Quick commerce is seeing tremendous growth as more people demand faster delivery times for their online grocery and food orders.
What is Quick Commerce?
Quick commerce refers to delivering groceries and food orders to customers within one hour or less. It offers ultra-fast delivery compared to traditional online grocery delivery which usually takes 1-3 days. Quick commerce platforms have warehouses located in densely populated city areas which allows for very efficient order picking and short last mile delivery times.
Growth of the Quick Commerce Model
The quick commerce model first emerged in larger metropolitan areas across Europe and Asia before gaining traction in the UK. A few key factors have contributed to its rapid rise:
Convenience: People have become accustomed to on-demand delivery through services like Deliveroo and Uber Eats. Quick E-commerce (Quick Commerce) satisfies the demand for instant gratification by delivering groceries within an hour.
Covid-19 Impact: The pandemic accelerated the shift to online grocery shopping over concerns of virus exposure in stores. This sparked greater interest in quick delivery options.
Urbanization: More people now live in crowded city centers which are well-suited for quick commerce's micro-fulfillment model. Warehouses can be located very close to dense customer catchment areas.
Technology Enablers: Advancements in technologies like artificial intelligence, robotics and analytics allow for hyper-efficient warehouse management and delivery planning. This makes ultra-fast delivery economically viable.
Competition Heating Up
Several startups have poured millions in funding to scale up quick commerce operations across major UK cities. Here are some of the top players:
- Gorillas: The current leader with 25 warehouses in London and expansion planned in other cities. Known for its flat 10 minute fee.
- Getir: An Istanbul-based startup with over $1 billion in funding. Aggressively expanding its quick delivery service throughout London.
- Dija: Launched by Deliveroo founders, Dija is focused on London and aims to deliver within 15 minutes using its own fleet of drivers.
- Weezy: A Leeds-based startup with six micro-fulfillment centres and promises delivery under 15 minutes.
- Jiffy: Operates out of a warehouse in London and partners with local retailers and convenience stores.
- Zapp: Part of the Tesco empire, Zapp only partners with the grocery giant for now and focuses on certain London areas.
Challenges Facing the Sector
While quick commerce sees rocketing customer demand, it also faces challenges that could impact long term growth and profitability:
High Operating Costs: Warehousing space in city centers comes at a premium. Mammoth investment is also needed to set up robust order picking systems. Delivery within an hour also results in lower order values.
Traffic & regulation: Quick delivery relies on using public roads which can cause issues during peak traffic hours. Heightened regulation may also be imposed to manage environmental impact.
Unit Economics: Most companies are yet to prove they can break even, let alone become profitable, given the capital required to achieve scale. Sustaining heavy promotional discounts also hurt margins.
Competition: As the sector grows, platforms will intensely compete on delivery times, range of products, price and other factors. Considerable funds are required to differentiate and gain durable customer lock-in.
Labor Issues: Reliance on contracted gig workers and maintaining a reliable workforce for round-the-clock operations can introduce risks like strikes and demands for better pay/conditions.
Despite current hurdles, quick commerce shows strong long term prospects in the UK given projected e-grocery growth and evolving consumer lifestyles. Major players may address challenges through various strategies:
- Selective expansion into high density urban/suburban locations with optimal warehousing.
- Leveraging technologies like drones and autonomous vehicles to optimize delivery routes and increase order density.
- Forming commercial partnerships with retailers, stores, delivery agencies to control costs and fulfillment.
- Introducing subscription plans, private label products, meal kits to boost average order values and retention rates.
- Adopting more sustainable practices like electric vehicles and demand prediction software to minimize environmental impact.
- Using hyperlocal community partnerships and feedback loops to improve customer experience over time.
As quick commerce players fine-tune their unit economics through scale, strategic alliances and technological disruptions, this may emerge as a profitable sector supporting UK's vision of urban sustainability and multi-channel grocery retailing in the decade ahead. Backed by strong VC interest, quick commerce is poised to transform the face of food delivery across the country's major population hubs.
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