On one end, ecommerce biggies Flipkart and Amazon have rolled up their sleeves to enter the B2C grocery segment in a big way. On the other end, India’s biggest online grocery player Big Basket is transitioning into B2B sales.
Catering to the needs of food businesses
Most ecommerce firms these days are focusing on developing and expanding their private labels to increase revenue. Big Basket is no different. Its list of own-brands includes Fresho, BB Popular & BB Royal and Tasties.
Through its HORECA (Hotel, Restaurant and Catering) initiative launched in July 2016, Big Basket introduced its home-grown brands to many businesses in the food industry. The company’s co-founder Abhinay Choudhari revealed that their B2B arm clocks sales worth Rs. 12 crore every month, which accounts to 75% of the sales generated from private labels.
The focus would be on selling fresh produce and staples. This way the clients get their hands on affordable grocery and Big Basket gets to earn high profit margins. The etailer also plans to introduce new range of food products for its B2B arm.
“In fruits and vegetables, we make good margins and the clients also save money. We will also start bringing in additional specifications in terms of staples, say different qualities of rice or larger packs of other commodities meant only for the B2B business,” stated Choudhari.
Exclusive warehouses coming up for Big Basket’s HORECA segment
As the needs and demands of B2B customers are different than B2C buyers, the e-grocery leader is setting up distribution centres for its HORECA business. The plan is to invest Rs. 50 crore in the next one year to build dedicated warehouses across 8 cities. Big Basket’s target is to accumulate revenue of Rs. 500 crore from this segment by the end of fiscal year 2017-18.
Speaking about the need to set up distribution centres, Choudhari said,
“We are setting up dedicated business-to-business distribution centres starting with Bengaluru. Some customers have different specifications. Getting vendors to meet those specifications becomes a challenge. With a centre of our own, we can meet those specifications easily.”
Shift from B2C to B2B due to low sales?
In FY 2015-16, Big Basket witnessed three-fold growth in sales. But the company’s losses too multiplied by more than four times. Experts believe that slow sales growth rate in the B2C grocery segment compelled the e-grocer to jump into the B2B segment.
Would that help? According to Harminder Sahni, founder of Wazir Advisors,
“B2B will bring volume, but it also shows the growth in consumer side has stagnated. B2B is a volume business, but negotiating margins may become difficult. Any institution that buys from you will look to sell the products again at a profit. Even if it is with private labels, which are high-margin products, institutions will look to buy at the cheapest price possible.”