BigBasket crosses Rs 1,000-crore sales mark in FY17

Innovative Retail, which runs BigBasket, has more than doubled its business to cross the Rs 1,000-crore sales mark in FY17, indicating the growing preference for online grocery-shopping in India despite sluggish trends in the broader consumer market.
 
Innovative Retail reported revenues of Rs 1,090 crore in the year to March 2017, translating into a 107% jump from ?527 crore a year ago. Losses increased to Rs 191 crore last fiscal, compared to Rs 103.4 crore in FY16.
 
BigBasket has two operating entities. Supermarket Groceries sources products from companies and sells them to Innovative Retail, which in turn runs the consumer-facing portal and makes the last-mile delivery to comply with the norms on foreign direct investment (FDI) in direct online retail.
 
"With fill rates and on-time delivery over 99%, our performance is the best even among global retailers. We have invested heavily in marketing and creating infrastructure to help maintain our focus on customer experience," said Hari Menon, founder of the company that is backed by a clutch of investors, including Helion Venture and Ascent Capital.
"Our larger markets such as Bangalore and Hyderabad have already broken even at an operational level," Menon said. "We hope to close the current fiscal with sales of over Rs 2,000 crore."
 
Fill rate refers to the percentage of customer orders satisfied from stock at hand and is a measure of a retailer's ability to meet demand.
 
The six-year-old e-grocer signed up Bollywood actor Shah Rukh Khan as its brand ambassador in 2015. About a fortnight ago, the Competition Commission of India approved Chinese ecommerce giant Alibaba to purchase a stake in BigBasket. The purchase will help further cement Big-Basket's position as market leader in the grocery segment while allowing Paytm Mall, backed by Alibaba, to get a beachhead in this market.
 
Online food and grocery penetration is less than 1%, suggesting that the category is still in its infancy in India and underscoring the potential opportunity in the Rs 2.6-lakh-crore market. Morgan Stanley expects online food and grocery segment to become the fastest-growing, expanding at a compounded annual growth rate of 141% by 2020 and contributing $15 billion, or 12.5%, to overall online retail sales.
 
But the opportunity offered by the $500-billion retail market is attractive for any player — foreign or local. Food and grocery account for almost 50% of the overall retail basket in India, although general merchandise, personal and home products fill up a bulk of the profit pool at retailers.
 
"Online grocery retail will continue to grow since it addresses a pressing need of the country and BigBasket has the first-mover advantage. With several rounds of funding, it has stabilised the high transaction business, although sales growth might come down with increasing base and newer competition, especially from Amazon," said Ruchi Sally, director, Elargir Solutions, a retail consultancy firm.
 
Most retailers are trying to provide a multi-channel offering that meets the demands of customers who easily switch channels to buy products. Amazon India, too, has received government approval for its proposed $500 million retail foray in the food sector, and is ramping up its business with Amazon Pantry and Amazon Now. Offline players such as Tata, Reliance Fresh and Godrej Nature's Basket have launched omni-channel initiatives, although the scale is not too big right now. So far, the omni-channel strategy is mostly restricted to a few lifestyle retailers, including Shoppers Stop, Arvind and Aditya Birla Retail, as grocery delivery has a more complex value chain than fashion.
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