What's Q-Commerce and Why Should Online Retailers Care

Imagine coming back from a supermarket on a cooking night and getting the list of ingredients perfectly right. Almost right — you forgot garlic again. You have two options. Either you go to a corner store or use an app to order quick delivery and start peeling vegetables instead.

That's how the concept of quick commerce, also known as on-demand delivery, came about years ago and plunged forward as a result of the pandemic — a convenient urban food delivery that takes as little as 15 minutes.

Our Co-Founder and COO Anders Ekman once dedicated his lunch hour to counting the number of q-commerce riders passing by the intersection below our office in downtown Stockholm. That day, Foodora turned out to be twice as frequent as Uber Eats, for instance.

Essentially, it's a much faster, last-mile delivery upgrade of traditional e-commerce, albeit with a different choice of goods in smaller quantities. At least for now.

Here's what you need to know about the quick commerce ecosystem and the question marks that loom over the industry's future.

Quick commerce — a new delivery experience

Consumer expectations around the delivery times continue to evolve. There's never such a thing as online orders arriving too quickly — from pizza delivered to someone's door within half an hour to household essentials to a new clothing item for that last-minute occasion. One of the main delivery trends of 2022, the quick commerce model has been experiencing explosive growth and shows no signs of slowing down.

To put it simply, it sells like hotcakes. Venture investments in the q-commerce sector have been significant — it is estimated to grow from around $25 billion valuation in 2021 to $72 billion in 2025.

Dozens of quick commerce companies are shaking up the delivery landscape by going beyond the food industry and enabling quick, hyperlocal access to our favorite online brands — with delivery times reduced from two days to only 30 minutes. Big or small, they're scooping up funding to open new avenues of growth, including several unicorns minted in the last couple of years, with Philadelphia-based Gopuff being the largest.

"People who shop online expect deliveries on their own terms. For some goods, the consumer doesn't want to wait at all. They want super-fast and eco-friendly delivery,"
Piotr Zaleski, Co-Founder and CEO at Ingrid

E-commerce retailers, always on the lookout for the latest last-mile delivery trends, are considering the quick commerce business model a tremendous opportunity for growth and are already trying to get a slice of the pie. It's no longer only the busy and impatient consumers who expect next- or same-day delivery. Cutting down delivery time from days to minutes sounds like a real bargain to everyone today.

Building a strong q-commerce capacity is the next step for traditional e-commerce companies to streamline their order fulfillment process — all while putting a great delivery experience first.

An urgent need for scaling up

Despite a huge growth potential, the stakes are high. One of the key measures of profitability for a q-commerce company is the volume of orders it delivers within an hour.

Typically, an instant delivery company operates within a small delivery zone in a specific city district, say, a 3km radius. At a certain point, couriers reach a peak capacity delivering restaurant takeaways during lunch and dinner time. What happens during off-peak hours? Not much.

According to Anders Ekman, that's the development we're seeing here in Sweden, too.

— Q-commerce companies have been under a fierce pressure lately because of their business model. They're playing a long game when they think that if they win the market, they'll make a lot of money. Though it seems their investors are asking them to show revenue much sooner than it was expected four months ago. So, they're looking into new ways of making money, and one of these ways is to deliver e-commerce orders as well, he says.

From dark stores to less expected items

To address the market demands, many quick commerce companies have co-opted the format of dark stores — micro fulfillment centers catering exclusively to the q-commerce industry — and expanded to online grocery delivery.

Now, there's an even bigger fish to fry. Focusing exclusively on restaurant food and groceries leaves many opportunities untapped.

Why not emulate the q-commerce model in the e-commerce market? In order to gain profitability, the q-commerce sector needs to achieve higher order volumes, and it's the surge of online shopping that can offer just that.

We are already seeing a gradual industry consolidation.

Re-inventing retail stores with q-commerce companies

While leading online retailers team up with q-commerce startups to enable instant deliveries, quick commerce begins to emulate traditional carriers in certain markets to be listed in the e-commerce checkout next to PostNord, DHL, or DB Schenker. However, scaling up a q-commerce company requires more than differentiating on delivery speed — it's also about the categories of products they can offer.

Although not everything can fit into a rider's bag, there are other openings for the q-commerce market to explore. Munich-based startup Arive has partnered with a curated selection of online retailers, including brands like Apple and Aesop, to enable instant delivery of high-end items in four German cities. There's far more to come.

Filling in the blanks

According to Anders Ekman, the challenge for the riders and quick commerce is to be on top of the mind for the e-commerce consumer when they place the order. Many online merchants will try to reach out to q-commerce companies and propose their solution. There has to be a software that can support that.

