Business Case Study - Milkbasket's Quick Commerce Strategy
Business Case Study - Milkbasket: Cracking the Code of Quick Commerce in India
In the contemporary world of e-commerce, where customers are getting increasingly demanding towards speed and convenience, quick commerce platforms have become one of the battlefields in the Indian market. Strangely enough, one of the companies, Milkbasket, has managed not only to establish itself in the extreme rivalry but also to set an unusual example for the tendencies in the market.
Here is a detailed case study of Milkbasket, in which we will discuss in-depth about the strategies and techniques that have helped Milkbasket to jump to the top of the Indian quick commerce sector. From startup to its acquisition by Reliance Retail, we will uncover the fundamental factors that have made Milkbasket a huge hit.
Milk Basket's Origins and Inception
Milkbasket began when its founder, Mr. Anant Goel, had a very simple yet very deep thought. When Goel was in the UK, he noticed the comfort of having fresh milk delivered to his door every morning. This experience sparked a eureka moment in his mind, why don’t just repeat this model in India, where we have a very deep and profound love for dairy products and a virgin field of undeveloped home delivery services?
Spotting an opportunity in the Indian dairy market, Goel and his partners, Anurag Jain, Ashish Goel, and Yatish Talvadia, decided to shake up the entire system the way Indians received their daily necessities. From the humble stall to an apartment complex in Gurugram, it was the beginning of what was to become a rapidly growing delivery business.
To start with, the founding team carried milk themselves, using their vehicles. On the positive side, the surge in demand led them to hire auto-rickshaws initially and then to create their delivery fleet. In just a few months, Milkbasket was able to garner over 30,000 customers in Gurugram alone, another indication of the initial success of their new approach.
Understanding the Quick Commerce Challenges
The quick commerce sector, which stands for the immediate delivery of all kinds of products, includes numerous tasks that firms specializing in this field have to cope with. Milkbasket focused on solving the high cost of last-mile delivery and the problem of getting an acceptable AOV in the price-sensitive Indian market.
Last-mile delivery, a final part of the supply chain, consumes about 30% to 50% of the total supply chain costs. his huge cost issue has been a heavy load on the profitability of quick commerce companies, the majority of which are struggling to find a business model that works long-term.
Furthermore, consumers in India are very price-sensitive therefore, it was a challenge to go beyond the average order value of Rs.500. In general, quick commerce, due to its true nature of a small order size, is unprofitable, and the delivery cost cannot be distributed evenly as it can be in a traditional e-commerce situation.
The promise of convenience and speed was the driving force of the quick commerce model for a long time, even though in many cases the cost-effectiveness suffered as a result. Companies dedicate time to having their order delivered in 20-30 minutes by limiting the radius for deliveries and by ensuring that their network of warehouses and delivery personnel is dense enough to handle the high demand for fast fulfillment.
Milk Basket's Innovative Model
Financial inclusion is one of the primary challenges that milk-basket had to tackle, and it did so by utilizing one of the most respected elements of Indian culture, which is the love for milk and dairy products. Thus, milkbasket found a new way of doing quick commerce.
One of the top strengths of Milkbasket lies in the fact that milk is an essential part of daily routine, which creates 100% loyal customers. Despite the very thin margin on dairy items, the company perceived how important milk in the Indian diet is and it could be viewed as a way to compete and win the customer's trust and loyalty.
Customer Loyalty and Trust: Consumers are notoriously loyal when it comes to their milk, which means that Milkbasket ends up with a lot of steady customers. Not only does this coterie of brand-loyal customers ensure a constant crust of revenue, but it also serves as a base for establishing trust and credibility.
High Inventory Turnover: The quick restocking of inventory allows margin losses to be offset by selling more products, contributing to capitalization. The high turnover rate enables Milkbasket to stay within the limits of meagre margins whilst being economically viable.
Milk as an Entry Point for Upselling: Forming a bond of trust by regularly supplying the customers with milk, Milkbasket opened the doors for upselling more than just milk, thus, increasing the number of household essentials offered by them.
Pre-order System for Next-Day Morning Delivery: Milkbasket invests time and gasoline that could be wasted for intensive deliveries during the day by having customers place their orders by midnight for delivery the next morning. Using this approach, Milkbasket contributes to saving on the distribution cost and the company extends the radius of its delivery to more places while the need for multiple warehouses is minimized.
Consolidated Deliveries Reducing Costs: Dispatching orders at one time has helped cut down delivery costs, expanding much of fast commerce companies. This incorporates the optimal method, which is not only beneficial to the efficiency of operation but also contributes to the overall profit of the business.
Extending Delivery Radius: Milkbasket enlarged its delivery range for up to 15 kilometres with the pre-order system and, in turn, switched to a less dense warehouse distribution system. helping the business save money as a result of a more cost-effective expansion strategy.
Minimizing Need for Multiple Warehouses: Through grouping orders and broadening the area of delivery, Milkbasket has considerably reduced the number of quick commerce providers and their costs that are normally highly concentrated on logistics.
The Economics Behind Milkbasket
An important thing to consider that will further help to reveal the secret of Milkbasket's success in the quick commerce area is a thorough analysis of how it operates economically.
Average Order Value and Margins: With an average order value of Rs. 200, and a gross margin of 15% to 20% it operates in the price-sensitive Indian marketplace. The AOV may seem paltry compared to traditional e-commerce operations, but the Milkbasket model allows them to achieve profitability because of operational efficiency and the relatively large number of orders.
Part-time Delivery Staff: Part-time delivery staff is one of the core factors that cost Milkbasket less. By employing a flexible workforce, Milkbasket will utilize its logistics operations more efficiently and decrease expenses resulting from regular staff.
Subscription Model and Delivery Fees: Milkbasket uses a subscription model, which costs customers Rs. 149 monthly. Moreover, the people who are not subscribers are charged 12 rupees as delivery expenses per order. These revenue streams, accompanied by the cost-effectiveness of their operational model, were also contributing factors to the business's success.
Scalability and Path to Profitability: As Milkbasket's operations expand over time, its special model grows more profitable. The company's plan of big volume orders, smooth delivery operations, and loyal customers makes it possible for the enterprise to develop long-term sustainability and profitability.
Comparison with Traditional Quick Commerce Players: The Milkbasket model is a cost-efficient solution in comparison to other huge competitors that tend to concentrate on speed over profitability. Through implementing concentrated deliveries and exploiting the consumer's loyalty to milk and dairy products, Milkbasket has proved that the traditional approach could be outdated and a cost-effective quick-commerce concept tuned to the Indian market could serve as an alternative.
Marketing Strategies and Expansion
Milkbasket's business model stands as an innovation with operational quality that has helped the company realize its potential and connect with the target audience, create the brand name, and drive customer acquisition and retention.