The Covid-19 pandemic has significantly accelerated the growth of e-commerce in the UK as more people shopped online to avoid crowded stores and public places. However, the traditional online grocery delivery model still takes at least a day to deliver orders. This delay does not meet the immediate needs of many consumers who want their items within an hour.
Enter Quick Commerce
To address this gap, a new online shopping model called "quick commerce" or "q-commerce" has emerged in the UK. Quick commerce aims to fulfill and deliver grocery and consumer goods orders within 60 minutes or less. Pioneering startups like Gorillas, Getir and Zapp have launched 10-15 minute delivery services in major UK cities like London. They promise delivery within a small timeframe rivaling in-store shopping speeds.
How does quick commerce work?
Quick E-commerce (Quick Commerce) companies operate micro-fulfillment centers aka 'dark stores' located close to customers. These warehouses stock popular grocery and household items based on predictive algorithms. When an order is placed via their mobile app, staff located at these stores pick, pack and dispatch the order for bike or vehicle delivery within the promised quick delivery window.
Advanced technologies like artificial intelligence, machine learning and predictive analytics help the startups with inventory management, optimal fleet routing and maximizing operational efficiencies to deliver orders at lighting speeds. Customers can track their delivery in real-time via the app. Contactless delivery limits health risks. Payment is processed digitally.
Rapid growth and extensive funding
The quick commerce sector has witnessed remarkable growth over the past year in the UK with increasing consumer adoption. Gorillas reached a $1 billion valuation after just one year of operations while listing in over 65 cities globally. Turkish startup Getir expanded to the UK and received funding of over $1 billion, cementing its status as Europe's fastest-growing startup.
Investors are pouring substantial funds into these startups, recognizing the disruptive potential of on-demand quick commerce. It has attracted over $5.5 billion in funding globally in 2021 alone. Major players plan to use funding to aggressively expand warehouses and geographical footprint, hire more staff and fleet, and enhance their tech capabilities to improve delivery speeds. This will further accelerate growth.
Challenges to overcome
While quick commerce is revolutionizing online grocery shopping, it also faces challenges that could impact its long term growth and profitability.
High operating costs
Maintaining the hyper-local infrastructure of micro-fulfilment centers and fleets is incredibly capital-intensive. Costs include real estate, warehousing equipment, large staff strength, delivery vehicles and maintenance. Margins are thin as startups provide steep discounts to attract customers in the initial growth phase. Sustaining operations relying solely on rapid expansion funded by venture capital could prove difficult.
Traffic and environmental concerns
The gigantic fleet sizes required to enable 10-15 delivery speeds have led to rising traffic congestion and emissions in busy cities. This goes against the green sentiment of many consumers and policymakers. Quick commerce startups will need innovative fleet management and environment-friendly delivery vehicles/tech to balance speed, cost and sustainability. Failure to address this adequately could impact their public image.
Competition from existing players
Traditional online grocers like Ocado, Tesco and Sainsbury’s are ramping up their own fast delivery offerings and partnerships with last mile delivery providers. Amazon is also piloting its own Express grocery delivery service. If existing players leverage their supply chain strengths, brand loyalty and customer data to match or better speed, it may dent the appeal of startups. New regulations around gig workers could also impact their cost advantages.
Despite challenges, quick commerce is expected to be a significant disruptive force that transforms urban grocery shopping in the UK. As operations mature and demand sustains, startups are likely to explore new revenue streams by expanding beyond core categories, offering private labels and promotional partnerships. Successful ones may consolidate via mergers in future. Key will be achieving profitability without diluting the speed differentiator.
If issues around congestion, carbon footprint, scalability of ultra-local model and labor competitiveness are addressed, quick commerce could emerge as a multi-billion pound industry in the UK within this decade. It fits well with increasing smartphone penetration and preference for on-demand conveniences among busy city consumers. The express 10-15 minute grocery delivery proposition is set to revolutionize shopping as we know it.
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