commerce as a platform provides the opportunity for maximum disintermediation as far as fruits and vegetables are concerned. If we can act as direct conduit between the farmer and the consumers, then we have the best opportunity to bring perishables in the shortest possible time from the farm to the place.
Under the Farmer Connect programme we have built infrastructure in rural areas where the farmer can come and transact his produce and supply to all. As a result, there is more transparency in pricing, quantity, payment and quality. Farmer Connect programme helps the farmers earn 10% more than he would earn by selling his produce at a regular mandi.
What does the infrastructure in rural areas include?
We have set up collection centres or physical locations where the farmer can walk in with his produce and sort and grade his produce and pack it. So it generates employment in rural areas as well. For commercial transactions, we have a device where we capture data of this produce and generate a goods receipt report and based on this his payment is transferred to his bank account within 48 hours.
What margins do you earn on fruits and vegetables? How much are they contributing to the total sales?
I think fruits and vegetables contribute to a healthy bottom line for BigBasket. For other companies its becomes a margin shrinking category but we maintain margin which is pretty much similar to what we see in the other categories such as FMCG. For the perishable category we expect margins between 20-25%.
We do volumes of about 3,500 tonnes of fruits and vegetables every month. Fruits and vegetables contribute towards 18-20% of the business and is valued at about R20 crore per month.
How is the performance of your private labels?
At BigBasket we took an early lead at creating our own private labels. Fruits and vegetables were sold under our private label brand – Fresho from the beginning. We also focus on staples under our label BB Royal and BB Popular.
Now, we have private labels in many other categories such as cookies, batter, ready-to-eat meals and jams. The total contribution from private labels is around 35% of the total sales or R30 crore per month.