BigBasket witnesses 3-fold growth in sales & anticipates profitability by 2020; Are things looking up for online grocery?

The online grocery industry has been gloomy over the past as many ended their operations in this area of online retail. LocalBanya and PepperTap shut down their e-grocery retail operations. Flipkart ended its grocery delivery app Nearby and Grofers decided to stop deliveries in 9 cities where it wasn’t seeing the sales figures it desired.

The etailers in this segment of the online retail industry are hoping 2017 brings better fortune as they aim high for this year.

Hope of good fortune for online grocery

BigBasket, the largest online grocery store in the country witnessed a surge in its ecommerce growth in the fiscal year that ended in March 2016. The online grocer grew three-fold with sales rising over Rs. 500 crore. The jump in sales was around 231%. In the previous fiscal year, the company made sales of Rs. 170 crore. In March 2016, the sales of the company were at Rs.563crores. This indicates the country’s growing preference for online grocery shopping.

In spite of these terrific sales figures, the losses made by the company cannot be ignored. BigBasket’s losses have also increased from last time’s Rs. 61 crore to Rs. 277 crore.

The company founder, Hari Menon claims, “Losses jumped up due to increase in corporate costs, investments in mobile applications and setting up warehousing in every new city we penetrated.”

The e-grocery company increased its expenses on marketing, enhancing delivery services and expansion to 25 cities from 6 in the previous fiscal year. Bollywood actor, Shah Rukh Khan has been signed as the BigBasket brand ambassador as well. So, all of these factors explain the expenses incurred so far.

BigBasket plans for the future

“This fiscal, we will look at only consolidating in the markets we are in,” Hari states.

BigBasket is owned by Supermarket Groceries Supplies. It sources produce from companies and sells them to Innovative Designs, a portal for consumers that also carries out last-mile delivery.

The founder of Future Group, which runs Big Bazaar says, “Overall, the food grocery business is huge and Rs 500 crore is nothing but a fraction of it. They will grow, the losses will grow more. Anybody can start a food and grocery business and sell at whatever price.”

At the moment, the BigBasket’s turnover is only a fraction of the overall FMCG market, which is believed to be at Rs.256,000 crore. The online grocer’s sales match about a dozen of Big Bazaar stores on an average.

In FY17, the company aims to earn Rs. 1,800 crore to Rs. 2,000 crore in sales and attain profitability by 2019-2020.

The founder of Wazir Advisors, Harminder Sahni mentions, “The grocery market is tough. Investors have realised it and are shying away now because at the end of the day the company and the kiranawalla next to you are selling the same product. The company has benefited from the shutdown of other grocery players and by opening up in new markets”

The possibilities of online grocery have attracted many players as well. Nature’s Basket by Godrej and Reliance Fresh are omni-channel initiatives by offline players. And, online marketplace Amazon also has its own online grocery model called Amazon Pantry.

BigBasket’s rival Grofers also witnessed growth and simultaneous losses. To bring down its losses the company decided to change its delivery model.

Hopefully, the efforts taken by these players in online grocery will attract the attention of more consumers and investors alike to help the industry reach its potential.