Those determined to pioneer the next generation of last-mile delivery are facing many questions — how to put puzzle pieces of delivery infrastructure together to build your own instant delivery promise?

Traditional e-commerce vs q-commerce business model

First, let's consider the conventional way of shipping e-commerce orders to customers, a process that can be completed either by the merchant or outsourced to a third-party logistics (3PL) provider. Typically, each item ordered online goes through several steps of the order fulfillment flow before reaching a carrier and landing in the consumer's hands.

To keep things simple, once the consumer hits the buy button, the fulfillment process begins. The retailer's e-commerce platform sends order information to the enterprise resource planning system (ERP), the warehouse that keeps the inventory and packs the items, and the transport management system (TMS) to book a shipment with a carrier.

Finally, the package receives a shipping label and goes for delivery before reaching the customer's doorstep in a day or two.

What about delivery times?

Even if you don't run a brick-and-mortar store, physical locations still matter in e-commerce. It is not uncommon to be delivering packages to another part of Europe or, even domestically, from one side of the country to the other from one of your large warehouses.

That being said, optimizing your order fulfillment cycle and narrowing delivery zones based on where your customers reside will give your stock better use and help you reach the most people in the shortest time.

Turning capitals into 15-minute cities

The q-commerce delivery model disrupts everything we know about deliveries with a new promise — it's an improved order fulfillment cycle that bypasses several steps of the standard warehouse process. Essentially, once the consumer hits the buy button, the system sends a request directly to the physical store-turned-warehouse with a real-time inventory.

In a few moments, the item's labeled and ready for pick up by an instant delivery company that has already accepted the order based on a specific delivery area. When the order comes, the courier goes to the store, gets the item, and delivers it right to the door — all in about half an hour.

Not only does a physical network of storefronts remain in play, but traditional e-commerce companies also get to solve their stock problem — instead of one large warehouse you get ten micro-fulfillment centers and with more delivery hubs you get more business.

What's in it for e-commerce?

Even though it's a smaller selection of goods and bulky products don't fit well with the q-commerce capacity, the most popular categories will be readily available and shipped in minutes.

What's more, merchants achieve higher conversion rates, because the quick commerce business model is all about fulfilling evolving consumer demands, i.e., increased shipping flexibility and shortened delivery times. Anders Ekman continues:

— We think the trend will keep growing. Convenience matters to people, and we're getting more and more used to it. Those online companies that have a network of stores will join the trend to gain an advantage over pure-play e-commerce brands that cannot deliver within half an hour.

Ingrid's bet is on helping to connect e-commerce brands with q-commerce companies, on building that bridge. Shop assistants will have the resources to see the order, pack it and prepare for delivery. Same for the q-commerce riders, who need to need to be at the right store at the right time and get the items delivered."

Successful quick commerce integration story: Foodora

Foodora, part of Delivery Hero since 2015 and the most popular restaurant food delivery platform in the Nordics, has been offering rapid delivery of other categories of goods than food takeaway and grocery items for the past few years now. It has successfully partnered with Kronans Apotek, Sweden's third-largest pharmacy chain, to deliver on-demand over-the-counter items already at the end of 2021.

However, there's often been a catch. Those who wanted a rapid delivery of a non-food item would have to shop via Foodora's own app and they rarely did so — unlike those who have been ordering food on a regular basis and may have known Foodora's full offer.

Store-to-door for e-commerce in minutes

With Ingrid as a technology solution to connect the dots, Foodora was able to move into the e-commerce checkout space and be listed as an on-demand delivery method alongside traditional carriers. E-commerce merchants that use Ingrid for deliveries and have a brick-and-mortar store in the customer's proximity will be able to offer Foodora as an instant and sustainable delivery method.

"It's a natural step that has taken some time to put in place, especially technically. We can now offer a 30-minute deliveries in all our locations,"
Hans Skruvfors, CEO at Foodora

For now, these primarily include pharmacies, like Kronans Apotek, and online brands with a wide network of physical storefronts. It enables Foodora to compete with Budbee, Airmee, and Instabox.

If Amazon can do it, so can you

It's a fast-growing sector with fierce competition and thriving innovation. Scores of companies are getting in on the quick commerce action, but the scale required to run a profitable operation requires further market consolidation and scaling up as fast as possible.

Both q-commerce companies and e-commerce merchants have their work cut out for them to respond to the challenge. Building on the right delivery platform to connect the dots of all stakeholders in the same checkout process will help everyone bring home that bacon.

Pun intended. Anders Ekman concludes:

— There might be an adjustment in the market when both e-commerce and q-commerce companies will face tougher times ahead. Yet it's a delivery model which people will anticipate in a three-year perspective.

In other words, quick commerce is here to stay.

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