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Understanding of E-Commerce through BigBasket

Understanding of E-Commerce through BigBasket A Documentation Report Submitted by Prem Kumar Abdul Sameer Vijay Kumar

A Documentation Report Submitted by

Prem Kumar Abdul Sameer Vijay Kumar Murali Krishna Surya Teja Chaitanya

BigBasket A Documentation Report Submitted by Prem Kumar Abdul Sameer Vijay Kumar Murali Krishna Surya Teja

ABSTRACT:

Transacting or facilitating business on the Internet is called ecommerce. Ecommerce is short for "electronic commerce."

Popular

examples

of

ecommerce

revolve

around

buying

and

selling

online.

But

the

ecommerce universe contains other types of activities as well. Any form of business transaction

conducted electronically is ecommerce.

The buying and selling of products and services by businesses and consumers through an electronic medium, without using any paper documents. E- commerce is widely co nsidered the buying and selling of products over the internet, but any transaction that is completed solely through electronic measures can be considered e-commerce.

The document consists of a business done in E- Commerce. We have chosen an example of E-Commercing site www.BigBasket.com we had chosen this because it’s a world’s largest E- Commercing website which sells groceries.

BigBasket.com is the first comprehensive online grocery store in Bangalore, Mumbai & Hyderabad. With over 10,000 products and 1000 brands in our grocery list you will find everything you are looking for. Right from fresh fruits and vegetables, rice and dals, spices and seasonings to packaged bread, bakery and dairy products and other branded foods we have it all. Save time and money, shop at Bigbasket.com - the best online fruit & vegetable store, meat store, provisions store - an all-encompassing online groceries store of Mumbai, Hyderabad & Bangalore.

S.NO

Name of the Chapter

INDEX

Page No.

1 Introduction to E-Commerce

1

2 BigBasket.com

3

2.1

Background of the company

3

3 Description of the product & service

4

4 Investment Rise

5

5 Valuation

6

6 Sales & Revenue

7

7 Challenges of BigBasket

8

8 Business model

9

9 Competitive Advantage

9

10 SWOT Analysis

10

11 Future Plans and Growths

11

12 Recommendations

12

13 Conclusion

12

INTRODUCTION TO E-COMMERCE

E-Commerce:

E-Commerce simply defined as Commercial transactions conducted electronically on the Internet.

The buying and selling of products and services by businesses and consumers through an electronic medium, without using any paper documents. E-commerce is widely considered the buying and selling of products over the internet, but any transaction that is completed solely through electronic measures can be considered e-commerce. E-commerce is subdivided into three categories: business to business or B2B (Cisco), business to consumer or B2C (Amazon), and consumer to consumer or C2C (eBay) also called electronic commerce.

to consumer or C2C (eBay) also called electronic commerce. Electronic commerce, commonly known as E-commerce or

Electronic commerce, commonly known as E-commerce or e-commerce, is trading in products or services using computer networks, such as the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction's life cycle, although it may also use other technologies such as e-mail.

E-commerce businesses usually employ some or all of the following practices:

Provide Email or "virtual storefronts" on websites with online catalogs, sometimes gathered into a "virtual mall Buy or sell on websites or online marketplaces. Gather and use demographic data through web
Buy or sell on websites or online marketplaces. online catalogs, sometimes gathered into a "virtual mall Gather and use demographic data through web contacts
Gather and use demographic data through web contacts and social media. mall Buy or sell on websites or online marketplaces. Use electronic data interchange, the business-to-business
Use electronic data interchange, the business-to-business exchange of data. use demographic data through web contacts and social media. Reach prospective and established customers by e-mail
Reach prospective and established customers by e-mail or fax (for example, with newsletters). data interchange, the business-to-business exchange of data. Use business-to-business buying and selling. Provide secure
Use business-to-business buying and selling. and established customers by e-mail or fax (for example, with newsletters). Provide secure business transactions.
Provide secure business transactions.and established customers by e-mail or fax (for example, with newsletters). Use business-to-business buying and selling.

buying and selling. Provide secure business transactions. E-commerce has grown in importance as companies have adopted

E-commerce has grown in importance as companies have adopted pure-click and brick- and-click channel systems. We can distinguish pure-click and brick-and-click channel system adopted by companies.

