Amazon's journey in the Indian grocery market has been met with significant challenges, notably from BigBasket, which has established itself as a leader in this segment. Here are five reasons that have contributed to Amazon's struggle against BigBasket:
Strong Foothold and Customer Base
BigBasket, with its early entry into the online grocery market, has built a strong foothold and a loyal customer base. The company claims to have about five million registered users, out of which almost half are transacting customers. This strong customer base has given BigBasket an edge over competitors, including Amazon.
Private Label Strategy
A significant part of BigBasket's success can be attributed to its private label business, which accounts for roughly 35% of its revenue. These private labels, often offered at lower price points, cater to a variety of consumer needs, including organic food and high-end consumer products, giving BigBasket a competitive advantage in terms of both pricing and product differentiation.
Hyper-local Delivery Model
BigBasket's hyper-local delivery model, which involves tie-ups with over 2000 grocery stores across India, enables the company to deliver products within one hour from the neighborhood. This model has enhanced BigBasket's capability to provide quick and efficient delivery services, a critical factor in the online grocery segment.
Physical Store Presence
With the launch of its physical store, Fresho, BigBasket has also ventured into the offline grocery space, expected to be an additional revenue generator for the company. This move into the physical realm offers a tangible experience to customers and diversifies BigBasket's business model beyond the digital domain.
Data Breach and Trust Issues
While not directly a factor in BigBasket's success, it's worth noting that BigBasket has had to navigate challenges such as a significant data breach in 2020. Despite such hurdles, the company's proactive response and commitment to customer security have been pivotal in maintaining consumer trust.
In contrast, Amazon Fresh has expanded to 60 cities in India and competes with several quick commerce players. Despite this expansion, the grocery segment's razor-thin margins and high operational costs have made it challenging for Amazon to dominate this highly competitive and cash-guzzling market.
The dynamics of the Indian online grocery market are complex, with each player bringing its strengths and facing its unique challenges. BigBasket's strategic focus on private labels, hyper-local delivery, and expansion into physical stores, coupled with its established customer base, have given it a significant competitive edge in this sector.
