Recomended read from September 2015: The Bigbasket of groceries is set to get bigger
Bigbasket aims to use the proceeds of this round to finance its growth through further penetration into existing markets, expansion into Tier II cities across India, scaling-up of its recently launched express delivery and specialty store business that caters to top-up and emergency purchases, and increasing the product range offered to customers.
We are excited about the investment opportunities in India, a key geography for us, where we continue to identify and partner with market leading companies. Abraaj will leverage its experience in the consumer sector to enable Bigbasket to further enhance its strong domestic position.
We intend to increase the reach of our just-launched one-hour express delivery service and also launch our marketplace for specialty stores in the coming months. This coupled with an expansion in our range of private label products will create a solid foundation for growth in both revenue and profitability.”
Several on-demand grocery startups raised funding last year, especially early-stage startups. However, a slew of them wound up their operations while some, like Bengaluru-based Jiffstore, got acquired. Unit economics is a challenge in delivering grocery and other daily essentials in the current on-demand model, considering the negligible margins and the low delivery fees that companies charge customers. Earlier this year Grofers and PepperTap rolled back their operations in nine and seven cities respectively.
The roll back by market leaders Grofers and Peppertap raised questions on whether this young industry can scale beyond major cities. However, Bigbasket has managed to raise funds at regular intervals. The company’s strategy to roll out its own labels (like rice and pulses) is helping it improve margins. The company is also ensuring it has other differentiating elements, like focusing on organic products. While Bigbasket has launched a marketplace business, especially to deliver bakery and meat products quickly, it is still relying on its inventory model. This focus on a relatively traditional model seems to have kept it ahead of its on-demand peers. Time will tell if that advantage will last.