Pure-click or pure-play companies are those that have launched a website without any previous existence as a firm. Bricks-and-clicks companies are those existing companies that have added an online site for e-commerce. Click-to-brick
Bricks-and-clicks companies are those existing companies that have added an online site for e-commerce. launched a website without any previous existence as a firm. Click-to-brick online retailers that later open
Click-to-brick online retailers that later open physical locations to supplement their online efforts.as a firm. Bricks-and-clicks companies are those existing companies that have added an online site for

Background of the company:

BIGBASKET.COM

BigBasket.com is India’s largest online food and grocery store. With over 10,000 products and over a 1000 brands in catalogue BigBasket find everything you are looking for. Right from fresh Fruits and Vegetables, Rice and Dals, Spices and Seasonings to Packaged products, Beverages, Personal care products, Meats BigBasket have it all.

Choose from a wide range of options in every category, exclusively handpicked to help you find the best quality available at the lowest prices. Select a time slot for delivery and your order will be delivered right to your doorstep, anywhere in Bangalore, Mumbai & Hyderabad. You can pay online using your debit / credit card or by cash / sodexo on delivery.

BigBasket guarantee on time delivery, and the best quality!

Big basket is an online grocery mart which was started at jan-12-2012 in Bangalore. Big basket.com has launched the IT capital’s first comprehensive online grocery store. BigBasket was promoted serial entrepreneurs and fabmart. Co-founders of fabmart were v.s. sudhakar, harimenon,vipul parekh,v.sRamesh &abhinay choudari with leading entrepreneurs’ k.ganesh &meena ganesh. Founders of successful ventures like vista,customer asset, IT&T as the co- promoters. The founding team brings with it over 45 years of offline and online retail experience. E-commerce pioneers having floated India’s first e-commerce site fabmart.com which was actually started in Bangalore. Later it expanded to Mumbai and Hyderabad.

Since 2012, BigBasket has been present in Hyderabad and Mumbai. Within a year, the company will start services in Delhi and Chennai as well. Subsequently, it will also cater to Pune, Ahmedabad and Kolkata. "We expect to be present in 10 cities in next three years," says Parekh, co-founder and head (marketing and finance), BigBasket.

to be present in 10 cities in next three years," says Parekh, co-founder and head (marketing

Description of the product & services:

This is an online grocery store with over 12,000 products and over a 1,000 brands. BigBasket delivers food items such as fruits, vegetables, bakery products, dairy products, staples & provisions, toiletries, frozen foods such as ice cream Etc…

Big basket is targeting the people mostly who live in metropolitan cities. An easy to use & intuitive site interface, cash on delivery and the option of choosing the time slot & day on which the grocery needs to be delivered makes the shopping experienced totally attuned to meet a busy customer’s need.

The company has two working models. When it started operations, it adopted the just-in- time model - not just perishables, every item was brought against an order. BigBasket now buys products directly from suppliers - HUL, P&G, farmers and mills - and stocks these in warehouses. It sets initial inventory levels and later, re-ordering levels. The entire process is automated.

"We buy directly from the manufacturers or suppliers and add a margin to the product price before selling. At a mature stage, the blender margin stands at 20-25 per cent," says Parekh.

BigBasket has started delivering perishable items, too. Compared to other e-commerce segments, here, it is critical to hit a minimal basket size; else, you end up with negative contribution margins, says Navin Honagudi, investment director at Kae Capital.

BigBasket has a warehouse each in Bangalore, Hyderabad and Mumbai, as well as hubs (where delivery vehicles wait). Goods are sent to hubs and from there, to customers. The routing is done automatically and the vehicles are GPS-tracked. Each city is split into zones and each zone has a hub.

"Using analytics to predict weekly demand, the company can optimize logistics and supply volumes to drive better margins," says Honagudi.

