BigBasket’s decision to pivot to a QuickCommerce (Q-Commerce) model is more a compulsion than a choice. As founder Hari Menon has said, customers seem to prefer Q-Commerce which is what has prompted BB to make it the default option while retaining slotted deliveries. “We decided to give it a push,” Menon has said in interviews. Essentially, BB is merging its two interfaces — BBNow (Q-Commerce option) and SuperSaver (slotted next day or later delivery). The interface will offer all 30,000 SKU (stock keeping units) to be delivered in 10 minutes, up from 8,000-10,000 currently now available.
While Menon may claim he was in no hurry and was waiting to gauge the customers’ response, the fact is BB is behind on many counts. In what is effectively a three-player market, Blinkit has a share of around 40% while Zepto and Swiggy Instamart have shares of an estimated 28% each. Reliance Retail has piloted a 30-minute delivery service in parts of Karnataka and Maharashtra. After launching in Bengaluru, Flipkart Minutes’ Q-Commerce service is now available in Gurugram. Amazon’s service is expected in 2025.
The fact is no one can afford to ignore, what according to Goldman Sachs, is a total addressable urban retail market for quick commerce platforms– grocery and non-grocery—of around $300 billion. For perspective, India’s retail (Total addressable market) TAM was about $850 billion in CY23, of which $570 billion is grocery. The gross merchandise value (GMV) in July was an annualised $5.5 billion, a fraction of India’s retail market of $850 billion.
As Ankur Rudra of JP Morgan points out, competition will expand the market rather than restrict profits. But, it must hurry. BB says it will add dark stores from the current 400 plus level to upwards of 700, enhancing the capacity of the stores to accommodate 30,000 SKUs. In addition, it plans to have a network of 60 large warehouses to stock high-value long-tail products that will be delivered in 25-30 minutes. That sounds good but then everyone’s looking to add dark store networks over the next 8-12 months as they explore new cities and better penetrate existing markets. Blinkit, for instance, is expected to have 1,140 stores by H1CY25 while InstaMart and Zepto together are tipped to have 1,620 stores by then.
The key to profitability is high throughput for dark stores something that BB must get right. The changes in the assortment could help. While it will remain grocery- driven, new categories—toys, board games, electronics, accessories and sports goods—will be added. While earlier groceries, personal care, beauty and general merchandise together fetched all the revenues, they will in future bring in about 50-60% of sales. However, other Q-commerce players too offer varied merchandise stocking everything from electronics to clothes, luggage and kitchenware. In fact, freshly prepared food items—ZeptoCafe—are also available.
Menon believes, the average order value (AOV) can move to upwards of Rs 1,000. That seems ambitious because, as Garima Mishra at Kotak Institutional Equities (KIE) points out, Blinkit’s AOV, which has trended at Rs 610-625 over the past four quarters is now 15-120% higher than peers who in general rely more on food and groceries. Again, Zepto adds a cart fee of for smaller orders of below Rs 99 and also charges a transaction fee of Rs 6.50-15 for all orders. However, a Zepto pass makes customers eligible for free delivery for orders above Rs 99. “The average order of `600 means that the fees get largely waived,” says an analyst.
Even if BBNow’s merchandise is more varied, food and groceries will bring in a chunk of BBNow’s top line. That said, KIE’s Mishra believes BB may have an AOV advantage thanks to it slotted delivery service and the incumbent customer base. Moreover, Mishra feels Flipkart may also have an advantage as it also seems to be selling items such as laptops in 10-20 minutes in selected locations. In this context, the fact that new players seem to be competing on price, is something BB needs to be mindful of.
To its credit, BB already operates across more than 35 cities, of which more than 25 are tier 2 cities. Zepto is currently present in 15 cities while Blinkit is present in over 30 cities and Swiggy Instamart in over 25 cities. Again, since the AOV gets thinner in smaller cities, experts highlight the importance of choosing the right cities to be in. Indeed, the competition is intense. As JP Morgan’s Rudra says, “We expect rapid rollout by competitors and traditional e-commerce peers BigBasket, Flipkart, Amazon to expand the market but struggle to compete with Blinkit on economics from lower hyperlocal expertise and scale.”
BB is betting on the power of the brand to differentiate itself, its understanding of the grocery business over 14 years and its ability to manage complex inventory stacks especially with perishables. It helps that the back-end infrastructure is leveraged across multiple businesses. But, as Anirudh A Damani, managing partner, Artha Venture Fund says, the transition would require substantial investments, including in technology. Rivals like Zepto have snagged close to $1 billion from investors in recent months.
The good news is that BBNow has been growing at upwards of 25% quarter-on-quarter for several quarters now. Menon estimates that the two businesses will bring in revenues of $1.5-$2 billion (Rs 12,600-16,800 crore) this year, on the back of the growth in BBNow which is expected to contribute a bigger share of 65-70% to revenues from 50% now. For BB to stay in the game, that must play out.