'Consumers never wanted 10-minute delivery,' says Bigbasket's co-founder

In the time where major e-commerce platform are chasing rapid delivery Bigbasket's co-founder Hari Menon has said that the unit economics for 10-minute delivery just doesn’t work.

While speaking at the Sharrp Summit in Mumbai on Wednesday, Menon mentioned that consumers never wanted quick delivery and it was something that was thrust upon them.

A ‘good sensible’ business that will make sense is 15-30 minute deliveries, which is what companies in this space should chase, he added. On the growth of quick commerce Menon added that  he doesn't think it will scale that fast.

“Quick commerce has certain dynamics required for unit economics to work, which means you need a high density of orders, it will be cut off at some point. The Bigbasket model will scale, but quick commerce without density doesn't work,” Menon said.

Tata Group-owned Bigbasket also runs a quick commerce offering under BB Now, which delivers groceries in 15-30 minutes. Menon believes this model works because it is able to leverage warehousing, which is common with the main Bigbasket grocery delivery business.

Moreover, BB Now is increasing the number of purchases for Bigbasket overall.

“The good thing is the same customer buying in both places. If they were buying 10 items earlier, now they are buying 14 across both platforms. What they were buying from a Kirana store outside, they are now moving to BB Now and pantry buying continues on the main platform,” Menon told CNBC-TV18 on the sidelines of the event.

Combined buying, as a result, has gone up by 15 percent for Bigbasket, he added.

The quick commerce space has gained immense momentum over the past two years, and is currently dominated by players like Zepto, Zomato’s Blinkit, Swiggy Instamart and Dunzo that promise grocery deliveries in under 10 minutes or within 10-15 minutes.

Bigbasket joined the fray in December 2021 with the launch of BBnow, but offers grocery delivery in 15-30 minutes.

While BB Now is able to leverage common warehousing, setting up a business for only quick commerce becomes harder, says Menon, adding that quick commerce is viable provided you have a high density of orders.

The key then, he adds, is to prioritize dense locations, instead of covering an entire city.

“If you go to a place where you have very few orders, it doesn't make sense. So you have to choose your locations, only cover dense locations. If you go into non-dense locations, you'll bleed,” Menon says.

While the order volume varies depending on the business model, Menon says those running only quick commerce will need about 800-1,500 orders in a day to remain viable.

What is also critical apart from order density, is also order value – which is currently around Rs 400-450 – and cost of last-mile delivery, which again is linked to density.

“The more dense the area, the cost of delivery comes down,” Menon said.

Bigbasket is currently present in 400 cities and towns across the country. Menon says the company is unlikely to add more geographies this year.

Despite demand remaining tepid in rural markets and some pockets of Urban, Menon said that demand has started picking up, in rural as well and believes grocery as an industry will grow anywhere between 30-35 percent this year over last year.

Bigbasket is also seeing high traffic from the Tata Group’s super app Tata Neu, Menon said, and expects 15 percent of its business to come from the Tata Neu app.

“IPL just started and Tata Neu is doing a lot of advertisement and so traffic has really shot up. We’re seeing great conversions and many new customers coming in,” Menon added.