This article about Quick Commerce was co-authored with students from the Digital Major of HEC Paris Masters in Management, promo 2022. During the course, students have to learn how to optimize and create content to be published. For this, they dive into the trends impacting Retail and e-commerce, and only a select few are published in the blog. 

We want to give our special thanks to Faraz Kavehei & Johannes Bareis, the two students who co-authored this post.

Quick commerce or q-commerce is completely disrupting e-commerce and Retail. 

In this post, we’ll explain this model in a nutshell, introduce key players and analyze the advantages and challenges in the q-commerce industry.

What Is Quick Commerce or Q-Commerce?

Quick commerce, also known as Q-Commerce, is THE big new topic in the retail sector. Covid accelerated the rise of this new delivery model that addresses the consumer’s need for responsiveness and convenience. 

Q-commerce changes the entire shopping experience, from the initial spark of interest in a product to the delivery rider knocking on your door.  

Wait—you’re thinking—I thought online shopping was e-commerce, not q-commerce. 

And you’re not wrong. 

Q-commerce is a form of e-commerce, but the turnaround time between order and delivery is much shorter in quick commerce. For example, instead of waiting a couple of days for a product, customers receive their order within one hour, often in as little as 10 minutes. 

This is why q-commerce is also called the third generation of e-commerce. On-demand deliveries that are executed almost instantly will be the new benchmark.

Q-Commerce was not born during the pandemic. But the increase in online ordering during the pandemic created the perfect tailwind for q-commerce.

Multiple industries took a severe hit due to the pandemic; q-commerce was one of the few sectors of Retail that flourished when folks had to stay at home. And that change of habit is here to stay.

How Does Quick Commerce Work?

You are expecting a few friends but did not find the time to prepare. You can simply go to the q-delivery app of your choice and order snacks and maybe one or two bottles of wine. About 10 minutes later, a delivery rider will ring the bell of your door.

But how does the magic happen?

Most q-commerce pure players warehouses, so-called “dark stores” or “micro-fulfilment centers.” These dark stores enable workers to quickly pick and deliver the products they have in stock. 

Dark stores typically have over 1000 products ready for distribution. These “flash supermarkets” are often placed in strategic locations and act as urban fulfillment centers for a city district. 

Until now, it mostly sounds like a regular logistics company that moved a bit closer to the consumer. But Q-commerce players use technology to make their processes more efficient and agile. For example, they use data to understand which locations are better suited to establish dark stores. 

They develop specific Order Management Systems to route orders to the closest store to fulfill the order. Next, they match your order with the nearest rider to fulfill your order.

All within 30 minutes or less. 

The Quick Commerce business models

There are different q-commerce players all over the world.

All have some specificity, but these are the few common factors:

1. Delivery in less than an hour (10min delivery best-in-class)
2. Locally focused delivery from dark stores
3. A fleet of two-wheeled vehicles to move faster

Most q-commerce retailers are like supermarkets, so-called flash supermarkets.

They have everything from snacks to cosmetics to cleaning products. 

Some q-commerce pure players are, in fact, “supermarkets” that hold their inventory. Other q-commerce players work with legacy brick and mortar supermarkets. They are third-party providers that perform the delivery.

What Are the Advantages of Quick Commerce?

1. Speed, Speed, Speed

Speed is the most significant advantage of q-commerce.

The genesis of q-commerce came from the need for ultra-fast delivery in the food industry.

Q-commerce sellers generally don’t have physical locations where customers can walk in and buy things. Still, q-commerce retailers have a unique selling proposition (USP) that sets them apart from competitors. 

2. Brand loyalty

Q-commerce today is a commodity. 

There are many players, and customers can easily choose from which one to be served. 

But it is a winner-takes-all market. Not necessarily globally, but most likely in your district or city.

The one company that can meet customer demands quickly and efficiently will have the most repeat customers. 

Customers are more likely to make a repeat purchase from a company that has consistently met their needs.

3. Ultra-fast delivery with 24/7 operations 

Dark stores can operate 24/7, leaving no gaps between demand and delivery (given that the local laws permit 24/7 ops)

This makes q-commerce flourish in areas that have limited business hours for physical storefronts. 

One of the main benefits of Q-commerce is to order anything you need at any time of the day (or night). 

