Why owning Bigbasket makes sense for Amazon

Battle for grocery pie amongst leading e-commerce players poised to intensify later this year. After Flipkart’s announcement about its re-debut in grocery, Amazon India, which also runs grocery and FMCG service under brand name - Amazon Now, reportedly has initiated talks to acquire Bigbasket.

According to the Bloomberg report, the discussions are at a very early stage. BigBasket, run by SuperMarket Grocery Supplies, is India's largest online grocery, fruit and vegetable store with operations in about 26 cities across the country.

While Amazon declined to comment to Bloomberg, Bigbasket dismissed the report by saying that ‘Amazon is in talks to buy the firm is not true’. Rumour about Amazon’s interest in Bigbasket isn’t new, such anticipations also surfaced in January this year.

Meanwhile, Entrackr does not have any official confirmation on whether Amazon has any strong interest in buying Bigbasket. However, the online grocery could be a meaningful deal for Amazon given its depth in the online grocery retailing.

So far, only Bigbasket has been able to get strong foothold in grocery segment. Six years old company claims to have about five million registered users, out of which almost half (2.5 million) is transacting customers base.

During December last year it claimed about sales of Rs 150 crore every month. BigBasket also contemplated to touch around Rs 2,000 crore in revenue last fiscal year. Entrackr didn’t verify this independently as company is yet to reveal its financial details of last fiscal.

Importantly, private labels are holy grail in grocery segment where margins are wafer thin and unsustainable with marketplace approach. Currently, private labels contribute close to 35% of the total sales for Bigbasket, largely driven by their fresh produce, staples and FMCG brands.

Launched in November last year, Amazon Now is currently operational in Bengaluru, Mumbai, Delhi (NCR) and Hyderabad. According to some estimate, Amazon Now currently does about 7,000 odd orders across these four cities.

Having Bigbasket in its kitty, Amazon can achieve great scale in no time. However, going by its track record, Amazon prefers to build businesses from scratch instead of acquiring front runners. Before its arrival into Indian e-commerce turf in 2013, it was widely speculated that it might enter India with acquisition of large horizontal e-commerce companies like Flipkart and Snapdeal.

Given that, grocery, FMCG and fresh fruit and vegetable are set to bring next set of growth for both Amazon and Flipkart – Bigbasket might prove to be a great channel for Amazon to up their ante in the overall hyperlocal game.

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