When you ask customers whether they want things quickly, the answer is a loud ‘yes,’ but how fast is fast?
With e-retail sales accounting for 14.1% of all retail sales worldwide, eCommerce continues to grow fast despite global economic uncertainty. Statista forecasts that these figures will keep growing and reach 22% in 2023. eCommerce is thriving worldwide, and savvy retailers need to stay up to date with the latest trends in the industry.
Globally quick, last-mile delivery has exploded in the last five years. According to a Clutch survey, online customers often get products within two to three days, but some constraints exist. People demand delivery that is both speedier and less expensive. Two-day shipping, it turns out, is no longer sufficient, neither for customers nor for eCommerce companies seeking to give the best possible customer experience. The goal today is for near-instant delivery at no additional cost.
When you ask customers whether they want things done quickly, the answer is a loud ‘yes,’ but how fast is fast? Consumers are being offered more alternatives in terms of speed, whether it’s 15 minutes, 10 minutes, or 5 minutes, which is driving rivalry amongst e-commerce sites. Enter qCommerce.
When the shipping of goods and services failed to meet demands during the pandemic, a new business model stepped in – quick commerce. qCommerce follows a super-fast delivery business model that streamlines logistics operations and provides on-time, fast doorstep delivery within 10 minutes to half an hour of ordering.
Post-pandemic, the need for on-demand delivery and digital offerings arose for food and retail businesses since these two industries were particularly hard hit during Covid-19. They needed to adapt to continue operating successfully, giving rise to quick commerce.
And what exactly has been holding the industry back from this goal?
Warehouses are enormous structures that are positioned distant from city centers. The average Amazon fulfillment center is 800,000 square feet, about the size of 16 football fields. Because this cannot be done in a city center, the distance from clients increases delivery time.
Large eCommerce retailers carry too many different products. For example, Amazon has more than 353 million SKUs, of which only about 12 million are fulfilled by its Prime two-day delivery service – while the rest face longer delivery times.
Multiple pick-up places – certain services, particularly those that pick up and deliver groceries, cause delays. Delivery employees must travel to several grocery stores, search for items, and then wait in line at the checkout each time.
qCommerce shops reduce complexity
The demand for near-instant delivery has prompted the development of qCommerce, or rapid commerce, a new, speedier delivery method that may complete in under 15 minutes. Online merchants use a network of micro-fulfillment centers, typically only 2000 to 5000 square feet, to fulfill orders in qCommerce. This shortens the distance to the client, resulting in a significant increase in delivery speed. This strategy works particularly effectively with household and perishable items like food.
To build such micro-fulfillment centers, qCommerce retailers typically purchase underutilized, less costly real estate in metropolitan areas. However, other entrepreneurs consider alternative ways to convert rental flats or even shipping containers into micro-fulfillment centers.
qCommerce shops reduce complexity by carrying considerably fewer things for sale, resulting in faster delivery times. qCommerce micro-fulfillment centers typically house 2000 to 4000 SKUs of the greatest turnover products, compared to 60,000 SKUs in a standard grocery store.
Multiple pick-up points are also eliminated with qCommerce. Orders are chosen and packed from a single micro-fulfillment center, and there is no checkout queue because the consumer has already paid for the product online, considerably increasing efficiency.
The qCommerce concept has shown to be successful not just for customers but also for profitable operators. For example, Gopuff has been EBITDA profitable since day one, owing to its great negotiating power resulting from purchasing a small number of SKUs in large quantities.
As a result of qCommerce’s inventions, this industry is exploding internationally, with six unicorns minted in the last two years: Gopuff, Getir, Gorillas, Flink, Glovo, and JOKR.
Where will we go from here?
While the US and Europe were the early adopters of qCommerce, emerging markets will see a rapid expansion. Rappi, for example, recently bought Avocado in Brazil to expand into qCommerce.
Leading retailers will also make purchases or form agreements with qCommerce firms. This is similar to how huge retailers have worked with startups to offer same-day delivery in the traditional industry, such as Costco’s partnership with Instacart.
There will be consolidation in the industry. qCommerce, like the ride-hailing and food-delivery industries, is a predominantly duopolistic business that benefits greatly from economies of scale. More micro-fulfillment centers mean more business, which feeds the positive cycle.
Also, we can expect IPOs of leading qCommerce startups in the next five years as they strive to contribute to building their capital advantage. Indeed, Gopuff, the world’s biggest qCommerce startup, has recently begun preparing for an IPO.
The pandemic has flipped customer shopping behavior entirely. Some customers are likely to shop in-store, but others will shop online easily and conveniently. qCommerce gained popularity during the pandemic, and from then on, its usage has been increasing.
Moreover, the latest news suggests that major companies are expanding their delivery fleets to meet the demand for quick commerce and online delivery services. Drone delivery is also likely to get wings with technological advancements. Drones can increase the reach to greater areas, making delivery times more reliable and quick commerce more reasonable.
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