The important takeaway is that all the founders are gray! The big difference is that there is a very large population on the Internet today. What took us 3-4 years last time from a sheer revenue perspective; we managed to do this time in seven months. In 1999 when we started Fabmart we used to use dial-up lines which used to hang up. Bandwidth was a serious issue and people were not comfortable at all buying online because they worried about whether PAYMENT GATEWAYS were secure. Today smart phones and smart devices allow you to use the Internet on the go. We’ve just launched our Android app. All this has made a huge difference.

Investmentrise:

Online grocery Bigbasket has received funding of Rs.200 Crores in a round led by Venture capital firms, Helion and zodius fund venture with avendus. Existing investors Ascent capital & lion rock capital also participated in the round which saw the valuation of the two year- old startup crossed Rs.600 Crores.

Big basket, which has now risen to a total funding of Rs.278 Crores, Which competes with more than a dozen of online grocery stores including zop now, aaram-shop and farm to kitchen. It is currently present in Bangalore, Hyderabad and Mumbai. Plans to use the funds to enter 10 more cities, including Delhi& Pune, which has 2 lakh customers across 3 cities.

Yes, BigBasket were aiming for a GP between 20 23% and net profit between 5- 7%. There are a number of reasons we believe this is achievable. For instance, They have our own private label in staples which allows us higher margins. Fruits and Vegetables contribute 20% of the business. Here also the margins are set by us.

Besides growing the GP BigBasket also have some margin advantages as an online model such as no shrinkage, while the brick and mortar stores have shrinkage as high as 2%. 4% which goes straight from the bottom line. Also while our logistics costs are high, our costs on rentals are low. Not having stores further helps us save on cost of utilities electricity, telephone etc.

costs on rentals are low. Not having stores further helps us save on cost of utilities

Valuation:

Initially, venture capitalists weren't very comfortable with the business model. Often, they drew parallels with Webvan, a US-based online grocery store that lost a reported $800 million (about Rs.4,880 crore) in venture capital and initial public offering proceeds before being shut in 2001.

In February 2012, BigBasket raised $10 million (Rs.61 crore) from Ascent Capital in series-A funding. "We don't need to raise funds for some time now," says Parekh.

Raja Kumar, founder and chief executive of Ascent Capital, says, "Grocery is a $160- billion (Rs.976-crore) opportunity, where the online model could potentially be a scalable and capital efficient to overcome many challenges organized retail faces. The success of Ocado and Tesco in the UK, Yihaodian in China and FreshDirect and Amazon Fresh in the US pointed to an emerging untapped opportunity."

Parekh says as of now, the company's unique selling point lies in its range of products, both in fresh and frozen categories. "We have significant experience in own-branded products and that helps keep a check on quality. Our delivery track record is strong - 99.99 per cent orders are delivered on time, else we refund 10 per cent of the order cost to the customer's account. We also track the delivery and update the customer of the status," he says. Also, if the company cannot fill an item, it refunds one and halftimes the item value back to the customer. If a product is returned, the money is refunded.

The company which has crossed annual revenue of Rs.250 Crores and is growing 10 % each month, relies heavily on technology solutions to track every process from the time an order is placed margins in grocery business in India are above 20 % compared with countries like the US & the UK, where they run in single digit numbers.

Now BigBasket valuation is more than Rs.600 Crores.

Sales & Revenue:

Average no. of transactions per day is around 300 and the average value of each bill is around Rs.1200. so we can clearly see the revenue they generate each day in one state.

Total Revenue for the day is

1200 * 300 = Rs.3, 60,000

Total revenue for month

3, 60,000* 30 days = Rs.1, 08, 00,000 per month

New customers who were joining each month are around 3000.

One of the advantage of this company is that they have is their own private stable crop which contributes to 20 % of their business.

Profit margin also looks veryattractive

Gross Profit remains in between 20% - 23% & Net profit is around 5%-7%, where as usual retailer’s profit margin is 3-5%.