4. Tech-oriented inventory management

With AI and smart technology, q-commerce ensures that products are readily available for people in the area. 

Q-commerce software analyses demand trends to help re-shelf stocks based on demand. And even if a product is unavailable for a short period. Then, the app will simply stop promoting that particular product and steer the demand towards other products in stock.

5. It is super easy

Once you’ve tried q-commerce, you understand its ease.

Q-commerce apps generally have straightforward UX/UI. They are built to have super simple sign-in processes and make repeat purchases very easy. 

If you forget an item on your shopping trip and don’t want to return it, you can open an app and have someone bring it to you. 

You don’t have to take your sweatpants off and put jeans on again. 

What Are the Challenges of Quick Commerce?

1. Q-commerce is a commodity

The biggest challenge of quick commerce is staying on top. 

All the q-commerce players have a similar model. It all comes down to the best inventory and the best execution.

The number of players existing today makes q-commerce a commodity. As a result, there are almost no switching barriers for customers.

This means that customers have plenty of choices to choose a provider. And it is just as easy to lose a customer as to gain one. 

2. Q-commerce customers have Zero tolerance for failure

The primary drawback of ultra-fast delivery is living up to the ultra-fast standard. 

It is a market where customers have zero tolerance for failure. 

They will only stay loyal if their customer experience is always great. 

A player that provides only “good” experiences loses its value and customers. 

This is a market that is built on customers that NEED ultra-fast delivery for whatever reason. Unfortunately, these types of customers are the hardest to please.

3. Q-commerce is an extremely risky business model 

With such customers, players have to constantly monitor efficiency across their supply chain. 

The entire industry is hinged on speed and accuracy for profitability. And as we said before, this is a winner-takes-all market. This means that players need to raise massive amounts of cash to establish operations quickly and win the market. 

And the entire business model is based on the availability of staff. Companies cannot scale and maintain their operations without enough riders and pickers available. 

Players like Getir, Gorillas, or Flink have provided their staff with employment contracts. Others are still relying on gig workers. However, most countries and cities have started regulating the gig economy, which will impact the business model. 

So, in the end, only one or two players will survive per area, and most players will burn through their cash. 

4. Convenience often comes at the cost of work conditions 

Delivery speed and convenience might come at the cost of agreeable work conditions. 

Of course, it’s fantastic to shop for a beer and some snacks at 3 AM on a Tuesday. But there’s someone out there who has to bring you the bag of chips. 

And as we said before, parts of the industry are based on the gig economy without full-time contracts or benefits. We’re not saying the gig economy is bad per se. But it has time and time again been proven to offer precarious work conditions.

But riders and pickers also have the freedom to decide where they want to work. Arguably, a job in a classical supermarket is also not more exciting. 

In most countries, quick commerce companies would make a strategic mistake to offer lousy working conditions. There is a significant labor shortage in the low-wage sector, and companies have difficulties filling positions.

The food delivery company Wolt offers a sign-on bonus for new riders. An Indeed study suggests that the number of job postings is skyrocketing (e.g., 88% increase in the Loading & Stocking sector).

Companies should not focus on improving margins by reducing labor costs. Instead, they should consider the opportunity costs when they cannot fill positions or have enough riders available.

5. The model might not work everywhere

Q-commerce is mostly available to urban consumers. 

The economics of the model is catered to densely populated areas in urban areas. As a rule of thumb, we could say that the sweet spot of the model is in areas with at least four-story buildings.

Some players serve more rural areas but with much longer delivery times. The economics of the model are different outside of the cities. 

Additionally, it might not work in every country equally well. Convenience and delivery business models work very well in countries with high inequality (Singapore or Hong Kong). It needs a population segment with high disposable incomes that looks for convenience. And a lower-income population segment that is willing to perform the gig work. 

It remains to be seen if the model also works in countries with small Gini-Coefficients, such as Nordic countries.

6. Q-commerce has a significant impact on local and small businesses 

Additionally, one of the main casualties of q-commerce is local and small businesses.

It took a global pandemic to get stores to come around to in-store or curbside pickup for online orders. 

Stores that are not adopting an omnichannel approach are being crushed. 

This is a good thing because most local stores had utterly failed to adapt to changes in customer behavior.

But q-commerce mainly sells items from big supermarkets or big sellers. The type of players who can afford their commissions.

