Featuring speed and convenience, fast commerce is expanding its dominance in the world of online shopping. Initially questioned for its long-term viability and relevance beyond metropolitan cities, fast commerce has flourished over the past two years, driven by growing demand for fast, on-demand shopping solutions, especially among Gen Z and millennial consumers in urban areas.

While great actors like Flipkart and Amazon experiment with fast delivery optionsPurely specialized fast-trading companies have become increasingly aggressive. Even Swiggy has ventured into this space with its 10-minute food delivery service, Bolt.

Despite skepticism due to the global failure of similar models, this segment has seen strong growth in the country, with monthly transacting users (MTU) increasing by over 40% in FY24 compared to the previous financial year, according to a RedSeer study. report.

This is only symbolic of the fact that user behavior is changing, and this claim is supported by RedSeer data, which highlights an increase in monthly order frequency from 4.4 in FY21 to almost by 6 in FY24. Momentum will only increase in FY25, with market growth of 75-85%, reaching $6 billion GMV.

To capitalize on this, Tata-owned BigBasket, which disrupted the traditional online grocery market long ago, has completely shifted to the fast commerce model. Although the company is known for its slotted deliveries, it now sees BB Now as the main focus of the platform.

Notably, GrandPanier launched Fast Trade in early 2022. At the time, it offered both Fast Trade and slotted delivery service.

“The fast trade wing offered delivery within 10 minutes, while slot delivery took between two and four hours. The product mix also differed significantly: fast commerce had between 8,000 and 10,000 products, while slot delivery had around 40,000,” BigBasket co-founder Vipul Parekh told Inc42 in an interview.

He added that the company has now decided to merge the two services into a single offering. “The default option will be fast trade, offering delivery in 10-15 minutes, but customers will still have the option to choose slotted delivery if they prefer.”

BigBasket’s rapid commercial pivot

While BigBasket launched its rapid commerce service in early 2022, Parkeh said it has seen faster growth than the slotted delivery service. Initially, fast trade accounted for about 50% of sales, and the company predicted it could account for 60 to 80% of sales, taking away the charm of slotted deliveries.

According to the co-founder, this would have made slotted deliveries less impactful for them to continue working as a standalone feature. Additionally, offering both options was confusing for customers, who did not know which service to choose and on what basis.

“By merging the two services into a single offering, we have simplified the customer experience, presenting a unified solution. This change was driven by two key factors: the market shift towards fast-paced grocery commerce and the need for a simpler, streamlined browsing experience for customers,” Parekh said.

As part of its strategic shift, BigBasket is not only pursuing fast commerce but also expanding the range of products delivered within 10 minutes.

Previously, only groceries were delivered within this time frame, but now electronics and other categories are included. The company also ventured into general merchandise, fashion, clothing and jewelry. The company has also started selling the iPhone 16 in Bangalore, Delhi NCR and Mumbai.

However, according to Parekh, the shift from groceries to new categories and from slot deliveries to super-fast deliveries has not been easy. To explain this, he explained, the supply chain for electronics, for example, is very different from that for groceries (with purchases often clustered around discounts, promotions and holidays). end of year), while grocery shopping is regular and predictable. Understanding these differences in the supply chain has been a major challenge for the company.

To solve this problem, BigBasket has partnered with category-specific experts like Chroma for electronics, Tata Cliq for apparel and Titan for jewelry. These partnerships allowed BigBasket to leverage the expertise of companies that already excel in these categories, thereby avoiding a steep learning curve.

Additionally, another challenge was creating a customer experience and features tailored to these new categories. For example, electronics purchases often involve EMI options, returns, warranties and bank discounts, which are not as relevant for grocery purchases. To meet these needs, BigBasket had to develop new technologies and features, ensuring a seamless experience for customers across all product categories.

How is BigBasket approaching category expansion?

While BigBasket actively sought fast commerce two years ago, there was widespread skepticism about the service’s relevance beyond major metropolises. But today, it is clear that affluent customers in Tier II cities also prefer the convenience of delivery and exhibit similar purchasing patterns.