"Our Bangalore business saw revenues of Rs.20 crore in FY13. In FY14, we should clock revenues of Rs.300 crore and Rs.500 crore in FY15," says Parekh. The Bangalore business was expected to break-even by the end of this year and operations in the other two cities were likely to be profitable by July 2014, he added

by the end of this year and operations in the other two cities were likely to

Challenges of BigBasket:

One thing that has not changed in all these years is the inefficiencies in the supply chain. But that is a universal challenge. There are other challenges which are specific to our online format.

Challenge 1: In the online space people expect 100% fill rate. If even 1 item is short they crib that they have to now go to the market. Whereas if they were buying offline they could look for substitutes or go to another store.

Challenge 2: QC picks errors. The picker picks and packs the wrong product. However, this has now been addressed. BigBasket have invested in special scanners which record the order and if the picker scans the wrong product the scanner shows the error.

Challenge 3: Presently when BigBasket send goods the delivery boy is taken straight into the kitchen. This has its own requirements. To minimize the time spent, the uniform for the delivery boys is sandals since these are easy to slip out and slip in. It also saves the danger of smelly socks (retail is detail!). The delivery is done in open cartons. Not plastic packets. But still the process takes time and the delivery boy is held up till the process is completed. BigBasket now want to tell the customer that they should trust us on account of our sophisticated systems. If there is a problem that arises, call us and BigBasket gives a refund. The purpose is to save time for the delivery boys.

Business model:

We have two operating models. When we start the business we use what we call the just- in-time model. This means that not just perishables but everything we bring against an order. Because you don’t yet have the volumes for suppliers to supply in bulk and for you to stock in a warehouse. So you consolidate orders for the day, go and buy the products and deliver. When you reach a particular volume, you move from the just-in-time model to what is called the warehouse stocking model. That is where we are as far as Bangalore is concerned. We buy products directly from the supplies, like Unilever and Procter &Gamble; we buy from farmers and mills and stock the products in the warehouse. We stock a certain number of days of sales, depending on the product and sales. We are able to set initial inventory levels and then decide what the re-ordering levels are. So it is all completely automated.

Competitive advantage:

Interesting point was BigBasket is a successful grocery shop.So it is all completely automated. Competitive advantage: Sites which does a grocery selling through online

Sites which does a grocery selling through online are listed below:point was BigBasket is a successful grocery shop. o momgrocery.com o Walmart.com o

o

momgrocery.com

o

Walmart.com

o

Kiranawala.com

o

Foodbazar.com

Among all these BigBasket is the best E-Commercing site. It is an Indian business. India’s largest online food & grocery store with over. It
Among all these BigBasket is the best E-Commercing site. It is an Indian business. India’s largest It is an Indian business. India’s largest online food & grocery store with over.
India’s largest online food & grocery store with over. It has 1000 brands in BigBasket catalogue. It has 1000 brands in BigBasket catalogue.
store with over. It has 1000 brands in BigBasket catalogue. BigBasket CEO says that “There are BigBasket CEO says that “There are quite a few new entrants but they are mostly regional players. I expect the space to hot up very soon. I am hoping that more players will enter the MARKET because I am a strong believer of the fact that markets open up when there are more players. Otherwise the onus is on one or two players to build the market.”

SWOT:

Strengths:

Huge investment capacity. Convenience for customers. High quality products. Low inventory cost. Low delivery charges. Good relationship with
Convenience for customers. Huge investment capacity. High quality products. Low inventory cost. Low delivery charges. Good relationship with
High quality products. Huge investment capacity. Convenience for customers. Low inventory cost. Low delivery charges. Good relationship with
Low inventory cost. capacity. Convenience for customers. High quality products. Low delivery charges. Good relationship with suppliers.
Low delivery charges. for customers. High quality products. Low inventory cost. Good relationship with suppliers. Customization A vast
Good relationship with suppliers. quality products. Low inventory cost. Low delivery charges. Customization A vast variety of stuff available. Closer
Customization Low delivery charges. Good relationship with suppliers. A vast variety of stuff available. Closer working
A vast variety of stuff available. cost. Low delivery charges. Good relationship with suppliers. Customization Closer working relationship with customers.
Closer working relationship with customers.inventory cost. Low delivery charges. Good relationship with suppliers. Customization A vast variety of stuff available.

