Quick Commerce: Is this a profitable and sustainable way?

What is Quick Commerce?

Popularly referred to as the “next generation” of e-commerce, it is a distinct business model with a very short order placement and delivery window. As generation Z has taken control of the digital environment, the delivery schedule has shifted from a one-day delivery window to a 10-30-minute time period.

Finally, quick commerce can also be done through the use of third-party payment providers. Payment providers such as PayPal, Apple Pay, and Google Pay can process payments quickly and securely. This makes it easier for customers to make payments without having to go to a physical store.

With the rise of DTC quick commerce (or q-commerce) in recent years, which has ultrafast delivery speeds typically within two hours or less, there is a new category of e-commerce that has been made possible by the COVID-19 epidemic and the lockdowns that went along with it. The Q-Commerce market, which was roughly valued at $25 billion in 2021, will grow to $72 billion by 2025.

Quick commerce is gaining popularity, and currently, it has a small 4-5 percent share of the pie of the ecommerce market.  The  industry currently has about 2L to 3L workers and could double by the end of the current fiscal year. Third-party logistic services’ company growth will be directly impacted by this growth.

Why is Quick Commerce scaling rapidly?

  • High Feasibility: Factor which helps in making full use of the online outreach factor without  overspending.

  • People Preference: Post pandemic people prefer buying groceries online and at anytime, which makes this demand workable by quick commerce as it’s 24*7 operational availability and fast delivery within an hour.
  • Visibility: Nowadays customers want visibility on every purchase and so the ability to keep track of orders is also a major advantage. All of the customer purchases may be tracked, managed, organized, and traced using Q-commerce systems.
  • Customer Acquisition: Acquiring new customers, serving them to the best of your abilities, and ensuring that they’re retained for as long as possible
  • Location Independent: Through a quick commerce-enabled platform multi-location order fulfillment is one of the key aspects of helping businesses increase their outreach towards customers. 

Quick commerce to scale from 7% to 25% in the next five years?

  • Quick-commerce penetration within the online consumables market is nearly about 7 percent and is expected to grow to 12-13 percent by 2025. However, once reached to tier 2 cities, these numbers can drastically change as per the demand growth and can increase upto 21%-24% in next five years.
  • This market size would put India ahead of other leading markets, such as China, in terms of q-commerce adoption. Currently, there seem to be no plans for expansion in tier 2 cities.
  • Market analysts have already forecasted a significant increase in e-commerce growth, and as new technologies like drones, electric vehicles, voice ordering, and the automation of dark stores are developed, the market is poised for rapid expansion.
  • According to a recent Bernstein report, India is already leading other global markets in terms of quick commerce adoption, with a 13% penetration of Q-Commerce as a percentage of online grocery. China stands at 7% while Europe is at 3%.The Total Addressable Market (TAM) of USD 45 billion suggests plenty of room for growth.

Is this a profitable and sustainable way?

The quick commerce trend has primarily accelerated due to its sheer speed, the convenience of ordering, and the rapid delivery. However, the faster turnaround times (TAT), combined with poor profits and greater delivery costs, put enterprises under pressure and made quick commerce a risky business model.

If we talk about Q-commerce in India, the cost of last-mile delivery for Q-commerce enterprises is  projected to be twice that of traditional e-commerce firms. Also, part of this industry works with gig workers. In this rat race to deliver within 10 minutes, the working conditions, health, and safety of the riders and delivery partners remain majorly compromised.

The cost of selecting and packaging can be decreased by rapid commerce players with the correct automation solution. Automated picking systems improve accuracy and productivity, two factors that are essential for online fulfillment. As opposed to manual operations, automated solutions can help a business save money on real estate rental costs by making use of vertical space that is often underused or nonexistent.

The question for new-age players is what kind of long-term moats they have built, as currently, burning more cash is the new trend. For a profitable and sustainable business model, the kind of strategy these companies build to tackle cash burn will be crucial for their success in the long run.

The Future of quick commerce

  • Small shops and companies in metropolitan neighborhoods will eventually disappear due to quick commerce, suffering a fate similar to that of actual mobile stores in urban markets.
  • Private equity companies that are backing these cutting-edge startups will start asking difficult questions. Many major players are turning to debt financing instead of equity fundraising as their funding sources are already running low. Numerous unicorns that received significant money and launched with a flourish have since seen their funding sources dry up, and numerous firms have failed.
  • Only serious players who are committed to developing a successful model that prioritizes consumer needs and have their P&L in order will survive and emerge as long-term winners. Consolidation and rationalization among food delivery aggregators will be critical to improving – and potentially increasing – overall profitability.
  • Incorporating other categories like pharmaceuticals, clothing, cosmetics, and gadgets. Already, platforms like 1MG, Pharmeasy, and Apollo are competing to speed up the delivery of the medications.
  • A fleet of delivery robots or drones can further reduce last-mile costs by carrying more orders and reducing operational energy costs compared to manual operations.

What are dark stores?

High-level tasks in a typical warehouse system involve storing the products in the correct area, restocking the stock, choosing and packaging the components according to the order, and final shipment. In order to give delivery personnel ample time to reach the consumer, order arrival to dispatch times in dark stores should ideally not exceed five minutes (for a 15-minute guarantee time). As a result, creating a lean system to minimize time losses in all process phases due to unnecessary operator mobility or item searching becomes crucial for an efficient, quick delivery dark store or micro fulfillment centers.

How dark stores are changing the delivery systems?

Technological developments are making it possible to use space more effectively and to introduce intriguing new urban fulfillment possibilities, including dark stores. Internet retail sector sales are predicted to grow by 37 billion pounds by 2025, from 27 percent to 30 percent, according to the Future Gazing study.

A microcenter also requires workers to select and pack products, as well as prompt delivery services to get the products to customers’ doorsteps.

The attention that the sector is getting is only likely to grow in the future.

Final thoughts

Q-commerce is a newly emerging term that has opened many doors of opportunity in the commerce vertical. Keeping the current mindset in mind, picker/packer, loader/unloader, delivery, and inventory official/manager profiles will be prominent roles in this q-commerce industry, with a higher pay scale. In addition, quick commerce can also affect the job market in other ways. For example, it can create new job opportunities in the form of online customer service positions. Customers may need assistance with their online purchases, and businesses can provide this assistance by hiring people to answer customer inquiries and provide support.

Overall, quick commerce is an innovative way of doing business that can benefit both businesses and customers. It can also affect certain job markets, both positively and negatively. As businesses continue to embrace quick commerce, it is important to consider how it can affect the job market and how businesses can use it to their advantage.

Author

Ajoy Thomas

VP & Business Head
TeamLease Services Limited

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