Q-Commerce: our quick takeaways on a rapidly evolving sector

Not a day seems to go by that a New ‘Quick’ grocery operator doesn't raise funds - launching in a new country or forming a new partnership. In just the past few weeks Berlin-based Gorillas has raised $1bn, and launched a partnership with Tesco.

Q-Commerce: our quick takeaways on a rapidly evolving sector

insight / 4 Nov 2021

A day doesn’t seem to go by without another ‘quick’ grocery operator raising funds, launching in a new country or forming a partnership. In just the past few weeks Berlin-based Gorillas has raised $1bn and launched a partnership with Tesco. The Russian big-tech business Yandex has launched Yandex Deli rapid grocery delivery in London and Deliveroo and UberEats are creating rapid-delivery partnerships with established grocers. All promise the alluring prospect of having bread, milk, bananas, cornflakes, beer and thousands of other items delivered in minutes – albeit if you live in a major city.

There has been an obvious acceleration of overall online shopping habits over the past 18 months, with many consumers trying services for the first time or increasing their frequency of use. The frictionless ease by which products can be delivered to the front door is addictive. The latest wave of ‘quick’ brands is the most extreme form of this drive for convenience, promising to deliver your groceries in under 15 minutes. However, behind the frantic fundraising, glossy marketing campaigns and rapid geographic expansion there are some big themes emerging.

Firstly, consumer habits formed during the pandemic are likely to endure, especially among the young, urban and affluent. In a recent survey by OneStock 84% of UK consumers planned to continue using dark-stores post-pandemic. Extreme convenience is a sticky experience and many repeat customers value the simplification and time-saving nature of these services. One potential evolution of this could be an on-demand ‘high-street-in-your-hand’ concept where a curated selection of categories such as clothing, cosmetics, pharmacy or DIY can be delivered in less than 30 minutes. There has been a glimpse of this with Deliveroo and Boots partnering in the UK, while Doordash is working with PetSmart and Bed Bath & Beyond in the US.

Secondly, a wave of model merging and refinement has started. We have already seen the first wave of consolidation with Getir acquiring Blok and GoPuff taking over Dija and Fancy in the UK. More of this will come as smaller brands struggle to compete against better well-funded ones. News that Uber has partnered with Carrefour in France to launch a rapid service called ‘Carrefour Sprint’ and Deliveroo with Morrisons to launch ‘Hop’ in the UK is another structural change. This could evolve into a number of formats such as co-run dark stores where the grocer provides the stock, or dedicated sections of existing stores where a limited range of SKU’s are held to ensure stock availability and speedy picking. Finally, franchising is an approach that Getir is starting to launch in the UK, having successfully utilised it for over 560 sites in its native Turkey.

Thirdly, the eventual winners will be those who make the best use of technology and innovation to optimise the value proposition and improve overall unit economics, unlock the ability to expand outside urban areas, gain market share and mass consumer adoption. This could take a number of forms, but fundamentally it will be about improving the selection, service, and price aspects. Buyk in the US is an interesting example of what this future could look like; with AI, micro-fulfillment and picking technology to improve operations, optimise assortments and increase margins. We’re likely to see other operators rapidly adopt technology to improve procurement, picking and packing as well as platform analytics to improve conversion, order size and frequency.

Overall, this space is very much in its infancy. We’re at version 1.0 of the model and even brands like WalMart, Amazon, Uber and Instacart are adopting an experimentation mindset. The reality is consumer expectations of the experience remain high, so significant amounts of investment will continue to be used to drive value proposition, innovation and differentiation. However, future challenges are emerging including how to develop profitable unit economics, sustainability and growing worker rights concerns despite many operators avoiding the gig economy model.

Listen to our Executive Chair, Matt Truman, share his thoughts on this rapidly evolving sector on the BBC's Food Programme podcast: https://www.bbc.co.uk/sounds/play/m0012rhp