Quick Commerce stands for convenient online ordering and fast delivery within one hour after receipt of order. More and more industries are evaluating whether and how quick commerce can help them to meet rising customer expectations. Read on to find out who is benefiting from quick commerce and what the logistical challenges are.
The Essentials in Brief
It is not quick commerce vs. e-commerce, it is quick commerce being the turbo of e-commerce. The latter has accelerated traditional mail order into the 21st century, and quick commerce is taking it even further.
What is quick commerce all about?
- Fast delivery (ideally in less than an hour)
- Delivery from decentralized micro-fulfillment centers (so-called dark stores)
- Limited range of products (focus on fast-moving consumer goods)
- Delivery vehicles adapted for use in urban areas (e.g., two-wheelers, small transporters, mini delivery vans)
Significance of Quick Commerce in Logistics
Quick commerce applies to the B2C sector and, in particular, to the last link in the logistics value chain: the last mile. Quick commerce requires the development of dark store networks tailored to the needs of the respective sector. The vehicle fleet must also be adjusted to the requirements of fast delivery in urban areas. Last but not least, the individual process steps must be precisely interlinked to make fast delivery possible. Thus, high-quality process management is the essential prerequisite for quick commerce.
Quick Commerce in Summary
Quick commerce can be described as next generation e-commerce with exceptionally fast delivery of products. As with e-commerce, the purchase process is entirely online. The products are delivered within one or a few hours after the order is placed. This is only possible over short delivery distances and is usually only economically viable in urban areas. Quick commerce requires a network of decentralized warehouses stocking a limited range of preferably fast-moving consumer goods.
Quick Commerce: Examples from the Present, Prospects for the Future
As a complement to brick-and-mortar retail in urban areas, the introduction of quick commerce dates back to before the COVID-19 pandemic. At that time, the aim of retailers was to extend their core business with fast door-to-door delivery of everyday items such as groceries or drugstore products. Nevertheless, the subsequent rise of quick commerce is closely linked to the pandemic.
COVID-19 Pandemic as Catalyst for Quick Commerce
Quick commerce took off only with the lockdowns, which led to an explosion of online orders. Since then, the market for quick commerce solutions in urban areas has grown rapidly. This trend is likely to continue on a global scale. Quick commerce for grocery delivery is now available in most urban areas around the world, partly through established retailers and partly through specialized quick commerce providers.
Not Every Industry Is Suitable for Quick Commerce
Quick Commerce is not applicable to every business model or product segment. For example, it largely excludes the B2B sector and rural areas, where the quick commerce concept is simply not profitable: the low population density and correspondingly low demand, on the one hand, and the necessary dark store infrastructure, on the other, are not compatible from an economic perspective.
In addition, the weight and size of products are limiting factors for quick commerce. Large products such as furniture or flat-screen displays require more storage space than is available in typical dark stores, and transport involves larger vehicles. Moreover, there is the question of whether the cost of permanent storage for products that are not in constant high demand is in a healthy ratio to sales.
For this reason, sectors that are primarily concerned with rapid availability could benefit from quick trading in the future. Besides the grocery and drugstore sectors, this could also apply to the supply of pharmaceuticals, for example.
Chances and Challenges of Quick Commerce
In the age of e-commerce, customer loyalty can be driven not only by high-quality products, but also by a positive delivery experience. A hassle-free online shopping experience within one hour from order to delivery helps companies to attract and retain new customers.
However, the transition to quick commerce comes with risks that should not be underestimated. The changeover is costly in terms of fleet, personnel, and infrastructure. Furthermore, the required goods must be constantly available in the right quantities. Finally, delivery standards must be maintained at all times: if a company promises to meet customer expectations for smooth delivery in the shortest possible time, it can be at a competitive disadvantage and lose relevance if it fails to deliver even once.
Quick Commerce in Europe: An Object Lesson for Start-ups
All that glitters is not gold, as can be seen in Europe, for example in Germany, Europe’s largest consumer market. Here, only one of the original three quick commerce providers in the food sector remains. After the COVID-19 pandemic, the personnel costs and rents for the dark stores in the city centers were probably disproportionate to the order volumes. Well-known players have also withdrawn from other markets such as France, Italy, Spain, and Portugal.
One thing is clear: to offset the costs of quick commerce, the selling price of quickly delivered products usually has to be significantly higher than the retail price in brick-and-mortar stores – or the delivery charges have to be adjusted accordingly. Before implementing quick commerce solutions in a new market environment, companies must always conduct a detailed market analysis with demand forecasts: there must be a discernible trend in the willingness of consumers in a particular market to pay more for quick commerce.
Quick Commerce and the Future of Logistics
At DHL Freight, we expect that despite regional teething problems, many retailers of fast-moving consumer goods, and even luxury and specialty goods companies, will offer quick commerce options to their customers on a global scale. Given this trend, companies have two possible strategies to remain competitive. They can either partner with a logistics service and quick commerce provider, or they can develop their own first-party logistics quick commerce solution.
In both cases, supply chain teams must anticipate how their supply chains will change not only in the last mile, but also in upstream supply chain segments to make quick commerce a success. When these conditions are met, quick commerce is the ultimate logistics discipline for delivering a superior end-to-end customer experience. This requires efficient inventory control, effective demand planning, functional dark store distribution, and optimized delivery routes. These challenges make the presence of competent in-house logistics teams or experienced logistics service providers a key differentiator for companies.
