Overview
The success of Q-Commerce is due, yet this eCommerce model has been impressive. Have no doubt that Q-Commerce is the (near) future at our door. From online food deliveries to online shopping deliveries and grocery on-demand, quick commerce or Q-commerce has become a fad among everyone, including working professionals, millennials, and zoomers. Busy lifestyles and the convenience of getting things delivered at home without stepping out are the two reasons contributing to this market’s rise.
It is growing quicker than ever in retail shopping world with a whopping 36% market share by the year 2021; so what would be the future of Quick Commerce in 2023. Before we go deeper into the evolution of Q-commerce or on-demand delivery, let’s understand a few fundamental eCommerce concepts and their differences.
Last-Mile Delivery
Last-mile delivery is the process of transporting packages from a centralized hub/warehouse to the customer’s doorstep. It is the last leg of an elaborate fulfillment process followed by eCommerce companies.
The fleet of the courier delivery company usually does these kinds of deliveries. Delivery agents carry packages on their bikes, vans, or other transportation means, to deliver them to the customer’s doorstep.
Hyperlocal Delivery
Hyperlocal delivery is when a delivery agent picks up products from a seller and then directly delivers them to the customer’s doorstep. It is carried out in a small geographical area, and deliveries are usually completed within a few hours.
Quick Commerce
Quick commerce, as its name suggests, is all about speed. Quick commerce generally means consumers can expect delivery within one hour of placing an order.
Last year, we saw that due to the resurgence of omnichannel retail, demand for hyperlocal logistics shot up. Still, quick commerce companies went back to 30-minute deliveries. Many fast delivery companies scaled down last year and will scale down their dark stores this year.
Quick commerce (Q-commerce) as a business model raised many eyebrows in 2021 and began flourishing in 2022. Ola initiated 15-min delivery of groceries in Bengaluru, Swiggy’s InstaMart delivers in 15-30 minutes, Dunzo’s Xpress Mart in 19 minutes in Bengaluru, Flipkart in 90 minutes, and BigBasket’s BB Express delivers essentials within 60 minutes. As Q-commerce took pace, Zomato too joined the fray. Also, after its expansion to several cities, Amazon Fresh promises delivery in 2 hours. Many of these players have been raising massive amounts of money amid rising valuations. However, it also raised questions on business unit economics.
Are We Solving a Problem OR Creating a Different Need?
While most quick commerce platforms are still burning money, this business model has increased penetration in many metro and Tier 1 cities. A separate market segment has been created for quick commerce in large cities. The success of the platforms mentioned above validates the need for more such platforms. With the huge market size, quick commerce likes have also entered grocery delivery.
The consumer mindset to get things done quickly is another factor that has benefited enterprises in this sector. Consumers are always eager to complete tasks. Count the number of vehicles that pass swiftly as the light turns green or the number of passengers attempting to exit an airplane as it lands. Whether they are aware or unaware, it is imprinted in their Genetics, so when a business tries to satisfy this urgent demand by providing swift grocery delivery, it is almost certain to be successful.
Hyperlocal deliveries continue to be tricky for B2C and D2C brands as they target shorter delivery times. Customers continue to expect faster deliveries; however, the intent to pay for the service varies.
Quick commerce platforms are necessary and an enabler of growth for quick retail as a consumption-based economy takes shape globally. Unfortunately, the majority of these sites continue to lose money. A particular delta behavior is driven by the state of capital burning. If the product is valuable, customers are likelier to stick with the brand until they find a superior option. Burning occurs due to the market’s efforts to determine what products function best and in the interests of a sizable consumer base. The ability to balance the “burn” and “earn” is still crucial for eCommerce businesses because it aids in strategically and cost-effectively guiding the business. Quick commerce will undoubtedly be able to maintain success over the long term.
No Significant Investments Taking Shape
According to several news releases, many quick delivery companies have scaled down their dark stores (warehouses) this year. One of the alleged reasons for this is the funding crunch that the model has seen this year. Besides the market slowdown, many investors hesitated to fund the companies as the business model has yet to prove its worth.
In the last few years, several startups and unicorns have gone public globally at exorbitant valuations. However, recently we have seen significant corrections in their stock prices. The new-age startups will eventually face the same thorny questions as major players face receiving low funding. Unfortunately, several unicorns that received substantial funding and launched with a bang are not seeing their funding taps dry up.
Anything that involves a shift of consumer habit patterns usually takes a long gestation to get its due attention and the right economics. Recently, many brands have tweaked some of their offerings, such as increasing the charges for speedy deliveries and the threshold for free orders. At the same time, we saw some rollout of member subscription programs to allow customers to order without being charged additionally for delivery.
According to experts, it is critical for these players to return to the fundamentals of a fundamentally sound business, namely, attractive margins, attractive profitability, and excellent customer satisfaction. In addition, the type of moat these companies build will be critical their long-term success.
No Major Motivators for Delivery Agents
The year 2022 saw a lot of conversations around the working conditions of gig workers, which includes these companies’ delivery executives, who are the backbone of the segment. And while delivery timelines have decreased, these delivery partners continue to work on an incentive-linked payout, which considers the number of orders fulfilled in a stipulated period and the time taken to deliver the order, among other factors. As a result, the demand for delivery partners has increased over time. However, there is no increase in salaries due to the squeeze on unit economics and bottom-line.
Hyperlocal deliveries account for 40% of business in eCommerce, and the volume of orders will continue to increase, with more customers coming from smaller cities and beyond. However, this might not necessarily translate into better salaries for gig workers.
Hyperlocal Deliveries Are on a Growth Spree
The hyperlocal sector is set to grow with deliveries within a fixed radius in typically 30-40 minutes. The sector is driven by multiple factors, including quick commerce, an omnichannel strategy adopted by retail brands, the push from D2C brands, and the launch of the government’s open network for eCommerce.
Customers aren’t necessarily looking for 30-minute deliveries from mass D2C brands but surely expect faster deliveries across four-hour delivery, Same Day Delivery (SDD), or Next Day Delivery (NDD). If the customer needs the delivery in a shorter timeframe, they may be ready to pay an extra fee. Speedy deliveries also help brands reduce returns by a significant margin.
Whether it is 30 minutes or less, the hyperlocal delivery model is the key to quick commerce, and it’s here to stay. However, a quick delivery promise comes at a huge cost, which is hard to sustain over time. So, while it helps to attract customers initially, one has to move to more sustainable delivery times to stay in the game.
The Years Ahead
Investments and fundings will likely pick up the pace for the hyperlocal logistics space. There will be both direct and indirect investments in hyperlocal logistics. Indirect investments include mostly supply chains, electric vehicles, and drones for deliveries, among many others. In addition, we will continue to see innovation happening in the coming years.
While a demand becomes necessary, much-needed customer delight can be achieved through hyperlocal deliveries and quick commerce offered by eCommerce businesses.
In the meantime, continue adding to your cart. Happy shopping!
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As Director - Marketing, Zenul leads the marketing and branding at Krish. He brings with him an in-depth understanding of the evolving digital ecosystem and has a proven expertise and experience in strategic planning, market and competition analysis, creating and implementing client-centered, lead-gen and brand marketing campaigns. He has a heart for technology innovation and has been a keynote speaker on various platforms.
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