From a bike-hailing service to a hyperlocal delivery startup: the Baxi Fresh journey
Gurugram-based startup Baxi Fresh chose to move from a pure play bike-hailing service to a hyperlocal delivery service. Here’s why.Sindhu Kashyaap
When Ashutosh Johari started Baxi, he was extremely inspired by the bike-taxis that operated in Africa. The IIT-Delhi alumnus, then the CEO of ISON Technologies, was very interested in last-mile connectivity.
“What struck me was that India then just didn’t have a Rs 20 last-mile connectivity. Autorickshaws, otherwise the cheapest form of public transport, start at Rs 30 or Rs 40,” he says.
This realisation led Ashutosh to launch Baxi as a bike-taxi service along with his IIT-Delhi batchmate Manu Rana.
The bike-hailing or taxi service works like a cab service. You book a ride on the app, and a rider comes to the pick-up location and drops you off at a scheduled point. The service differs from dockless and docked scooter-sharing companies like Bounce and Vogo, where a scooter must be unlocked with an app and the consumer rides the bike.
However, they ran into a legal roadblock. “Indian Motor Vehicle rules did not permit commercial use of bikes as taxis,” says Ashutosh. To do things the right way, the duo took permissions from the Haryana government first, and later the UP government to get yellow number plates on bikes.
“Baxi was the first company in India to get legal permissions to run bike-taxi services. At that stage, with two-wheeler driving being one of the most abundant skills in India, it seemed like the perfect match for the huge demand for cheap last-mile connectivity in the country,” Ashutosh says.
But do bike-taxis work?
But when the rubber hit the road, the team realised that while bike taxis were a welcome last-mile option for commuters at a price point of Rs 20, the challenges lay in making earnings feasible for the drivers. It led to Baxi pivoting, and they decided to focus on the hyperlocal model.
Explaining their learnings between 2015 to late 2017, Ashutosh says bike taxis did not seem to be a feasible full-time employment option for bikers. A bike taxi ride is priced at Rs 20-25.
The bike driver needs to complete approximately 50 rides each day, a very high number, in order to make upwards of Rs 1,000 a day in an aggregator model. However, bike taxis can work as a reliable part-time employment option.
“When we compared it with a minimum earning target of Rs 1,000 in a full-time employment model, we realised that it was easier to target and earn Rs 200 a day (or Rs 6,000 a month) by working part-time during peak morning and evening traffic hours,” Ashutosh says.
The team figured out that millions of blue-collar workers in major Indian cities were engaged in non-career growth jobs such as housekeeping, maintenance, and security, and could easily supplement their incomes and earn Rs 6,000 a month extra as part-time bike drivers.
They felt that bike taxis would work better as road-side pickup models, than an app-assisted, on-demand request model. The average revenue of Rs 20-25 per ride is too small for a bike driver to go and pick up a customer from a certain location and then drop him somewhere else, unless s/he is given subsidies and incentives.
“What we found was that our riders could easily get customers from outside metro stations or office complexes, wearing bright T-shirts to be identified as bike taxis,” Ashutosh says.
Baxi started creating part-time bikers from the huge blue-collar workforce of India by:
- tying up with Bajaj and TVS to finance bikes at 100 percent cost for these people.
- training bikers to work as part-time bike-taxi drivers by using the Baxi Biker App as a meter, so they could earn more than their bike’s EMI easily.
“We built up a network of 800+ part-time biker drivers this way. This created a stable supply of bikers who did not need incentives and could be used as part-timers for multiple services,” Ashutosh says.
Soon, these bike drivers were picking up customers from outside metro stations and not through app requests, as they found this model faster and more efficient. The startup co-founders then decided to explore various models where they could connect this supply of part-time bikers to a steady and committed customer demand apart from the road-side pickup bike taxi rides.
Working the hyperlocal delivery model
“During our research, we realised that there was a need for a hyperlocal delivery model that helped local retail chains for on-demand delivery of grocery. All incumbents, including newer entrants, actually kept their own inventory and competed with the retailers,” Ashutosh explains.
This opened up an entirely new area – and led to the evolution of Baxi to Baxi Fresh. Baxi Fresh could help retailers in two ways - generate demand for them through the app and execute delivery for them through part-timers.
Ashutosh explains it partnered with Mother Dairy, which is Delhi-NCR region’s largest milk retail company with over 65 percent market share and a milk booth present roughly every 500 metres in the region.
“Milk is a daily requirement for most households in India and this gives us the opportunity to create a morning and evening delivery service, combining milk with other grocery items. So, a committed daily demand enables a committed daily earning for our part-time bikers,” Ashutosh says.
Working on an asset-light model
He adds that its model in India is very similar to Instacart in the US, which also uses part-time workers to complete deliveries from retail chains who don’t have their own apps and delivery fleet.
Ashutosh believes it has helped them grow very fast and reach a scale where it can compete with Amazon Fresh and Walmart Grocery. “Today, through our partnerships (with Mother Dairy and Patanjali) we have over 5,000 grocery SKUs on our app,” Ashutosh says.
The drivers work for two hours in the morning in their own locality and Baxi Fresh pays them Rs 200 per day.
“With the concentrated deliveries that milk generates they are able to deliver to 50+ houses in that time, bringing cost per delivery to less than Rs 4. This is 10 times more economical than existing delivery rates for any delivery service,” Ashutosh says.
Non-milk products are brought from local wholesalers and large retailers, and the entire logistics chain costs Baxi Rs 5 per delivery.
The team believes that all successful models of app-based services are zero asset and zero inventory models, be it Uber, Ola, Swiggy, Zomato etc.
Competition and the milk space
With this new model, Baxi Fresh is now competing with the likes of MilkBasket, DailyNinja, and BigBasket Express, all of which are well funded. With an average ticket size of Rs 1,500 for full stack and Rs 650 for Express delivery, BigBasket will be touching a revenue of Rs 1,800 crore by the end of this fiscal year. MilkBasket is also aggressively expanding beyond Delhi-NCR and has raised significant funding.
Speaking about how Baxi Fresh (B-Fresh) will nevertheless thrive, Ashustosh says it has already managed a gross merchandise (GMV) more than the funding and five times the spend within six months since the pivot.
“We expect to have a GMV to funding ratio of 20 in the next one year. This is a huge improvement over existing e-grocery delivery models where the GMV to funding ratio is less than one,” Ashutosh explains.
B-Fresh currently almost has close to 2,000 monthly active households spending an average of Rs 1,800 per month. The average basket size is Rs 45
“This is even though we have just tapped two percent of Mother Dairy’s 2,000 outlets,” Ashustosh says. The team recently raised Rs 2 crore for their pivot and an initial angel funding.
The team seems on track to expand to a 100,000 daily milk deliveries in the next 18 months.
Speaking of the company's future plans, Ashutosh says, “We are geared up to create this delivery fleet through existing strategic tie-ups with several market leaders, including Bajaj and TVS, for providing fully financed bikes to part-timers; and Mother Dairy, Patanjali, and multiple wholesalers to provide dense retail partnership presence. We have recently initiated discussions to raise a Series A round, which will enable us to launch across all outlets of our partners to help us reach over 100,000 deliveries within a year.”
(Edited by Teja Lele Desai)