In 2015, Online Grocery application buzzed Indian market in big way and also attracted all leading
investor community which poured in around $500 million. On paper it looks very
impressive and similarly their concept were very attractive.
The Capital intensive segment
forced all players to investment in warehouses and delivery chain while the
placement of order did not picked up. Most of the Grocery player went ballistic
in hiring the best branding company to handle their brand as well as invested
very heavily in print and digital media. We all know that how companies like
Gofers and Pepper Tap struggled in the market place and downsized their
operation leading to major losses.
On a contrary; Big Basket managed
to convince existing and new investor about their march towards profitability
and positioned itself by partnering with Shops, selling private branded product.
Delivering more than 50k order every day collected across more than 18 cities
they operate.
Coming to my concern and I am
sure that Big Basket management will be even more concerned about it, is the
conversion ratio. I do not think that even 300k delivery per day will be
sufficient for them to be profitable. I observed that they come out with full
or half page advertisement in print media more or less thrice a week and also
believe that the intention is to attract organic user base. On Google Play they
have less than 5 Mn user base ( On the higher side of the assessment) and must
have spent millions of $ in
advertisement.
In my point of view; They should
take the direct user acquisition strategy and can achieve that through direct
integration in Smartphone. Believe me the return will be better than what they
are getting right now.
The continuous billboard to print
media advertisement and that too on front page is not going to help them given
the fact that their application rating on Google play is only 3.9 which clearly
shows that users are not happy with the performance of the application.
I will not be surprised, if one
good day Indian newspaper and digital media will be flooded with Big Basket
holding company decision to restructure the operation to cut down the cost but
I will be very happy to see if they announce that they are profitable on PAT
level.
