The ability to ship items within a short period of time is no longer a novel approach. In the last decade, companies have wowed us with next-day delivery, blown our minds with one-hour shipments, and now we can order groceries and have them at our door within 15 minutes.
Quick commerce (or q-commerce) companies are the product of this evolution – and consumers' soaring expectations. Q-commerce has leapfrogged forward as a result of the Covid-19 pandemic. The global quick commerce market is now estimated to reach a value of €47 billion by 2030, and q-commerce is one of the defining e-commerce trends of 2022.
However, competition in the space is fierce, and the stakes are high. Scores of companies have entered the market, but only two or three players will achieve the necessary market penetration to run profitable operations on such a large scale.
If you're new to quick commerce, keep on reading this article – it brings you everything you need to know about this fast-growing sector.
Table of contents:
- What is quick commerce?
- Benefits of quick commerce
- Challenges of quick commerce
- Future trends in quick commerce
- Q-commerce wrap up
What is quick commerce?
Quick commerce (also called q-commerce, rapid commerce, or rapid delivery) refers to the delivery of small orders of goods, often groceries, to urban customers in under an hour. A natural evolution of e-commerce, this market has grown in response to consumers' rising expectations and shifting consumer behavior, giving rise to notable startups like Getir, Delivery Hero, Gorillas, and many more.
Q-commerce companies offer a range of benefits when compared to traditional e-commerce companies. Primarily, it allows local businesses to reach a wider customer base while providing customers with guaranteed availability of products and the ability to shop around the clock since most services operate 24/7.
At the same time, quick commerce has a positive sustainability impact because customers tend to buy only what they need for a day or two, which lowers food waste.
The quick commerce ecosystem consists of the following parts:
- Third-party delivery platforms,
- Existing delivery platforms that deliver items from neighboring retail outlets and popular retail giants who initiated a shift to an omnichannel experience,
- Q-commerce with drone deliveries and last mile delivery services,
- Vertically integrated specialists who create neighborhood warehouses called dark stores to deliver often-purchased items to shoppers within 10 to 30 minutes.
Benefits of quick commerce
While quick commerce offers consumers convenience, it can also benefit brands that take advantage of its benefits.
Competitive Unique Selling Proposition (USP)
Quick commerce provides companies with a new value proposition that can really set them apart from competitors, especially your typical conventional retail outlet. Customers in need of immediate delivery are often willing to try new products and order from new stores. The added convenience that comes with fast commerce offers online retailers a way to compete with large international marketplaces, like Amazon, as well as brick-and-mortar retailers.
Potential for greater margins
Quick commerce can bring companies big profits if they choose to invest in the technology. A study from Deloitte suggests that during the pandemic, 50% of shoppers spent the extra funds to conveniently get what they needed. They paid extra for on-demand delivery, as well as "buy online pick-up in-store" (BOPIS) options.
Delivering products faster than ever
Q-commerce allows customers to receive items they have purchased faster than they would if they had ordered them through traditional e-commerce. Quick commerce is often associated with smaller product selections, so retailers can also use this opportunity to drive sales for their most profitable lines. It's worth noting that convenience often appeals to wealthier demographics, such as time-strapped professionals and business leaders who value convenience more than discounts.
Providing a great customer experience
Providing the ultimate customer experience in e-commerce can help online retailers meet and exceed their clients' expectations, fostering brand loyalty. The pain points that quick commerce addresses are meaningful – rapid delivery can save a party host who has run out of food, help an uncle who has forgotten to buy his niece a birthday present or simply assist someone who can't make it to the shop to stock up on essentials. How could customers be anything but satisfied?
Challenges of quick commerce
Greater competition
Companies launching quick commerce initiatives enter into a market brimming with competition – from forward-thinking grocers to specialized rapid delivery companies.
Q-commerce has gained a lot of traction during the Covid-19 pandemic, bringing about new entities using dark store models to provide "ultrafast" deliveries. Contrary to traditional e-commerce businesses, quick commerce companies like Delivery Hero operate out of dark stores or micro fulfillment centers in cities to make it possible to deliver goods in the 10-minute timeframe. This may eat away at grocer's baskets and reduce in-store shopping frequency, especially if their competitors promise deliveries within 10-15 minutes.
Delivery speed matters more than ever
Now that retailers are facing a lot more competition than before, they're looking for ways to stand out from their peers. Q-commerce players may soon increase their assortment, moving from just a dozen types of goods to fresh produce and pantry stocking.
That's why grocery retailers are turning to this technology trend – they need to become the cheapest, fastest, and most profitable, or else competitors will overtake them. One survey showed that 38% of grocery CEOs are prioritizing e-commerce profitability today.
