Grocery delivery company BigBasket is embarking on an ambitious US$15 million expansion strategy across India and already expects to generate profits by the end of the year.
In an interview with ZDNet, the startup's co-founder Hari Menon predicted the Bangalore online grocery store would generate profits by the end of the year--just 24 months after launch. It also has operations in Mumbai and Hyderabad, which are expected to reach profitability by March 2014.
The site was established with a US$10 million Series A investment by Ascent Capital, a large chunk of which bought the infrastructure and "learnings" to create the Bangalore operation. Menon founded BigBasket with colleagues from his previous grocery store venture Fabmall.It offers 8,000 stock keeping units (SKUs) manufactured by 200 vendors, including fruits and vegetables, fast moving consumer goods (FMCG), fresh meat and household products. This ranges from locally-sourced dahls and vegetables, to cleaning products manufactured by global firms such as Procter & Gamble.
Perishables are only warehoused for a matter of hours as online orders can be delivered on the same day, in some cases. "It's 24 hours from farm to fridge," said Menon.
The "hub and spoke" model sees wholesalers distribute goods to four major warehouses in Bangalore, where 50 branded delivery vans courier the goods to the consumer.
Bangaloreans generate close to 1,000 orders a day, spending an average of 1,250 rupees (US$23). This equates to about US$694,000 monthly revenue. The magic break even formula is 1,500 orders of a 1,250-rupee basket, he said.
In mid-2012, seven months after the launch in Bangalore, the company commenced operations in Mumbai and Hyderabad. Comparatively, it was a breeze.
"You can do things at far cheaper cost in the new city as there's no cost of learning," Menon said.
Mumbaikers and Hyderabadis generate just 275 to 300 orders per day, but he expects this will increase five-fold by March 2014. This means the expansion cities turn a profit three months faster than Bangalore.
"The first city took up a huge amount of the US$10 million, and a good chunk went into learning and trying a few things, but none of that is required in each new city," Menon said.
Furthermore, by the end of the year, he expects to launch BigBasket Web sites in Chennai and Delhi, the first cabs off the rank in a seven city US$15 million pan-India blitz.