When the ICONIC first launched same day delivery within 3 hours of ordering back in 2011, many thought it was a one way ticket to bankruptcy. Fast forward to today and 3 hours feels like an eternity in a need it now economy.
Stringent lockdown measures, combined with consumer reluctance to visit stores and surging uptake of eCommerce, have created the perfect conditions to fuel the growth of quick commerce or on demand delivery as it is known. Quick commerce is the next horizon for eCommerce and, as the name suggests, it’s all about speed. Quick commerce generally means consumers can expect delivery within one hour of placing an order.
Demand for q-commerce
According to research from Roy Morgan 5.5 million Australians aged 14+ (26.5%) used meal delivery services in 2020, up from 3.9 million (19.0%) in 2019 and 3.3 million (16.3%) in 2018. Measured by revenue, the food delivery services market in Australia is now worth $847.9 million as of 2021.
The uptake of meal delivery in Australia has provided consumers with a taste for speed and meal delivery is really the tip of the iceberg when it comes to q-commerce.
In a world where consumers value convenience and speed, demand for instant delivery of everyday household essentials and groceries is on the rise. According to Coresight Research, the quick commerce market for retail sales (predominantly grocery/essentials) totalled $20–25 billion in the US alone in 2021.
Whilst an annual study by Instacart (a leading grocery marketplace and delivery platform in the US), found 50% of all smaller quantity orders were delivered within one hour of purchase in 2020 and 95% were delivered within 2 hours.
And if those stats aren’t enough to convince you of the trend – you only need to take a look at the amount of investment occurring within the space globally as a slew of start ups across Europe and the UK battle it out to take a slice of this rapidly growing market.
The q-commerce market
Q-commerce lends itself to rapid delivery of an array of household and essential items including food, drink, cosmetics, pet supplies, pharmacy items, stationary or even quick gifts. The q-commerce market is broadly characterised by two types of players:
The first is third party delivery platforms like UberEats, Doordash and others which are extending beyond meal delivery to other grocery and essential items. Third party delivery platforms don’t house inventory typically they partner with retailers and local businesses to create a marketplace for food, beverages and other essential items that are needed quickly.
The second type of player are vertically integrated models, such as Gopuff, Gorilla and more. These companies run dark warehouses and pick from a range of essential items in their own stores and courier them to shoppers, typically within 10–30 minutes. Vertically integrated models like Gopuff, Gorilla and more compete directly with retailers for a slice of the grocery, pharmacy and other essentials.
Implications and opportunities for brands
The substantial order volumes and pace of growth in the sector confirms that consumer demand for rapid fulfilment is there. Given the two distinct business models that exist in the market (third party delivery platforms and vertically integrated delivery players), q-commerce represents a host of opportunities and implications for retailers and FMCG brands alike.
For retailers and convenience stores, the competitive pressures are already prompting major chains in the US and UK to embark on ventures into immediate fulfilment, either directly and or via third party delivery platforms - and closer to home we have seen the likes of Chemist Warehouse partner with Doordash to provide their fast delivery service. Enabled by DoorDash’s white label delivery service Drive, fast delivery sees direct integration into the Chemist Warehouse cart enabling consumers choice when it comes to speed of delivery.
Convenience stores in particular face significant head winds with the rise of q-commerce as their competitive advantage of being within close proximity to where one lives is diminished by one’s ability to get essential items and grocery top up items delivered within 10-30 minutes of purchase. Convenience is no longer a category or channel but a need state. BP is one brand that was early to the party having partnered with UberEats in 2019. BPs Couchfood enables delivery of snacks to consumers when they need it most. Following on from its successful partnership, BP has subsequently partnered with Menulog, Deliveroo and Doordash to scale its on demand delivery offering. The impending arrival of large overseas vertically integrated players, however, will put pressure on convenience players to further enhance their eCommerce and fulfilment capabilities to effectively compete for the top up shop and household essentials.
For FMCG brands looking to tap into the eCommerce opportunity, the rise of rapid delivery and q-commerce creates opportunity, particularly for those with perishable portfolios as well as challenge. Whilst there are a few notable examples where FMCG businesses have cracked the DTC market, many are struggling to create a compelling offering and one which is scalable and profitable. Q-commerce provides FMCG brands with the access to large marketplaces and audiences as well as a fulfilment model to take advantage of the growth in food to go, ready meals and meal kit opportunities amongst others. The undercurrent in the rise of q-commerce is also the decentralisation of grocery. The rise of alternatives bought about by quick commerce and other trends like subscription based services will see consumers shop across an array of channels which poses a threat to the way grocery used to be done.
The risk for FMCG brands is to continue to work on old assumptions in the way the market operates.
If you are in interested in building your organisation's q-commerce strategy get in touch with us. We work with leaders to build transformation strategy and drive lasting organisational change - and we'd love to help!