Quick Commerce: The Now and the Next

Author: Shivani Khanna Great Lakes Institute of Management, Gurgaon

The last couple years have burgeoned the explosion of online commerce throughout the world. Customers locked inside the house unable to shop physically, demands pent up and failed supply chains led to the emergence of a new template of business called Quick Commerce. Quick Commerce can be attributed to a business model that delivers goods and services within a very short span of time. Short meaning 10-15 minutes per delivery! This model is currently being used majorly for restaurants deliveries, grocery & daily needs delivery and intra city just in time couriers

Quick commerce start-ups have been under the radar of investors and capitalists who are taking unusual interest in it because of the immense popularity and functionality of the services they provide In such a short span, the quick commerce industry in India is expected to hit $5 5 Billion by 2025 It isn’t just the no of orders that is causing the success of this model but the variety of the products that it supports and the increasing speed with which orders are being fulfilled is the talk of the hour Going from the previous delivery time of 1 5 hours to 10-15 mins today, seems shocking for a pre covid world However, the goal of quick commerce is to fulfil a delivery magically on the door the moment an order is made but 10 minutes is as close as it can get in reality as of now.

It is imperative to note that Tesco (the British grocery chain) came up with this idea in 1999 However, the pandemic accelerated this and integrated it as a way of doing business for many entities This has enabled a lot of platforms to just be distance based and operate solely via delivery where cost algorithms are also altered such that the reduction in the operational costs funds the delivery cost This is very evident in Dark/cloud kitchen models where ghost brands are popping up who are delivery only eateries which is a very future reflective model

An initial entrant in this industry has been the Turkish ultrafast delivery start-up Getir who ventured into this game as early as 2015 and is now operational in more than 9 countries including UK, US and Germany

The Getir secret is to have a G store as they call it, in every major neighbourhood and optimise the inventory, the service level and the costs according to the needs of that particular neighbourhood. This can be interpreted as a sort of a second generation of retail model. Massive warehouses, fulfilment centres in every locality/town are how these companies are expanding their operations and making it possible to deliver in such a short span of 10-15 minutes

Zepto, Blink It and even Zomato today are entering into the 10 minutes delivery space. Some of these companies received a massive spike in number of orders and downloads made during the pandemic but it is highly unlikely to get that kind of peak demand again. Plus, the economics of the business are the fundamental challenge here, consumers are extremely price sensitive when it comes to delivery charges.

Also, Grocery (where majorly this model operates) is an altogether a different industry as marked by low margins and large scale, adding a delivery fee on top of it only makes it more challenging to operate

Therefore, there is less wiggle room in this to chart out costs plus profit but in order to be a mainstream, as an industry it needs to reduce the charges even more by gaining operational efficiencies Being in control of everything, from sourcing to storing to delivery partners makes it easier to keep the costs in check As what the industry is competing originally, is personal supermarket experience Another point of importance is that people are a core to this business model With the advent of gig economy, it isn’t too difficult to find delivery service employees at convenient pay rate but the quality of service is highly dependent on them. Therefore, it becomes crucial that the companies become an executer of fair employment

Today end to end system is optimised by tech and data across quick commerce platforms. Customer buying behaviour is monitored and analysed into an accurate prediction that can be used to optimise services. Hence, businesses can thrive just by being good in tech and data optimisations and forecasting inaccuracies Of course, there has to be a good assortment of products and consumer reliability on a high frequency but technology does come in handy The industry still has many tricks in its sleeves left Drone delivery for example, looks like an accurate solution to high operating costs

There is not a given formula of what works for the quick commerce industry as it is at a very nascent stage, take that from the background of retail/grocery industry - a few years back, no one had the crack to an ideal model for egrocery as to how to ensure margins and customer quality Specially in Indian scenario, the kind of penetration of grocery stores that India boasts, the idea of e grocery doesn’t sound as compelling but the pandemic accelerated the ease and safety that it offered Today, Zepto – an Indian quick commerce brags an average delivery time of 9.5 minutes!

Governments around the globe are becoming more lenient and regularised for drone operations. In fact, in India as well private players will be allowed to use drones for delivery purposes backed by the Drone Rules,2021 It also solves the innate issue of rising pollution levels contributed by supply chain solutions Anticipatory shipping, a model currently being used by Amazon as a patent technology results in better customer service and fewer forecasting errors because to the growing integration of machine learning and AI technologies. Demand forecasting will be carried out to track customer behaviour and accurately predict demand and trends which will further power something called as geotargeting, a sort of advertising that makes use of location data to send messages to consumers that are relevant to their locality and behaviour. Several innovations are anticipated in the smart warehousing segment also like IOT based perishable product monitoring which will save inventory spoilage. The industry on the whole is picking up but there’s still a lot more scope for it as far as the hyperlocal market goes, connecting every last bit of it is a challenge but it is the only road to success

The world has finally realised the importance of strengthened supply chains and gearing up to create a future ready model for the same