From FabMall to Fresho – it’s a full circle!

A decade back, three Co-Founders of a former start-up came together to complete a job which was incomplete. This time, they decided to take the digital route, even as India was warming up to the new online world of social media with websites and mobile applications such as Facebook, Twitter & Foursquare among others, peer to peer and peer to group communication platforms such as BlackBerry Messenger (BBM) and a startup then, which was WhatsApp. The trio decided that they shall now focus on Grocery e-commerce using a website where a customer would place an order and the items would be delivered to their doorsteps, within a few hours. Just that unlike their previous venture Fabmart supermarkets across neighbourhoods, this time the goods would be picked up from a warehouse in tony Indira Nagar in Bangalore. At the time, the venture was a simple website by the name BigBasket.com and didn’t have a mobile app, an intuitive UI or UX like today, lacked private label products and a 60 minute delivery, among other features, which one sees today. Nor did the start-up have unlimited cash in their kitty. They just had a vision and a dream to take the digital revolutionising of grocery delivery using the internet. They did. Last time, they sold Fabmart to Aditya Birla Retail, which then became “More.” Supermarkets and Hypermarkets. Interestingly, Amazon took a strategic stake in More Retail a few years ago and has been building a formidable omni-channel strategy.

Hari Menon, VS Sudhakar and Vipul Parekh not only sold their dream run to the TATA Group for a whopping USD 2 Billion 8 years later after starting their venture but also paved the way for a whole new way of retailing food, grocery and household items. At the peak of the pandemic, the company was delivering 160,000 orders everyday across 200 cities in India. The business grew significantly even as Indians were locked up at home due to the Covid-19 led pandemic which changed the way urban and semi-urban India shops for their home and office pantry. Big Basket had clocked gross sales of $1.1 Bn or INR 8,000 Cr in the financial year 2020-21 that ended in March this year, a growth of 36% over the previous year. The company is now on the road to clock gross sales of around $1.6-$1.7 Bn in FY22, CEO Hari Menon has said in an interview earlier this year. The company was acquired in 2020 by the TATA group to strengthen its Food & Grocery retail presence for a valuation of USD 2 Billion, though the company had raised over USD 1 Billion over the years through a handful of Investors from across the world.

On 24 Nov. 2021, Big Basket opened it’s offline store “Fresho” in the southern suburban neighbourhood of Basaveshwara Nagar in Bangalore. Fresho has also been the brand name of the private label products offered by the company under which fruits, vegetables and other edible items are being sold by the company on their website and mobile apps.

“Big Basket has always endeavored to take a customer-first approach, which the Fresho store has in terms of making fruit, vegetable and grocery purchases as seamless as cash transactions at ATMs. It’s a place to be a game changer, “said Mr. Hari Menon, Co-founder and CEO of BigBasket. He added that the store will provide access to the next 500 million customers who have not yet started buying groceries online, creating new big growth opportunities for BigBasket. Agricultural products stored in stores are underpinned by an extensive “ Farmer Connect ”program that directly procures fruits and vegetables in partnership with more than 30,000 farmers nationwide. With full traceability of all the fresh produce built into the supply chain, we want to give our customers the farmer details of each product, says Menon. The Fresho stores will essentially sell fresh fruits and vegetables in the store. However, to access BigBasket’s wider range of 50,000 products, customers can place orders online through Fresho app and collect them at Fresho stores at their convenience.  “We want to be everything in grocery (business). This is very strategic in nature as a large portion of customers still want offline shopping for groceries and fresh supplies. The total addressable market (TAM) is very big,” Menon told the Economic Times after the launch of the store on Wednesday. “There will be good chunks of users that remain physical.”

The company plans to open 200 such stores in the next 2 years and over 800 stores by 2026 with an estimated investment of over Rs. 400 Crores in setting them up. According to Mr. Menon, it would cost Rs. 50 – Rs. 75 lakhs to set-up a 2,000 sft store which will have advanced AI tools to understand and predict customer shopping patterns and would also double up as a pick-up point where orders placed on the BigBasket App can be picked up. The move is nothing less ironical, as the very essence of setting up the online website was to overcome the offline route of high capex, low margins, high overheads and a long gestation period to recover the capital and subsequently to make profits. Back in America and the UK, Amazon is setting up hundreds of similar offline stores, which offer snacks and food on the go, books, essentials, top selling items on the Amazon App and most recently, a fully automated Starbucks Cafe alongside it’s famed Amazon Go store. A few years ago, Amazon had acquired “Whole Foods” in the US to expand it’s offline footprint and acquire newer customers. Whether the move has added anything worthwhile to its topline or bottomline is anybody’s guess and Amazon doesn’t disclose its vertical-wise revenues anyway. The Tata Group which operates 48 Star Bazaar Stores in India alongside Westside Department stores and Zudio Fashion Brand through its Trent Hypermarkets saw its turnover drop to Rs. 2,251 Cr for FY 20-21 from Rs. 3,329 Cr in FY 19-20, has been building a super App to include all of it’s offline retail formats in to one and integrate it with the Big Basket App.

Offline Retailers are not only bemused but also wondering by would a digital first company with a large spread on the e-commerce business would want to open 100s of offline retail stores. A shopkeeper in Marathahalli in Bangalore, whose business has fallen down by over 50% during the last 12 month period blamed the e-commerce companies led by BigBasket, Swiggy & Grofers for the irreversible mess created in the offline grocery retail business which has caused a huge dent in their day today operations. He used to employ 25 staff members in 2 shifts before the pandemic. Now, there are only 10 of them and they stay all day. The others have left to their native places in deep interior Kerala. A 3rd generation kirana shop owner in Banashankari in Bangalore has a similar sob story to share. “Even when Metro Cash & Carry started deep discounts a few years back, it didn’t affect our business this much, but the online discounts and home delivery has almost killed our business since apartment dwellers do not want to step down anymore. Earlier, it was the fear of the pandemic, now it is sheer convenience”, says Krishna Bhat who hardly meets his business expenses any more against his income. Across India, e-commerce companies have created a wave that has impacted offline retailers, especially the small and marginalised, though they have also improved the assortment, range and customer convenience, coupled with timely delivery, payment options and refunds and setting up new, high standards every other day with some new innovation or the other.

BigBasket opening Fresho stores seem to mimick the Amazon Go & Amazon Fresh stores popular in the West. But would fully automated stores work in India is anybody’s guess, with shop break-ins, cleptomania and pilferage being major threats to manless stores in the country which has over 12 million offline retail shops. Time would tell how successful BigBasket would be in their quest to reach the next 500 million customers. Until then, we wish them good luck, wholeheartedly.