Most local small businesses don’t have the volume or margins to become q-commerce sellers. So a lot of them will inevitably be crushed by q-commerce players. 

Is Quick Commerce Profitable?

Short answer: yes, at least in the long term. 

There’s a lot of opportunity in quick commerce when executed correctly.

A study from Deloitte revealed that 50% of shoppers spent more money to get what they needed quickly in the heat of the pandemic. Q-commerce players can capture this willingness-to-pay.

In the US, GoPuff is the first-mover. They operate their better warehouses with 40% gross margins and a 10% contribution margin. 

Of course, increased competition will put pressure on margins.

100% of GoPuff’s fulfillment centers became profitable after 18 months, and the best ones were even profitable after nine months. 

At the same time, classical supermarkets are much more capital-intense and need many years to break even.

Is Quick Commerce Sustainable?

It is hard to prove that q-commerce is more sustainable than traditional shopping. But a few things about it are encouraging.

Deliveries are usually performed with electric scooters or e-bikes. It would be more sustainable if customers would no longer have to get into their cars to drive to the supermarkets or shopping centers.

The way supermarkets work produces significant food waste. Q-commerce has the potential to reduce food waste big time. It has short turnaround times of products. Food can be stored more functional (e.g., dark and cold). It does not have to be displayed in a way that is appealing to customers (e.g., on a shelf with bright light)

Customers do not touch food, and q-commerce companies can also sell the “curved cucumbers” that would be neglected in a supermarket. 

Since q-commerce firms are more data-driven, they can better forecast demand. In turn, companies waste less food by ordering the right amount of non-durable products.

Food about to expire could be promoted or discounted on the app. If quick commerce players operate seven days a week, they would not have to deal with fresh food that could get rotten over the weekend. 

What is next for Quick Commerce?

Expansion of the product offering

Most players have started with grocery delivery. But their product portfolio will expand to other areas such as OTC (over-the-counter) pharmaceuticals. 

After all, we want to stay in bed when we are sick and don’t want to make our way to a pharmacy. Some do this already.

Beyond Groceries, Food, and convenience products

Quick commerce does not have to be limited to food delivery, groceries, OTC drugs, or other convenience articles. It could also solve that last-mile problem in the broader retail industry. 

Q-commerce players could also help brands deliver other items like fashion of consumer electronics. 

First, start-ups are already addressing this niche. For instance, Arive works with brands like Apple to deliver their products within 30min. The biggest challenge here is inventory. The products can be “flipped” with groceries within 2-3 days. With laptops or designer fashion brands, the warehouses would need to have a lot of expensive inventory. The products need to be readily available in many sizes, colors, or technical configurations.

Reshuffling of the marketing budgets of food companies

Food companies like Kraft Heinz spend a lot of money promoting their brand and products (let’s say a Bacon BBQ-Sauce) to a broad audience. 

The demand for their product by customers and their brand image helps them to engage in favorable terms with supermarket chains and retailers. 

But their marketing efforts (e.g., in the form of billboards or TV spots) have also targeted consumers that are highly unlikely to buy their Bacon BBQ-Sauce. 

Maybe because they are vegetarian or simply do not like BBQs. 

Quick commerce players can disrupt marketing in the food industry. Unlike brick-and-mortar supermarkets, they have very detailed information about the preferences and habits of individual customers. 

They can monetize that knowledge and address consumers in a much more targeted and effective way. 

Own Label products increase margins.

Quick commerce players will be offering their private-label products. They can do this because they have direct access to the customer. 

Instead of negotiating with giants like Unilever, Kraft Heinz, and alike, they can offer customers own-label products. This would increase their profit margins.

Who’s Who in Global Quick Commerce

Let’s look at the major quick commerce players currently on the market. 

The amount of money being poured into financing rounds for each player gives you a sense of how big the market could be. 

GoPuff

The GoPuff business model is considered the q-commerce role model. Based in the U.S., GoPuff brings food, alcohol, over-the-counter drugs, and more to consumers in multiple states. 

With micro-fulfillment centers, for a delivery fee of $1.95, shoppers have access to over 3,000 products within 30 minutes.

The company confirmed in July 2021 to have raised $1Bn to expand its global operations. GoPuff is consolidating the market and has acquired competitors such as Dija, Bandit, Liquor Barn, RideOS, Fancy, and BevMo.

