Quick Commerce Narrows Delivery Windows to New Lows

Competitive growth and investment support consumer’s desire for near instant gratification, but with competitive pricing and low delivery fees. There are now multiple billion dollar valuation companies including Gopuff (US), JOKR (US, Europe, and Latin America), Glovo (Spain), Gorillas, and Flink (both Germany). Growth is rising in Latin America with Rappi (Brazil) , Gojek (Indonesia-based), and Zomato (India), which expects to invest US$400 million in Q-commerce. Some are said to deliver in select urban areas within ten minutes. These services have received nearly US$6 billion in funding to date with up to US$25 billion in US sales in 2021 (Coresight). The operators of these services extend beyond the start-ups to include retailers and aggregators.

e-Commerce fulfillment centers have traditionally been located outside of urban and suburban locations. Large fulfillment center footprints can run up to 800,000 square feet. US grocery stores average about 38,000 square feet. SKUs range from Amazon with approximately 353 million to grocery stores with 15,000 to 60,000. Contrast this with Q-commerce, which leverage very small, hyper local sites from 2,000 to 5,000 square feet, including previously empty urban real-estate. These service providers hone their inventory to a maximum of 4,000 SKUs of Fast-Moving Consumer Goods (FMCG). This grants the service provider greater purchasing power for ordering and replenishment. JOKR stocks about 1,800 SKUs. Gopuff alone has about 600 of these centers to date and Rappi planned up to 100 dark stores in Brazilian locations by the end of last year.

Consistent time to deliver is everything. Zomato’s portfolio company Blinkit debuted ten-minute grocery delivery in India last August. Orders are fully completed online only and filled from a single, optimal location versus multiple grocery orders, which are often filled alongside customers in busy aisles and some last mile services that fill orders through multiple stores. Rappi is able to fill orders in three minutes and only serves orders within an approximate 1.24-mile radius. Despite the need to keep selection targeted, these services tend to either cater to a very specific set of goods like meals and/or grocery items (takeaway is a common focus in Europe), or few choices of broader categories like Gopuff, which sells fresh food, snack food, alcohol, and vapes.

As competition grows rapidly within the US and Europe, as well as Latin America and APAC, there will be greater pressure on profitability. Although near real-time delivery continues to grow share, companies will need to address options including their fees, pricing structure, and order minimums as well as partnerships, investment options, and operational ties to leading retailers and aggregators. Additional growth can include ventures into emerging markets. It is expected that several will Initial Public Offering (IPO) or attempt the Special Purpose Acquisition Company (SPAC) route soon. SoftBank-backed Gopuff hired banks for an IPO in January. Each services provider will need to assess their assets, strategies, and competitive differentiation to plan best options, which may vary by geography. The current environment is not viable long-term.

How can delivery times shrink any further? Filling the order itself can be done in as little as three minutes by providers such as Rappi. Transportation can include two-wheel options from bikes to motorcycles, saving on fuel and vehicle cost/maintenance. Other options worth investigation for speed and profit are autonomous form factors, removing most of the human labor from delivery (other than remote control). Drone use is still very limited, but Autonomous Mobile Robots (AMR’s) such as Starship Technologies and Nuro provide the speed and cost profile the surviving Q-commerce companies may need to survive.