Are the odds against BigBasket with Amazon now in online food retail?

Amazon is inching closer and closer to ecommerce supremacy in Indian online retail. The US based etailer plans to sell everything under the sun and food products are no exception. It requested government approval for its food retail business in India and promised to invest $515 million in this sector over the course of five years. In the general online retail market, the marketplace has already secured the number 2 spot by over throwing Snapdeal, Paytm and Shopclues. Will it do the same in online grocery?

Can Amazon overthrow BigBasket from its #1 spot in online grocery?

The online grocery segment has seen some bitter days with quite a few quitting this segment. Amazon’s major Indian rival Flipkart shut down its grocery delivery app, Nearby, last year, PepperTap tapped out of e-grocery and so did LocalBanya.

Currently, in this segment, there are just a few doing well and BigBasket is in the lead. It is the only one of its kind to have scaled its business at a quick pace and plans to turn profitable by 2018. According to industry experts, with Amazon in this segment, BigBasket may have bad news. The Jeff Bezos led ecommerce platform has business strength and might that cannot be matched in this segment.

Compared to BigBasket Amazon has –

  1. A larger customer base

The biggest advantage Amazon has over the online grocery leaders is its mega customer base. It can easily tap into this for extraordinary sales.

  1. More suppliers

Apart from its customers, Amazon has better chances at attracting more suppliers through its ability to offers better-guaranteed volumes, rates and incentives, which give it a natural edge over other players, said Chief Analyst, Sanchit Vir Gogia from Greyhound Research.

  1. Superior technology and expertise

Gogia further added, “The art of doing ecommerce does not always lie in category expertise, but in keeping costs low from a technology and customer perspective. Amazon’s ability to sell, upsell, cross-sell and offer better discounts can be traced to its low CAC (customer acquisition cost).”

Amazon is an expert when it comes to managing an inventory-led business model and possess superior technology infrastructure to keep its CAC under control.

  1. Deeper pockets

The international etailer, Amazon has very deep pockets and competing against it will result in a huge cash burn for BigBasket. To match Amazon’s operations BigBasket will need money to improve its operations and performance. Based on Gogia’s thoughts it will take more than a large war chest. It will require expertise development of a whole new level and better USPs to fight off Amazon.

Can BigBasket foil Amazon’s invasion?

BigBasket certainly knows its stuff. The online grocery company has managed to obtain $250 million from investors and boost its revenue three-fold to Rs.563 crore during the financial year that ended in 2016.

It achieved 300% growth over the course of last year and plans to exceed its Rs.2,000 crore milestone by the end of this fiscal year.

BigBasket has above 4 million users and is live in more than 30 major cities in India. It is betting big on its private label business and expects profitability by March next year. Bigbasket may also absorb online grocery business Grofers. This smaller player is also doing well in online grocery with a total of $200 million as funding and exceptional growth.

It recently tweaked its business model to make it a 70% inventory-led model. This way it collects products from different brands directly and stores them in its warehouse for quicker delivery.

The fact that BigBasket is inching closer to profits cannot be ignored. But, once Amazon begins full-scale operations will the game change for the online grocery native?

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