BigBasket Leverages Store-Level Pricing to Boost Dark Store Profitability
Overview
Tata-owned BigBasket is reshaping its dark store network with location-specific pricing to enhance the economics of its quick commerce model, BB Now. Under its IBBN initiative, underperforming dark stores offer deeper discounts, while high-volume locations reduce them, aiming to drive efficiency and profitability across its operations amidst fierce competition.
BigBasket Bets on Location-Specific Pricing to Sharpen Dark Store Economics
Tata-owned BigBasket is strategically overhauling its dark store operations by implementing location-specific pricing. This move aims to directly tackle the economic challenges within its quick commerce segment, BB Now, by adjusting discounts based on individual store performance.
Revamping Dark Store Network
About a year ago, BigBasket began transforming its traditional dark stores into Integrated Big Basket Now (IBBN) units. These revamped stores are significantly larger, stocking up to 50,000 Stock Keeping Units (SKUs) across approximately 20,000 square feet, a stark contrast to competitors' smaller footprints. This expansion is part of a larger pivot towards its rapid delivery service.
Store-Level Profitability
The success of the IBBN model hinges on optimizing store-level economics, treating each dark store as an independent profit center. Stores are categorized into 'Unnati' (growing) and 'Pragati' (progress). Unnati stores currently average 500 orders daily and need to reach 1,500 to break even, while Pragati stores, handling about 1,200 orders, are already profitable. The company's objective is to convert more Unnati stores into the profitable Pragati category.
Precision Discounting Strategy
To stimulate demand in underperforming Unnati stores, BigBasket is applying steeper discounts. This creates price disparities visible to consumers; for instance, a kilogram of tomatoes might cost ₹58 in one Bengaluru locality and ₹29 in another. This "precision discounting" is becoming an industry standard, moving away from pan-India offers.
Intensifying Competition
BigBasket faces aggressive competition from players like Swiggy Instamart, Blinkit, Zepto, Flipkart Minutes, Amazon, and JioMart. These rivals are also heavily investing in expanding their dark store networks and quick commerce capabilities, intensifying the race for market share and profitability in India's rapidly evolving online grocery sector. Delivery and staff costs account for a significant portion of operational expenses, making efficient unit economics crucial.
