BigBasket enters microdelivery space: Will it outlast Milkbasket and DailyNinja?

Competition in nascent microdelivery space is going to be intense as hyper-funded BigBasket has officially announced its entry through the acquisition of RainCan and MorningCart. The e-grocer has integrated RainCan with a separate app bbdaily in Pune and soon to fold up Morning Cart under the new app in Bengaluru.

With the expansion of BigBasket in microdelivery, niche players including DailyNinja will lose marketshare. “Bigbasket would throw a lot of cashback and subsidy for subscribing bbdaily. As a result, acquiring new customer will be an expensive affair for competition,” said one of the venture capitalists who invested in the space.

Currently, microdelivery service is popular amongst urban working professionals for scheduling morning essentials including milk, vegetables/fruits, and grocery. Microdelivery startups also anticipate aggressive market acquisition strategy from BigBasket.

Besides Pune and Bengaluru, BigBasket is also launching morning delivery service in Gurugram. The millennium city houses Milkbasket which hails as a leader in the segment. “It would be too early to comment as we don’t know the strategy of BigBasket for microdelivery yet,” said Anant Goel, co-founder and CEO Milkbasket.

However, he assures that there would be a wave when BigBasket would officially enter the segment. “The entry of bigger deep-pocketed players in micro delivery is a strong validation of the concept. But as always it’s the finer execution details that matter and will decide the leader in the space,” added Goel.

Although, Goel is unfazed by BigBasket expansion into his domain. “It looks like an easy segment from outside but it’s not. It requires a different skill set in terms of operations, backend, technology, and supply chain,” explained Goel.

Given that BigBasket is the largest e-grocer in India, a major chunk of its existing customers base won’t hesitate in subscribing for the extended service - daily morning essentials. DailyNinja is also anticipating heat from BigBasket entry.

“BigBasket is likely to come up with aggressive customers acquisition campaign comprising of cashback and discount. It will pose some challenge to our growth but won’t impact much. Over the past 3 years, we have been able to intact consumer base and kept winning new customers on the premise of consistent experience,” added Anurag Gupta, co-founder, DailyNinja.

According to Gupta, even if BigBasket goes on splurging for scaling up microdelivery  - it would erode mere 10-15 percent of his customer base in Bengaluru.

Microdelivery is different from grocery: Challenges for bbdaily

Bigbasket has been in the grocery business for the longest time in India and processes largest volume in the online segment. It also understands the space and has lakhs of loyal customer base with a deep pocket. Hence, driving growth for bbdaily won’t be a challenge.

One notification about bbdaily launch would entice several thousand users in Bengaluru in a few days. Such users will essentially come from various parts and locations of the city.

On contrary, microdelivery works with cluster model where a large number of orders hail from a particular area with high population density including apartments, RWA communities and pockets consist of busy working professionals.

“BigBasket will have to adopt altogether different strategy for microdelivery as it’s a different game,” said the above quoted VC.

Essentially, microdelivery is different from pure-play grocery biz in several aspects. Average basket size in grocery buying varies from Rs 1,000-1,400 while it hovers between Rs 100 to 300 in microdelivery segment.

BigBasket has never dealt with such low ticket transaction. Hence, it’s an altogether new business vertical.

So far, microdelivery has largely been a prepaid phenomenon where customers load money in the wallet and then order. Such model works in cities like Bengaluru and Gurugram but not in Mumbai, Delhi, and Pune.

“Postpaid model is very dominant and work well in these cities where milk vendors charge customers at end of the month,” pointed out a large milk vendor with operations in multiple locations in Mumbai. He works with SpurDaily which recently acquired by food delivery major Swiggy.

According to Entrackr sources, DailyNinja has also had a tough time in Hyderabad while driving prepaid phenomenon.

“Since BigBasket is planning microdelivery service in multiple cities, it will have to find a way for onboarding customers who prefer postpaid model,” said Satish Meena, Forecast Analyst, Forrester India.

Despite these challenges, BigBasket would certainly give tough competition to incumbents - DailyNinja, Milkbasket and Doodhwala and several others. Besides BigBasket, Swiggy is also planning a grand launch of microdelivery vertical soon.

“Entry of two biggies can also trigger consolidation in the nascent space. Given that both companies are backed by large investors - Alibaba and Naspers, they won’t mind acquiring companies that can help them to attain quick scale in microdelivery space,” outlined Meena.

Ultimately, we should also realise that Grofers had launched ‘Morning Store’ in November 2016 wherein it used to deliver milk, eggs and other daily essentials with a free newspaper in Bengaluru and Gurugram.

However, it had suspended service within two-three months of the experiment. But, why? This is what Albinder Dhindsa, CEO and Co-Founder of Grofers said, “We didn’t see merit in doing it and realised that the model was unviable. The average transaction size was below Rs 80.”