Fortunately there are other tactics that can help grocers improve profits at the contribution margin level. For instance, keeping delivery fees low and marking up some products can boost profits at the contribution margin level. It's also important to protect one's key value indicators (KVI's) but play with pricing on longer tail items. Setting up a micro fulfillment center is another option.
Building a long-term q-commerce strategy
Grocers risk derailing their efforts and reputation if they jump aboard the q-commerce bandwagon without a long-term strategy and business model. They're not the only ones around, which means that the market is oversaturated. Consolidation in the industry is inevitable. This may lead to quick-commerce firms switching from no and low delivery fees to "reasonable" fees to ensure profitability.
Following the influx of new entrants into this e-commerce niche, the instant-delivery space is looking unsustainably over-supplied and profit-challenged. It is likely that there would be consolidation, with some emerging competitors leaving the industry. After all, many businesses are competing on such similar unique selling points and often on the same turf.
Future trends in quick commerce
Just like any other niche that exploded during the pandemic, q-commerce is on its way to reaching maturity and going through some core changes in the process. Here are the most important future trends in the quick commerce area.
Inventory diversification
While grocery items today form most of the stock of a q-commerce setup, the idea of under-60-minute delivery may be extended to other categories like medicine, books, electronics, and accessories. With the right infrastructure and logistics system in place, this is a plausible option, with startups in this space leading the way with more diverse deliveries.
Improved supply chain management
Due to the constraints of rapid delivery, inventory and supply chain management are essential parts of this equation. Dark stores and micro fulfillment centers will have more tight-knit supply chains with delivery partners able to check the nearest next-store option in real time in case an item runs out.
Companies in this space will be using Inventory management tools that constantly update the status of inventory and calculate and estimate delivery times. This will be critical for ensuring that delivery partners don't waste precious time on figuring out what they have in stock.
Personalized customer experience
Personalization is a strong trend across many other secrets, so no wonder that it will become a key differentiator in a market where everyone has the same prices, offers, and inventory.
With artificial intelligence and machine learning, companies can make recommendations using tailored customer preferences based on past purchases and frequency, as well as user messaging. An intuitive design and hassle-free user journey can also drive user retention.
Brand partnerships
A trend that many brands are expected to follow is brand partnerships. In 2021, for example, the beauty brand Estee Lauder partnered with Uber for the 60-minute delivery of its products. The startup Simulate launched its vegan chicken tenders by releasing them exclusively on the rapid delivery app Getir. We're bound to see many brands trying out this new approach to get a slice of the rapid delivery cake.
Data analytics
At the heart of q-commerce lie the dark stores, mini-warehouses, and micro fulfillment centers located conveniently across delivery points. The strategic location of these stores can determine how efficient the delivery process is.
Artificial intelligence and machine learning will provide valuable insights into purchase volumes and values. Such solutions will help to suggest locations where a new store can add value.
Sustainability
As sustainability and net-zero emissions programs take global center stage, q-commerce companies need to find sustainable opportunities in every step of their process, from packaging to delivery. Some low-hanging fruits here could be using eco-friendly or reusable packaging options and electric vehicles for delivery.
Q-commerce wrap up
The pandemic has completely disrupted consumer shopping behaviors. Though some consumers will return to shop in-store, others will likely stick with shopping online due to convenience. And traditional e-commerce businesses are looking at some serious competition.
Q-commerce is a great opportunity on a global scale. With the right mix of technology, infrastructure, and an unwavering focus on customer experience, it evolves rapidly in today's landscape. 2022 promises to be a great time to sit back and watch the q-commerce industry mature.
Are you planning to implement this technology at your business? Or perhaps you've already done so? Please share your experience in the comments section; we look forward to hearing real-life stories from this fascinating niche.
If you’re looking for a technology partner to create your q-commerce product, contact us – we can provide you with a cross-functional software development team with relevant expertise and plenty of e-commerce experience.
In the meantime, check out our case studies:
- Home24 – We provided Home24 with 3 dedicated teams: backend, frontend, and mobile, that are responsible for the key elements in the company's technological process. We helped to develop a backend automated testing platform and continue to assist the company in its frontend and mobile technology processes.
- Total – A dedicated team of experts with a team leader delivered an innovative solution that aims to serve the needs of Total’s premium customers. The idea was to allow customers to manage their purchases more flexibly, saving valuable time and money. A dedicated Codete development team took ownership of backend and frontend web application development.
- Unirac – We helped the company introduce new features into its application and refactor its code. Our dedicated software developers divided the application into smaller modules, each serving a different functional role.