Weakness:

Sometimes the transportation cost increases than product cost. No. of potential customers who buy online is still a redundancy. Weak brand name.
No. of potential customers who buy online is still a redundancy. Sometimes the transportation cost increases than product cost. Weak brand name.
Weak brand name.the transportation cost increases than product cost. No. of potential customers who buy online is still

Opportunities:

Expanding oversea. Opportunity to expand 2 n d grade cities & towns. Product extension Strategic alliances Licensing
Opportunity to expand 2 Expanding oversea. n d grade cities & towns. Product extension Strategic alliances Licensing Venture capitalists nd grade cities & towns.
Product extension Opportunity to expand 2 n d grade cities & towns. Strategic alliances Licensing Venture capitalists Everyday
Strategic alliances to expand 2 n d grade cities & towns. Product extension Licensing Venture capitalists Everyday no.
Licensing cities & towns. Product extension Strategic alliances Venture capitalists Everyday no. of Internet users is
Venture capitalists & towns. Product extension Strategic alliances Licensing Everyday no. of Internet users is increased in a
Everyday no. of Internet users is increased in a rapid way.Opportunity to expand 2 n d grade cities & towns. Product extension Strategic alliances Licensing Venture

Threats:

Competitors go online Changing govt. policies. Govt. Regulations on retails in India govt. has more concern on retailers
Changing govt. policies. Competitors go online Govt. Regulations on retails in India govt. has more concern on retailers because
Govt. Regulations on retails in India govt. has more concern on retailers because so many families depends on this business.Competitors go online Changing govt. policies.

Future plans and growth:

# What’s coming up from BigBasket in the next 12 months? The next thing that will happen is that Bangalore breaks even in the next few months. That’s a big milestone for us. After that Hyderabad and Mumbai will move into the warehouse model. They are in the just-in-time model right now. Then in the quarter of January-March 2014 we will move into Delhi and Chennai. Starting March 2014 we will start work on our Series B round of fund raising which will help us go to 10 more cities. That’s the plan. BigBasket identified the need which would rise and they have made plans to adopt those in order to survive in this competitive world. As we know young generation is more health conscious so they are planning to add organic food in their portfolio, pesticides free fruits and vegetables. Although there may be bit expensive but will have a huge demand. Not just that they planning to keep freeze foods in their cart. So that people can order the same and eat the same without spending much time in cooking it.

BigBasket was planning to add international brands in their kitty. Expansion of business is also a part of the future plan. just within a year
Expansion of business is also a part of the future plan. just within a year it spreads over several metropolitan cities. was planning to add international brands in their kitty. Creating brand, BigBasket was planning to increase
Creating brand, BigBasket was planning to increase their brand value. within a year it spreads over several metropolitan cities. Increase in revenue, Increase in revenue leads
Increase in revenue, Increase in revenue leads in establishing newer branches. Creating brand, BigBasket was planning to increase their brand value. This leads in increase of profits
This leads in increase of profits automatically.was planning to increase their brand value. Increase in revenue, Increase in revenue leads in establishing

Recommendations:

At present BigBasket services are available in only metropolitan cities. They have the Scope to expand to type cities. If the picker picks and packs
They have the Scope to expand to type cities. services are available in only metropolitan cities. If the picker picks and packs the wrong products,
If the picker picks and packs the wrong products, then this can be addressed as there should be a special scanner which can record the order. If the picker scans the wrong product the scanner shows the error. cities. They have the Scope to expand to type cities. Consumers are expecting to get a
Consumers are expecting to get a 100% fix rates and that puts a negative impact (or) a pressure upon customersshould be a special scanner which can record the order. If the picker scans the wrong

Conclusion:

BigBasket.com, were excited about making life simpler and grocery shopping a breeze! Now you can buy organic food & grocery online at your leisure and from the comfort of your home - no more standing in the long queues at ration shops, provision stores & supermarkets. Online grocery shopping in Mumbai, Hyderabad & Bangalore is made easy & simple when you are shopping groceries at BigBasket.