BigBasket, which currently operates in 40 cities, has around 400 dark stores across India and is adding 30-40 more every month to meet demand.

According to Parekh, fast commerce will become increasingly relevant as grocery shopping rapidly evolves into fast commerce. “Unless someone has very specialized needs, almost all grocery deliveries will soon be done via super-fast platforms,” he said.

Additionally, more categories – beyond grocery – are moving toward fast-moving commerce, particularly for fast-moving products. Whether electronics, fashion or general merchandise, high-demand and fast-moving items will increasingly be delivered within minutes.

“For example, when the iPhone launched, we sold a significant number of phones in just a few days. Customers didn’t even want to wait until the next day; they wanted their new devices immediately. This trend will extend to other rapidly evolving consumer durable goods like accessories, mobile cases, chargers and earphones,” observed Parekh.

However, he mentioned that not all categories will change completely. Larger, more specialized products, such as high-end electronics or major appliances, are unlikely to be brought to market quickly. But smaller, fast-moving items within those categories will, Parekh said.

In the fashion industry, basic products like classic shoes, t-shirts and shorts will likely move quickly to market, unlike more specialized or high-end fashion items.

Going forward, BigBasket plans to expand into categories such as toys and general merchandise, as well as fashion, while also seeing a growing trend in seasonal products.

“When we decide which new categories to prioritize, we consider three factors: product size and weight, product speed, and customer demand. If a product has low velocity or is not naturally associated with fast commerce, we may avoid it. We are also evaluating the viability of selling higher value products under this model, as it does not always make financial sense,” Parekh said.

Conclusion: Can BigBasket be the winner in fast commerce?

Although BigBasket aims to become one of the largest players in fast commerce, Zomato-owned Blinkit had a market share of 40-45% in July, according to a recent report by brokerage firm UBS. Additionally, Instamart has a market share of 20-25%, followed by Zepto and BigBasket with 15-20% and 10-15% market share respectively.

Additionally, the online grocery retailer’s operating revenue saw only a 6% increase to INR 7,884.5 Cr in FY24 from INR 7,439.7 Cr in FY24. during FY23. BigBasket generated INR 7,609.6 Cr in revenue from the sale of traded products, which included household and grocery products. On the other hand, it reduced its loss by 17% to INR 1,267.2 Cr for the year by controlling expenses.

However, it seems that the BigBasket team has planned a strategy to bring more financial sustainability. According to Parekh, fast commerce actually depends on the amount of revenue that can be generated from a dark store.

“If your dark store generates a minimum revenue, it will automatically become profitable and start generating profits. It’s just like any other physical retail business. For example, let’s say we have 50 stores in Bangalore. If all 50 stores exceed a certain revenue threshold, based on your spending and margin profile, you will automatically become profitable for Bengaluru. In my opinion, the same is true for fast trading,” Parekh said.

So where does the problem lie?

The main problem is that a fast commerce platform can end up spending too much on marketing, in which case customer acquisition costs become very high, making it difficult to be profitable.

BigBasket has a large and established customer base that it can leverage through its long-standing presence. Additionally, its collaboration with Tata Neu and the Tata Group as a whole brings a significant base of Tata customers, who also become BigBasket customers, thereby helping to keep acquisition costs low.

Indeed, BigBasket has an advantage in the fast commerce segment because, unlike new players like Blinkit or Dunzo, it has been in the grocery and restaurant delivery business for some time, said Karan Taurani d ‘Elara Capital.

However, even though BigBasket has moved away from traditional deliveries to focus on fast commerce, they have yet to establish a unique selling proposition (USP) that sets them apart from their competitors. Currently, their product assortment and customer experience are either average or lagging behind their peers, according to Taurani.

As the race for fast delivery heats up, it will be intriguing to see how BigBasket gains traction in the fast commerce space, challenging established players like Blinkit, Swiggy Instamart and Zepto.

(Edited by Shishir Parasher)