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Understanding of E-Commerce through BigBasket

A Documentation Report
Submitted by

Prem Kumar
Abdul Sameer
Vijay Kumar
Murali Krishna
Surya Teja
Chaitanya






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 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.
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 its a worlds 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.

INDEX

S.NO Name of the Chapter 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.




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 contacts and social media.
Use electronic data interchange, the business-to-business exchange of data.
Reach prospective and established customers by e-mail or fax (for example, with
newsletters).
Use business-to-business buying and selling.
Provide secure business transactions.

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 online retailers that later open physical locations to supplement their
online efforts.

BIGBASKET.COM
Background of the company:
BigBasket.com is Indias 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 capitals 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 Indias 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.


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 customers 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. Weve 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.



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 retailers 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





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 dont 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.
Sites which does a grocery selling through online are listed below:
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. Indias largest online food & grocery store with over.
It has 1000 brands in BigBasket catalogue.
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 suppliers.
Customization
A vast variety of stuff available.
Closer working relationship with customers.
Weakness:
Sometimes the transportation cost increases than product cost.
No. of potential customers who buy online is still a redundancy.
Weak brand name.
Opportunities:
Expanding oversea.
Opportunity to expand 2
nd
grade cities & towns.
Product extension
Strategic alliances
Licensing
Venture capitalists
Everyday no. of Internet users is increased in a rapid way.
Threats:
Competitors go online
Changing govt. policies.
Govt. Regulations on retails in India govt. has more concern on retailers because so many
families depends on this business.


Future plans and growth:
# Whats 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.
Thats 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. Thats 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 it spreads over
several metropolitan cities.
Creating brand, BigBasket was planning to increase their brand value.
Increase in revenue, Increase in revenue leads in establishing newer branches.
This leads in increase of profits automatically.


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 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.
Consumers are expecting to get a 100% fix rates and that puts a negative impact (or) a
pressure upon customers

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.