New Delhi: Delhi will be the next battleground for online grocery majors BigBasket.com and LocalBanya.com. Online grocery shopping is yet to catch on in the national Capital and both these e-commerce companies are arriving here next month to change the way Delhiites do their grocery, veggie and staples shopping.
Online grocery stores have been growing exponentially, much like other e-commerce businesses, but competition is expected to pull its act together pretty soon - there has been growing buzz of e-commerce biggies like Amazon and Flipkart mulling entry into the groceries space. A report in Mint newspaper this morning says Godrej Nature's Basket may have bought online grocery store Ekstop.com though neither company has confirmed it.
For online grocery stores, funding was earlier a bit of a challenge, but things have improved as the business is growing exponentially. BigBasket.com (Innovative Retail Concepts Private Limited) already claims to be India's largest online food and grocery store with over 10,000 products. Co-founder Hari Menon told Firstpost that a third round of funding of Rs 100 crore has already been tied up. The company raised around Rs 275 crore in two previous rounds of funding.
Menon said the imminent arrival of e-commerce biggies does not scare him because deep pockets alone is not enough to succeed in this business. "The important thing is to have a deep understanding of this business. Besides, the total Indian groceries' market is $300 billion so there is enough space for everyone".
BigBasket is eyeing Rs 850 crore gross merchandise volume (GMV) in FY16, an almost three fold growth from the Rs 275 crore runrate it has already achieved on an annualised basis. LocalBanya, the other online store, is looking at Rs 150 crore GMV by the end of this calendar, up almost four fold from the Rs 40 crore it expects to reach by March.
Managing Director of LocalBanya, Karan Mehrotra said, $20 million in fresh funding is being negotiated with new investors and the deal will be sealed soon. Mehrotra comes from a family of institutional distributors of FMCG products in Mumbai. When he took over the business in 2008, at some point realisation struck that because of the nature of the credit cycle, at any given point in time four times the amount which was his company's turnover was stuck as credit with large distributors. Typically the credit cycle ranges from 30-60 days.
This was unacceptable to Karan. He started thinking of ways to break this credit puzzle. Just around that time, a Gujarati neighbour asked him if he could procure 'Surti Kolam', a special kind of rice eaten by the Gujaratis since she could not find it in the regular kirana shops.
"We sourced this rice from APMC, 25 kgs of it. She was so happy that she started doing all grocery shopping from us. This compelled me to think in terms of a grocery business which supplies to individuals, not just institutions, where there are no prolonged credit cycles. By late 2011, I had a business model for taking grocery shopping online ready and we went to market by late 2012," Mehrotra said. LocalBanya.com has raised $20 million in two rounds of funding already and plans to raise almost the same amount afresh.
But Hari Menon of BigBasket.com is a veteran who, along with four other partners has both offline and online retail experience. The same team had earlier set up India's first e-commerce site FabMart.com in 1999 and then established the Fabmall-Trinethra chain of more than 200 grocery supermarket stores in southern India. Trinethra was sold to Aditya Birla Group in 2006 and currently operates under the brand name 'More'.
Menon said breakeven was a good 24-36 months away even as traffic on the site has increased every month - typical weekend orders stand at 7200 a day. The store operates in Mumbai, Hyderabad and Bengaluru already, has launched in Pune last month, comes to Delhi in March and Chennai by February end.
Mehrotra said LocalBanya.com will be in 12 cities by the end of this year. It operates in Mumbai and Pune as of now, Delhi by mid-March, Hyderabad by June and Chennai or Kolkata by next year.
Competition to these online grocery stores will come not only from new entrants Amazon and Flipkart but also from existing large grocery chains going online. Reliance, Nature's Basket, Spencer's are all going online too.
