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Ideas Commerce2021-08-12

Quick Commerce: Third Generation of Commerce

Aniket Basu

Do you remember when Domino’s Pizza deployed its food tracking app? I do. I had this urge to see what was happening with my pizza and patiently waited for it to arrive. Many of you may be doing the same with your food order on Grab, Swiggy, foodpanda or Gojek. This quick delivery mechanism has now transpired into the grocery category and the Covid-19 pandemic has only accelerated this trend.

Retail commerce evolved from self-service superstores such as Walmart, to delivery in two to three days from online marketplaces such as Shopee and Flipkart, and now to its most evolved business model of delivering typically small-basket items in less than an hour – known as quick commerce or q-commerce.

Grocery stores such as supermarkets and local merchants listed products online as countries went into lockdown as a result of the pandemic. People purchased food items from retailer sites and delivery platforms. Order sizes would usually be small baskets. However, the surge in demand for quick delivery caused by the pandemic created a bottleneck in the last-mile delivery. There were challenges to find delivery slots, and at times, pre-order took as long as five to seven days.

Challenges of q-commerce

Based on the World Economic Forum’s report on The Future of the Last-Mile Ecosystem, e-grocery is expected to grow by 10% per year worldwide, while the number of delivery vehicles in the top 100 global cities will increase by 36% until 2030. The unparalleled demand for last-mile delivery and the tremendous rise of delivery platforms will start impacting our cities. We do not have to look further away from home – leading cities in Southeast Asia and India are already some of the most densely populated in the world, and the addition of last-mile transport will only worsen current traffic and carbon footprint issues.

In a global climate where economies are looking at sustainable business models, how sustainable is q-commerce? Can the last-mile delivery be made environmentally-friendly? 

Setting brands up for success

The lifestyle of consumers has progressed, technologies have advanced and business models have evolved. Speed and convenience are becoming more critical than ever before. But the fundamental truth remains the same – brands go where consumers are. Consumers are searching and browsing delivery apps every day to shop online, and just a few clicks set them up for buying a product. GrabMart and pandamart have been the buzz amongst consumers in local markets, yet many brands still struggle to understand how to partner with them.

Setting brands up for success requires smart decisions on strategic fit and operation requirements. Here are some key considerations:

  • Assortment: Being available and meeting shoppers’ expectations is essential. Brands and retailers must understand the algorithms of delivery platforms since these algorithms can influence product page listings. Brands would be seeking to drive higher sales and overall margins, as well as focus on core products or SKUs that are repeatedly purchased, priced consistently and rated high.

  • Unit economics: Brands’ key business objective is to be profitable, while minimising the erosion of margins. Delivery platforms charge a commission that can either hike the price of products or consume product margin. Hence, understanding what addressable audiences are willing to pay is essential to pricing SKUs right.

  • Branding and marketing: Every delivery platform provides a different experience and partnership, which may result in brands having less control. Brands must be clear of their long-term versus short-term engagement with customers and take charge of the overall narrative.

  • Digital marketing support: Increasingly, delivery platforms are offering advertising solutions in their apps. Similar to other marketplaces, these platforms have restrictions on sharing of customer data. However, brands and retailers can work on data-sharing agreements that facilitate precise targeting on other channels such as social media, and provide SKU-level reports for advanced measurement and business intelligence reporting.

Growth beyond cities

Urban areas in Southeast Asia and India have propelled the growth of online shopping. According to an e-Conomy SEA report, on average, people living in seven metropolitan areas buy six times more online than those living elsewhere, and they constitute only 15% of the region’s population. As companies make work from home a mainstay and remote hiring grows, many workers will start moving outside to suburban areas. These consumers will drive the growth of online shopping in the localities and communities. As delivery platforms will look to tap into this opportunity, the work will not be easy. They have to onboard many more micro-merchants and look at resolving challenges in delivery. These remote areas are also not well-known for their infrastructure.

Many interventions are in development to counter these last-mile challenges. Some primary interventions that have a net positive impact on carbon dioxide emission, delivery cost and congestion include:

  • Changes in vehicle to electric vehicles and drones

  • Customer movement to parcel lockers, office delivery and multi-brand parcel shops    

However, political and legal regulations vary significantly amongst Southeast Asian and Indian markets, leading to the inconsistent rollout of advanced technologies such as autonomous vehicles, drones and hydrogen-powered electric vehicles. Therefore, a synchronised and consistent regulatory environment will better deploy last-mile delivery solutions to maximise benefits and expand coverage to non-urban cities.

Aniket Basu is Senior Director, Technology and Ecommerce at Essence, and IAB Southeast and India’s Commerce Council member.

This article was originally published on IAB Southeast Asia and India.