Private labels constitute more than 50% of the sales in categories like fruits and vegetables, food grains and masalas, and meat
The pandemic has led to a spurt in daily orders for BigBasket, and resulted in a 20% increase in average order value from April to August 2020. Seshu Kumar Tirumala, in a conversation with Devika Singh, talks about the uptake of e-grocery platforms in small towns, launching more private labels, and tackling competition from JioMart.
How are you tailoring your strategy for the small towns, given that online grocery shopping is minimal in those markets?
Though small towns have a low contribution to online grocery spending, it has been on the rise lately. In pre-pandemic times, the top eight metro cities contributed more than 90% to our sales, while the 23 cities that we classify as small towns had less than 10% share. However, their share has now risen to 15%. Our average order value, too, for these towns has gone up from Rs 1,000 to Rs 1,400. Earlier, less than 1% of the population from cities like Visakhapatnam and Coimbatore was shopping on online platforms, whereas 7-8% of Bengaluru’s population would buy from digital channels. Now, due to the Covid-led adoption, about 5% of the small town’s population is transacting online.
Traditionally, we were offering a limited assortment of 10,000-15,000 SKUs in these towns, but now we are offering our entire range of 40,000-50,000 products there. We also plan to expand our presence to 40 towns from the current 31, and are following a cluster-based approach for this. Initially, we will service these towns from the distribution centres located at the larger towns nearby; then, as we start getting enough orders, we will open a centre there.
JioMart already has an extensive presence (200 towns) in the country. How do you plan to compete with that kind of scale?
It was a natural extension for JioMart to launch in the smaller towns given Reliance Retail’s offline presence. However, we are not perturbed by this expansion. We believe this will expose customers from small towns to e-grocery, and expand the category further, making it easier for us to onboard customers as we enter these towns.
Will you be launching more private labels in newer categories? How much do these contribute to BigBasket’s revenue?
Private labels constitute more than 50% of our sales in categories like fruits and vegetables, food grains and masalas, and meat. We plan to increase our tie-ups with farmers, poultry farms and fisheries to have better control over the quality of these products. We are also investing and strengthening our offerings in categories like bread and bakery products, ready-to-cook and frozen foods. For the next year, our focus will be on building our private label play in the food category with a special focus on healthy and organic products. For instance, we recently introduced an organic pickle range called Indi Secrets. We have witnessed a consumer trend towards organic foods, and want to tap it.
You reintroduced Express Delivery last year after discontinuing it in 2019. How have you made it more cost-efficient this time?
The original idea behind the Express Delivery service was to cater to last-minute needs of customers. Hence, we were offering a smaller range, only 2000 SKUs, of mostly perishable products. We realised over time that customers were not satisfied with the service due to the limited number of products available. So, we closed it down and rebuilt a model where at least 90% of the customer requirement was being fulfilled. Now, we are offering 7,000 products under this service, but delivering them within two to three hours, unlike the earlier 90 minutes. With the availability of a larger assortment, the traction for the service has increased; our average order value has gone up to Rs 1,000 from Rs 600.
How difficult is it to acquire customers for BBDaily service, when most kirana shops offer free delivery of daily essentials?
As customers were unable to visit kirana stores during the lockdown and buy daily essentials, we saw higher adoption for our BBDaily service; subscriptions grew by 150% in the last eight-nine months, and are still growing. We hold events in housing complex premises to acquire more customers. Although it is a slow acquisition process, it gives us continuous growth.