Quick commerce: getting on-demand delivery logistics right

Quick commerce has existed on the fringes of the e-commerce sector for about a decade – mainly in the form of app-based urban food delivery services. We’ve all seen them: those hardy souls on two wheels with insulated backpacks who bring us warm food on a chilly evening in about the time it takes to set the table.

Then came the Covid-19 pandemic. Suddenly, we had to navigate lockdowns, and just going out to the grocery store or pharmacy seemed like a bad idea. E-commerce exploded, and so did our expectations for the sheer diversity of what could be delivered to our doorsteps – and how quickly.

The dark days of the pandemic are behind us, but as the saying goes: Once tasted, always wanted. Consumers now know from experience that it’s possible to get all kinds of things not just same day but same hour, and they’re demanding more. Much more. Quick commerce has expanded beyond food delivery and is becoming mainstream for groceries, pharmaceuticals, office supplies, small electronics, and more.

Quick commerce – also known as “on-demand delivery” or “q-commerce” – is an accelerated model of e-commerce. The premise remains largely the same, but speed becomes the defining factor. Q-commerce delivery windows are measured not in days but in minutes – generally 60 or less.

These faster timelines are forcing e-commerce businesses to innovate their storage and last-mile delivery models. The global e-commerce sector continues its unstoppable rise, nosing past the 3-trillion-dollar mark in 2023. Quick commerce is claiming an ever-growing share of that as it expands into fast-moving consumer goods, small electronics, fashion – and even furniture!

Putting the “Q” in q-commerce requires sophisticated supply chain logistics. Here is a peek at some key components:

• Mobile first: On-demand orders typically originate in a mobile app, not a desktop browser. E-commerce businesses that hope to succeed in q-commerce need to adopt a mobile-first strategy.
  
• Micro-fulfillment: Q-commerce thrives on quick delivery of micro-orders, which requires goods close to the customer, typically three km or less. This means shifting away from large exurban distribution centers to small “dark stores” – micro-fulfillment centers with dynamic, fast-moving inventory. Dark stores are replacing the early q-commerce model of having couriers shop at brick-and-mortar outlets, which are ill-equipped for the dash-in/dash-out needs of on-demand delivery.
• Local access points: A major enabler of successful quick commerce in dense cities is a network of access points – locker stations or partner businesses – where customers can send, receive, and return parcels, even 24/7. Partnerships with brick-and-mortar retailers for in-store pickup of on-demand orders are another option.
• Two wheels, not four: Expectations for reliable on-demand delivery require q-commerce companies to think beyond delivery trucks and cargo vans in favor of scooters and e-bikes, which can more easily zip back and forth between hyper-local dark stores and customer doorsteps or access points.
• Lean workforce: Q-commerce typically relies on a quickly scalable, app-driven, round-the-clock fleet of independent “gig” workers using their own vehicles rather than a fixed workforce of drivers in company-branded vehicles.

Zepto, the poster child for q-commerce success founded in 2021 by a couple of teenage Stanford University dropouts, reported 300% year-on-year growth by 2023 to become India’s latest “unicorn” startup (valued at over USD 1 billion). This stellar performance is fueled by a network of dark stores in seven cities, an army of scooter couriers, and a promise of 10-minute grocery deliveries.

E-commerce businesses that invest in the people and infrastructure to succeed in q-commerce can expect handsome returns because positive fulfillment experiences translate to customer retention and loyalty in the form of repeat purchases.

But the potential windfalls of q-commerce naturally come with a few challenges:

• One strike and you’re out: On-demand consumers are … well, demanding. When you expect your stuff in 10 minutes, there’s not much tolerance when it’s 10 minutes late!
• Early-adopter risk: The long-term profitability of q-commerce ventures is difficult to predict, given the absence of long-term earnings stats in this young sector.
• Local pushback: “Dark stores” that replace once-thriving retail locations are not always popular among residents or city leaders. One solution is to house dark stores in the back of retail outlets.

Setting up an in-house quick commerce solution without any collaboration carries higher risk and requires significant up-front investments, so having a logistics partner lends a key competitive edge. A logistics partner can offer a proven network of storage and delivery capabilities – plus the kind of mobile technology that gives on-demand consumers the visibility of live order-tracking status and updates.

In Southeast Asia, for example, q-commerce revenue is expected to hit USD 3.74 billion in 2023, which is more than a six-fold increase since 2017. DHL Express has responded by tripling its service point network in the key market of Singapore to nearly 1,500 in total, thanks to a strategic partnership with Pick Network.

A network of access points is critical to satisfying q-commerce customer demand for flexible pickup, drop-off, and return options. For example, 47% of European consumers surveyed asked for more access points closer to home. DHL eCommerce operates the most extensive network of access points in the highly mature European market, with 80,000 service points and 20,000 parcel lockers. More than 25% of DHL eCommerce’s parcel volume in some European markets is delivered to such access points. Access points can cut package delivery emissions by up to 30% and help achieve sustainability goals.

The result is higher productivity and less time spent in traffic – the perfect recipe for greener e-commerce and q-commerce logistics.