Getir

Getir is a Turkish company that started with the speedy delivery of groceries and food from local restaurants. 

The company can also provide apparel, pet food, and sex health products within minutes. 

The Getir app has raised USD 550M in 2021 to expand to the US and other countries. The acquisitions of Moovand BLOK have accelerated Getir’s expansion. 

Weezy

Weezy is a U.K-based grocery delivery service that offers instant delivery within 15 minutes. 

It also highlights its stance as an anti-gig economy company, stating that its “riders are more than just riders.”

The company has “only” raised $25M in 2021

Cajoo

Cajoo is a prominent French q-commerce delivery service. 

Servicing ten areas in France when we wrote the article, the company specializes in grocery delivery. 

In late July 2021, Carrefour, France’s biggest retail company, acquired a minority stake in Cajoo. This investment is for an undisclosed amount. 

This investment will allow the Cajoo App to speed up its development. And it will also give Carrefour direct insight to ramp up its delivery operations.

Gorillas

Gorillas is a leading q-commerce start-up and the fastest German company in history to reach the unicorn valuation.

They started their brand to limit food waste by providing fresh food on demand. Their main offer is to deliver in ten minutes or less. 

The Gorillas app operates in the UK, Belgium, Denmark, France, Germany, the Netherlands, Spain, Italy, and New York City. 

The company has closed a $1B Series C round in October 2021 with the strategic investor Delivery Hero as the lead investor.

Flink

Flink is the second major player from Germany and operates in even more German cities than Gorillas. 

The company also expanded to France, Austria, the Netherlands, and Belgium.

Flink is backed by financial investors like Target Global and strategic investors with strong delivery experience such as DoorDash and Prosus.

The start-up has entered into exclusive cooperation with the retail giant REWE Group. 

Jokr

Jokr has had extremely rapid growth. 

It was founded by the Foodpanda founder Ralf Wenzel and other former Foodpanda and Rocket Internet employees who understand the food delivery market. 

They have expanded to dozens of cities in the US, Latin America, and Europe in a few months. 

The company has raised $170M in 2021 to expand its global operations. 

Glovo

Founded in Barcelona in 2015, Glovo is one of the “old” players in the q-commerce business. 

With Delivery Hero as their leading investor, Glovo has become a significant player for on-demand delivery in EMEA markets. 

With the rise of q-commerce, Glovo has been investing in its ultrafast delivery capabilities to compete in this market. 

They benefit from solid brand awareness and a robust presence in their current markets. So let’s see how they fare in the q-commerce business.

Rappi

Rappi is the Unicorn out of Colombia.

Same as Glovo, the company was a senior player in the delivery business founded in 2015. 

The company’s main activities come from on-demand delivery. 

They have risen to the top, establishing themselves as the dominant player in Latin America. They have become the most significant player in countries like Colombia, Brazil, or Mexico. 

In 2021, they launched a new Rappi Turbo feature, allowing for deliveries in ten minutes or less. This is the start of their q-commerce business.

Again, same as Glovo, they benefit from brand awareness and customer loyalty in their current markets. It will be exciting to see how they compete in the quick-commerce business. 

What will Amazon do in quick commerce?

The retail giant Amazon is currently standing on the sideline regarding quick commerce. For example, its fastest service Amazon Fresh needs about 2-3 hours of delivery time in major cities. 

Going forward, there are two possibilities for how Amazon will (re-)act. 

1. They will wait and acquire the leading quick commerce player
2. They will choose a different strategy (just-in-time instead of instant on-demand delivery)

Amazon could also decide not to become part of the quick commerce race. 

They are still way ahead regarding access to the customer and their household (think Smart fridges and Alexa). Amazon could bet on the convenience of automatic restocking. Your milk or guacamole could be delivered and restocked just in time before your current container is fully consumed. 

Conclusion:

There may be a lot of challenges ahead for Q-commerce. 

The market will consolidate, but several players might dominate in a specific city or area. 

So we do believe q-commerce is here to stay and will only grow in popularity. It educates consumers and changes consumer demands in the long run.

But we are thrilled to see who comes out on top in the long run.

If you know other players to include in this list, drop us an email, and we’ll add them. 

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