CASE STUDY - BIG BASKET

Q1. Do you think online grocery retailing would work in India? Please state your
Reasons.

Yes, online grocery retailing would work in India. When consumers shop groceries online,
they may do it from wherever they are and have them delivered right to their door. E-
commerce has significantly changed the way that businesses view the world. India's growing
population and expanding number of internet users make it a viable market for online food
retail. Other reasons, such as the preference of working individuals with a heavy workload to
shop online rather than offline, are also important to the success of online food retail. The
success of online grocery shopping is influenced by other issues such as traffic, a shortage of
parking spots, and inadequate road infrastructure. Online grocery buying is simpler, easy,
convenient, and more practical than going to stores for purchasing groceries. An improved
selection of items and services like fast delivery facilities will drive the growth.Many online
grocery stores have established online presences, including Big Basket, Amazon India,
Aaram Shop, etc. Big Basket has a strong foundation and will excel much more. Other than
these elements, online grocery retail picked a model like Inventory-based, Hyperlocal,
Mobile-app based, and Hybrid to define their performance and profit in the market. Even the
external money from investors shows development and growth.

Q2. Discuss the strengths and weaknesses of the two main models employed in online
grocery retailing.
The two primary models used in online grocery retailing are Inventory based model and the
Hyperlocal model.

INVENTORY BASED MODEL

Weakness
● Higher amount of working capital is required to set up a warehouse.
● Warehousing of perishable goods is very costly and risky. Cold storage is required.
● The retailer can lose its customers due to the unavailability of certain products.
HYPERLOCAL MODEL
In this model, the online grocery retailer started to tie-up with local kirana or convenience
stores to deliver goods to the customers.
Strength
● It is similar to the marketplace model which doesn't require warehouses, cold storage
facilities and inventory management which reduces the capital requirements and
allows the company to use the funds for expansion.
● It is fully based on the demand of the customers, hence there is no wastage of
products.
● Due to the tie-ups with the local vendors, the delivery was made faster.

Weakness
● The main weakness was to deal with the local vendors. They did not fully understand
the workings of the online grocery business such as technology adoption, reverse
logistics and inventory management.
● It is not suitable for big orders as only limited stock was available with the vendors. If
vendors could not keep a good amount of inventory then the retailer can lose its
business due to dissatisfied customers.

Q3. In your assessment, what is the scope for the hyperlocal model in online grocery
retailing? In the given scenario, describe the effects of the interdependence on
relationships between the company and the channel partner for any business model to
survive.
In a year when online retailing was going through the ups and downs in the market, the
Hyperlocal e-grocery continued to drive growth into the market. Most of the market is still
focusing on the larger cities where the players have moved away from the discounting led
models and have shown great success to earn profits. Hence, there is high scope for the
Hyperlocal model in online grocery retailing when applied with a systematic framework.
Nowadays, channel partners are becoming an integral part of the distribution strategies in
many businesses. Due to complexities in today's operating market, the firm's rely on channel
partners for the promotion and distribution of their products. If the relationship with the
channel partners is strong, it helps the firm with various benefits and advantages. If the
relationship is not good, then the firm's image is severely damaged with a down flow of cash
flows.
For a company to be successful, a right business process and technology is required which
creates a collaborative environment for the channel partners. The Hyperlocal model benefits
everyone with effective and efficient interaction between the firm and their channel partners.
Q4. It is important to transform consumer buying behaviour for groceries from buying
from local stores to buying online. Is BigBasket doing anything in this direction? What
can be done further to achieve this objective?
India would undoubtedly benefit from online food retailing. The major consumer sector is for
groceries.Groceries account for more than half of Indians' monthly earnings. The grocery
store is a super local business. This is the logical next step for e-commerce merchants as they
have established a solid delivery system and have a solid customer base. With a large
customer base and growing penetration of internet connectivity and the growing popularity of
online shopping, some entrepreneurs have seen the potential in creating online grocery stores.
Since buying groceries is increasing, the local markets are becoming crowded. Hence, it is
very necessary for Big Basket to transform consumer buying behaviour for groceries from
buying from local stores to buying online. They are currently working in an inventory based
model where they have direct contact with Hindustan Unilever, Procter and Gamble.
Big Basket is working towards innovation in every possible outcome as per the purchasing
preference of customers. For example, they offer three different delivery models such as-
● For larger orders, they have kept the ‘full service model’ which should include 25+
items and delivered in four slots in a day.
● For small orders, items such as milk, dairy, fruits, vegetables and meats, they have
kept a 90 minutes fast delivery service.
● They also have a speciality store service for those who want to buy goods from a
particular local store.

Q5. How would technology help BigBasket achieve its long-term objective? What would
be the role of technology in redefining BigBasket’s business model?

Electronic grocers have gone to great lengths to appeal to savvy shoppers, a task made easier
by New Age technology. Big basket uses computers, machine learning, and analytics to
simplify logistics and increase customer experience. The Big basket team has to process a lot
of information, most of it unstructured. This data is obtained by studying customer online
behaviour and interpreting transaction records.

The biggest idea of Big Basket’s online store is to be convenient. Their main idea is to cut the
time which is spent searching the products online. Customer analytics therefore helps
companies to understand the relationship between supply matrix and customer loyalty. The
technology helps track orders, update shipping details, manage inventory, and maintain the
website and his app.

Regarding future plans, Big basket emphasises that its investment in IoT (Internet of Things)
for AI-based innovation is growing internally. Big basket has added a new feature to its
website that helps in improving the overall shopping experience of their customers. The new
feature named “smart basket” uses AI and algorithms which helps the customers with a list of
their frequently bought items and enables them in quicker shopping. This inbuilt feature in
the website and mobile app helps in tracking the purchasing pattern and preferences of the
customers.

Q6. Should BigBasket continue with its inventory-based model? Why or why not? Give
your reasons.

Big Basket should continue with its inventory model, as there are many advantages attached
to it. This model lets the company work on contracts with the producers and vendors.
BigBasket was founded in December 2011, and the stocks they maintained were not as large
as they are now. In 2013, the firm switched to an inventory model for the majority of its items
due to the expansion of its operations. According to the inventory model, the business buys
goods from vendors including P&G, HUL, farmers, and mills. Depending on how it operates,
its procuring centres are dispersed around the nation. Since the company makes larger
purchases, it receives a greater discount from the cost and transfers a smaller portion to the
customers. In contrast to the industry average of one month, BigBasket keeps ten days' worth
of merchandise on hand. The company can reduce perishable items and save money by
holding onto less stock. BigBasket wastes about 5% of its perishables, which is a benchmark
worldwide. The company credits these two factors with reducing costs by around 3%. These
statements prove that BigBasket should follow the inventory-based model because it is cost-
saving and keeps them alive in this competitive market.