Q-commerce, which stands for ‘quick commerce’ – also known as on-demand or rapid delivery – refers to companies that deliver goods (typically groceries) in under an hour, or as quickly as in 10 minutes.
According to Global Data’s report on q-commerce, the rise of these companies is being fuelled by changing consumer behaviour since the pandemic and rising expectations. There has also been a shift (or rather, shattering) in customer loyalty, with consumers more willing to buy from a range of online retailers.
Speaking at this week’s eCommerce Expo event, Managing Director of Shipstation, Andrew Norman, highlighted how quickly this change occurred.
“Actually in the early days of the pandemic, people became more relaxed,” he said. “The Amazon ‘instant gratification’ effect was more relaxed, and people were more willing to wait.” However, as consumers became used to ordering online and competition within retail ramped up – the demand for fast delivery once again increased.
So, who are the big players in q-commerce, and who will succeed amid rising competition in the market?
Investment in q-commerce accelerates
Q-commerce is typically facilitated by ‘dark stores’ – fulfilment centres that are located in densely populated areas, to enable drivers to pick up and deliver stock super fast. Dark stores are not just a by-product of the pandemic – big retail brands like Walmart and Whole Foods have used the concept to improve fulfilment since before 2020 – while Deliveroo’s ‘dark kitchens’ provide a similar way for restaurants to get their food to customers, fast.
However, dark stores have recently seen an uptick in investment. Glovo is one of the latest European examples. The Spanish company has partnered with real estate investment firm, Stoneweg, which is set to invest €100 million in buying warehouses that will be turned into Glovo dark stores. The sizeable investment was perhaps inevitable – the company has reported a growth rate of 300% year-on-year in 2019 and 2020.
Glovo is far from the only example, of course, with a wave of new companies seeing growth and subsequent investment in the past 18 months. PitchBook Data found that the rapid delivery grocery market has generated nearly $14 billion in funds since the start of the pandemic, with more investment occurring in the first three months of 2021 than the entirety of 2020.
At the top of the ladder is British company, Gorilla, which became the fastest ever unicorn brand earlier this year, having raised €245m in funding and bringing its valuation to $1bn just nine months after its launch. Other names such as Dija, Weezy, and Jiffy have also generated investment (and offer a similar service to Gorilla), making the European q-commerce market a competitive one.
Big partnerships are happening
It’s not just new companies that are flooding the market. Big companies are similarly investing in q-commerce, with UK supermarkets either partnering with existing rapid delivery services or investing in their own operations – or both. Sainsbury’s, for example, partners with both Uber Eats and Deliveroo, and offers its own ‘Chop Chop’ rapid delivery service. If we needed more evidence that it is taking rapid delivery seriously, the supermarket recently re-launched its same-day delivery and click-and-collect services after pausing them during the pandemic.
In a statement, Sainsbury’s director of ecommerce, Nigel Blunt said: “Customer demand for shopping online and for getting groceries quickly and conveniently has grown significantly and we are committed to offering customers choice and flexibility – whether that’s within 20 minutes to their front door or picking it up at their local store on their way home from work.”
Groceries aside, big retailers in other categories are also making moves in q-commerce. Boots has recently partnered with Deliveroo to launch an on-demand service from 14 stores around the UK. The partnership means that users can order over-the-counter medicine, toiletries, baby items, and snacks – pitched as products that parents and people who cannot leave home might need. For Deliveroo itself, the partnership marks another move away from takeaway restaurant orders into groceries and other everyday essentials.
Calling all @Deliveroo fans! We’ve teamed up with them to offer delivery of 400+ health and beauty products from 14 pilot stores. Enjoy access to a wide range of our bathroom cabinet essentials – from medicines for minor ailments to bestselling #No7 products – on-demand. pic.twitter.com/zryJHCXlK5
— Boots (@BootsUK) August 24, 2021
Is it profitable?
The question, of course, is whether or not Q-Commerce is actually a profitable long-term investment? On balance, the on-demand delivery market is widely considered to have low-profit margins, with the last-mile typically being the most expensive part of shipping. Equally, the average order value of customers tends to be low – after all, the whole point is that it is the antithesis of the ‘big shop’. But this doesn’t mean that profitability is impossible, especially with delivery fees, and wider opportunities such as retail partnerships and advertising.
So, despite concerns about the hype, many believe that the ultra-fast business model has big potential, particularly when it comes to companies that own both the grocery inventory and delivery logistics. This means that companies don’t rely on retail partners, instead managing both picking and delivery themselves. JP Morgan analysts have reportedly said that the rise of the q-commerce market could even disrupt the online models of major supermarkets and compete with their convenience formats.
But with so many players entering the market, is q-commerce over-crowded? And more to the point, how can consumers differentiate between multiple, almost identical on-demand grocery companies? Naturally, delivery time is a big focus, hence Gorilla’s tagline, “faster than you,” which almost scoffs at the idea of anyone heading out to the local convenience store themselves. Dija also promises three months free delivery if any order takes more than 11 minutes.
At this stage, the race is still on, with many q-commerce companies focused on customer acquisition and market share rather than profits. So, what does this mean for big retailers? With the majority of them partnering with third-party companies to facilitate the last mile, profit is also a lesser priority, with on-demand delivery instead becoming a new differentiator for customer loyalty (in a similar vein to same- or next-day delivery in the past), as well as customer acquisition as digital adoption continues.
Overall customer demand is also key, of course, and with super-fast delivery mostly still limited to densely populated cities – not to mention customer behaviour still somewhat in flux since the pandemic – it could be a while before a true front-runner emerges.