By Henry Crawford
Published: 3rd December 2021

Q-COMMERCE: WHO WILL WIN THE RACE TO CONSUMERS’ HEARTS?

(Credit: Gorillas Press Kit)

Quick Commerce (Q-Commerce), is a rapidly growing market that continues to attract billions in venture investment. In this article, we dive into what it takes to compete and the future opportunity for this turbulent, fast-growing and demanding category.

Q-Commerce is a rapidly growing market segment for the fast delivery of goods direct to consumers, almost exclusively through mobile apps. Data and technology are, as a result, inseparable from Q-Commerce services. By effectively channelling data and technology these businesses will be able to improve their understanding of consumer behaviours, utilise investment more effectively, and drive consumer loyalty through true differentiation. 

Here, we delve into:

  • how Q-Commerce operates
  • the current market landscape
  • and why an effective data and technology strategy is critical to success within the sector. 

Operating in Q-Commerce

One of the key measures of profitability for Q-Commerce providers is the number of orders they can deliver in an hour. The present business model uses single deliveries, in short, circular trips or multiple deliveries in one longer trip to achieve the high order volumes needed to gain profitability. As a result, it is simply easier to operate in and market to urban areas – with London being the current battleground for market leadership.

Despite the attractive start-up and operating costs, food delivery and Q-Commerce companies are famously not profitable by traditional measures. Financial statements show net loss month after month, yet businesses continue to attract billions of venture investment. Within the Q-Commerce market, margins have turned red due to the intense marketing spending of these entirely growth-focused companies. Companies are valued against their future growth potential rather than a 1–2-year profit horizon, meaning most CEOs will be focused almost solely on company growth and revenues over the next 3-4 years.

Gaining market share through mass investment and intense marketing efforts is only sustainable for short periods, pointing toward a strategy based on future market consolidation.  The expectation is that 2-3 ‘Q-Commerce Winners’ will emerge and dominate geographically divided market regions, such as the UK. To achieve that, investment capital will need to focus on outspending the competition on acquisition and promotion assisted retention to gain market share.

State of Play in Q-Commerce

Currently, distortions from intense marketing and promotion in the sector have made understanding customer behaviour challenging. This is extending the time taken by Q-Commerce businesses to develop clear common customer missions and target profiles. Despite this, there are a few consistent target customer profiles emerging including; new mother, big night in, party drinks top-up, forgotten ingredient, and busy young professional. To add to this headwind, correctly pinpointing customer missions and target profiles is demanding as many customers add items they did not originally intend to order to their basket. Marketing to customers effectively is, therefore, more complex.  

What is certain is that amongst these target profiles, consumer expectations are high. This is down to direct-to-consumer services like Deliveroo and Uber raising those expectations. These companies have long been able to answer consumer needs consistently and accurately meaning consumers are now used to fast delivery times. 

Established Q-Commerce companies have signalled that high customer expectations act as a drag on launching Q-Commerce services in 2021. One CEO of a leading Q-Commerce company said that launching in 2021 has almost been a handicap because consumers have become used to a superior delivery experience for over six years now.

Despite the high expectations of consumers and difficulties identifying customer profiles, there are two emerging strategies that Q-Commerce companies are currently focusing on for growth:

Serve the convenience customer

This strategy involves servicing customers who desire ultimate convenience. These convenience customers represent small and simple missions. For example, customers who want goods like alcohol, snacks, cigarettes or medicines almost immediately. 

Additionally, there is potential for this strategy to expand into staple e-commerce like electronics and beauty products. Convenience customers could include ‘park deliveries’, focusing on delivering to outdoor spaces or communal areas. However, this type of customer has so far had a more negligible impact than expected.

Take on the weekly shop

Some of the leading Q-Commerce names (like Gorillas, Getir, Flink) are already betting on consumer behaviour, tending toward bigger basket sizes bought at a higher frequency. That will ultimately reduce the need for a regular supermarket shop. 

They aid this goal by differentiating their product selection through a range of unique items, which they achieve through partnerships with local bakeries, butchers and artisan ice cream brands. For example, Gorillas report that 20% of its stock comes from local products such as breweries, coffee roasters, and chocolate brands. That said, taking on the weekly shop remains a longer-term aspiration and is not yet reflected in the current basket sizes.

The Fight for Market Share

Interestingly, it appears there isn’t currently any real brand loyalty, so market share is there to be taken at pace. Q-Commerce companies will need to offer a balance of product selection, service and price to drive long term success. Which presents a genuine business opportunity for differentiation and brand equity creation. 

Any Q-Commerce provider looking to implement an effective growth strategy will find that using data to do so is vital. When a company manages to use that data effectively and build a complete understanding of its consumers, they will stand a genuine chance of being a market leader.  

A Future in Q-Commerce

When looking to the future of Q-Commerce, we see clear opportunities taking shape. One is the effective use of automatic suggestion engines. Effective use of automatic suggestion engines that are fully optimised can provide more control over the marketing and promotion of a company’s products within Q-Commerce. The development and maturation of these engines, which are only currently lightly implemented, will be a crucial tool in driving growth and success over the competition. 

The other, and perhaps most important to the future success of Q-Commerce operators, is the prioritisation of data capabilities within these businesses. Whilst most providers have invested early in building out competent data teams they tend to be spread over an extensive set of priorities and operations. These teams then spend most of their time and energy on the high pace of operational support, rather than investing in customer understanding and strategic forecasting. 

The companies that take the time to embed a strong data culture, with a focus on changing their data teams from service to the business to an asset, will be able to effectively use the vast amounts of consumer data they already possess and continue to gather to unearth data-based evidence, enabling them to direct investment more productively.

Whilst it is hard to say who will win the race, one thing is for certain, there will be clear winners and losers, it’s just a matter of time (and data).

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