What's next for Quick Commerce?

Source: Store Hippo

The key drivers for Quick Commerce are a) delivery speed b) offers & discounts c) variety of products d) quality of products especially for groceries e) serviceable area spread f) customer service and g) refund/return policy. From a business perspective, there is a dire need to a) have solid unit economics b) build long-term competitive moats and c) have fundamentally sound business i.e., attractive margins, attractive profitability, and great customer satisfaction. From a technology perspective, there is a huge potential to predict a) type of product b) price of product and c) demand to ensure product availability.

KEY DRIVERS OF Q-COMMERCE BUSINESS

The key drivers for Quick Commerce are a) delivery speed b) offers & discounts c) variety of products d) quality of products especially for groceries e) serviceable area spread f) customer service and g) refund/return policy.

TARGET CONSUMERS

Millennials, particularly Gen Z consumers in mid-to high-income households in metro and tier-1 cities are driving the demand. Quick commerce players currently service about 0.3 million orders daily. Once the top metro and Tier 1 cities in India saturate, these start-ups will need to start looking at international expansion in Middle-East or South-Asian markets where the demographics & culture is similar to that of India.

Q-COMMERCE BUSINESS MODEL

Although some of these companies such as Dunzo started as a marketplace model, there is a switch towards the dark store model to cater to the high user expectations of a) speed and b) availability of products.

For those who do not know - Dark stores are nothing but a mini storehouse to keep inventory that is not accessible to general public for purchases.

Going forward, these businesses might start charging delivery fees.

Source: Mobisoft Infotech

SUPPLY CHAIN & MARGINS

There are 4 major players within the quick commerce supply chain - a) manufacturer b) retailer c) distributor and d) last mile logistics. Most margins ~15-30% are made by the manufacturer; distributors make ~10-15% margins; retailers make ~7-15% margins. Most of these startups are focused on eating a) distribution margin by a) purchasing in bulk from the manufactures in case of staples and b) buying directly from farmers in case of groceries.

GROWTH DRIVERS

Key growth drivers for Q-commerce groceries companies are growing e-commerce penetration in semi-urban India, rising income, comfort with technology among youth, increasing urbanisation, changing customer lifestyles, and low delivery fees.

ACQUISITION MIX FOR Q-COMMERCE

App is the major source of acquiring these users. Hence, most apps focus on App Store Optimisation (ASO). Other than this, these apps focus on video ads on a) TV and b) video platforms to increase awareness & thus app installs. Post app installation, PNs are strongly leveraged to increase app launches and enable 1st transaction.

USER FLOW

All these apps focus on a) highlighting key value proposition of speed b) surfacing brands and c) browse through categories. [Detailed UX Teardown in upcoming blogs]

CHALLENGES

The key challenges are a) inventory availability b) product quality and c) maintaining consistency across products & regions.