In this episode we talk about the rise of quick commerce in India, challenges on the way and the real cost of convenience.
Hello and welcome to This Week in Indian Retail - a podcast and blog dedicated to the major events, news and stories that impacted the Indian retail industry in the last week. This is September 25th, 2022 and I’m your host Prateek Malik from New Delhi. Let’s get started!
For starters, what is quick commerce?
Quick commerce is a term used for any form of retail commerce model that aims at delivering an order to a customer within 30 minutes (or less).
It is also called Q-commerce.
Traditionally, retail used to involve an engagement of a customer at a store that transformed into pre-selected item based order delivery during the first wave of ecommerce.
With better supply chain, inventory handling mechanisms and technological enhancements, over time, this ecommerce order delivery period was reduced to 1 day and then to 6 hours, 3 hours and the very aggressive time of 1 hour.
Now you may be wondering - why did brands and ecommerce platforms venture into quick commerce?
Well, there are a few major advantages of this business model:
Product assortment - since most of the items are essential in nature like groceries, FMCG products, packaged foods, common home electronics, OTC items, etc. - it is easy to operate in an SKU range of 1,000-10,000 products.
Wider business times - due to the round the clock demand for the essential items, it is comfortably operated in a 12-24 hours window vs. 8-10 hours of traditional retail.
Surprise of speed - the speed of this operation and delivery also works in favour of the brands as the items reach the customer doorstep instantly. Naturally it is more convenient for most customers.
Some industry experts quote that convenience may not be the only reason, there are certain more psychological aspects that are driving this race.
Instant gratification - the latest generation of customers are driven by instant gratification of their demands. You need to buy something, just order it; you need to learn, just watch a video course; you need to go somewhere, just book a ride; you need to be with someone, just swipe on a dating app; you need a job, just apply on a professional app; you need to go for a movie; just cast on your TV. The entire consumer life cycle is driven by an instant gratification of demands at a click of a button. For this segment of consumers, there is no delight in the mundane tasks of buying daily use items among a group of strangers.
Social withdrawal - majority of the IT and urban corporate professionals were already busy at their office spaces, after the pandemic, it further pushed the concept of not stepping out of the home. Also, social engagements through social media apps, virtual events, etc. are also alienating the crowds of the city physically while mentally they are occupied throughout the day. For such consumers, it becomes a lifestyle to show off among the peers on social media - that they live a life where everything comes to their home directly and makes them feel like a king.
Digital benefits - after the demonetisation and the pandemic, young Indian consumers lead the one way traffic towards digital payment usage. Adding fuel to this fire, quick commerce apps present them with new benefits - membership benefits of quickest possible delivery, additional cashbacks on certain payment methods or exclusive coupons on certain purchases. All these act as the ultimate hook.
Irreversible behaviour - multiple consumer behaviour analysts have pointed out that once a consumer is provided with multiple times better experience vs traditional retail, then it results in an irreversible behaviour. Here, the consumers may stay engaged even if the benefits are not so sharp.
At this point, you may be wondering that if quick commerce is so great, what’s stopping all e-commerce platforms and brands from venturing into it? Well, like each segment of retail, quick commerce has its own set of unique challenges:
Product selection - in comparison to 20K-50K SKUs in a large hypermart, quick commerce teams needs to consistently analyse consumption patterns to refine to a narrow range of most essential SKUs. Each day, this product assortment needs to be refined.
Purchase planning - since the products are always in demand, it needs to be refilled sooner and the purchases need to be pre-planned. This may require having constant engagement with multiple vendors and dynamic market relationships. There needs to be a constant balance between being selective in policies and being active in ordering.
Warehousing - each quick commerce delivery area is powered by a dark store or a hyperlocal warehouse that is operated by an experienced staff and robust cloud technology solutions. The entire operating cycle has to be made super efficient to ensure each second is utilised well. Out of 15 minutes promised to the customer, hardly 2-5 minutes can be used here. Searching, picking, packing, dispatch - everything needs to happen on the fly. Parallely, the common SOPs of quality checks, hygiene, staff safety, infra safety, etc. need to be maintained.
Delivery logistics - under 15 minutes promised to the customer, 8-10 minutes are left for the last mile delivery agent to do the job. His job is not simple at all, picking of order, safekeeping in the delivery bag, chatting or coordinating with the customer, navigating through the busy routes, searching for the exact entrance of a customer’s door and answering his last moment queries - the expectation is no less than being a Superman.
Customer support - while consumer expectations are set at a very high standard of being quick, each time all promises may not be met. Sometimes the wrong item is given, sometimes the item can be missing in the correct quantity, the packaging can be faulty, the delivery partner could have missed the safe handling and what not. For a INR 100-500 order, where the net margin may not even be 5%, there’s an expectation of top of the line live chat or call based customer support to solve the queries. And if the platform is not able to solve, then the same social media app where the brand promoted it can be an easy outlet of customer frustration, thereby discouraging other consumers to engage.
When quick commerce started, most of the young consumers encouraged it, quoting that it shows the developed state of their city or the strength of the technical ecosystem in the country.
However, now that the first wave of engagement has happened, consumers themselves are raising questions about the cost of this convenience :
Safety of the delivery agent - while navigating through the busy city among the consistent distraction of the smartphone apps, these agents are urged to skip through traffic signals and ignore minor hiccups including verbal harassment by anyone in the way. This person can also be overloaded with items, and may not have the best weather to safely drive the bike or communicate with the customer. There have been cases of road accidents and even dangerous situations where agents are encouraged to deliver orders among flooded streets or unreachable spots.
Earnings of the delivery agent - while these agents are claimed to be making around INR 20K a month, including the operational costs, chargebacks for being late and traffic fines, it can come down to around INR 10K a month, which is even below the minimum wage requirements of the Indian cities. Now, there’s a lobby of awake consumers who are referring to the labour laws and work safety policies of the e-commerce delivery industry to be amended in favour of these gig workers. While quick commerce platforms claimed to provided employment to thousands of these agents, the reality is slightly skewed.
Mental cost of the speed - some consumers are also feeling guilty that due to their desire for speed of operations, it is putting an immense load on the entire supply chain - right from the purchase teams, to warehouse team to the end support teams. Sometimes, consumers quoted that to save Rs 50, they ended up wasting a few hours of their life and sometimes even multiple days while chatting with the support. In a lot of cases, the support teams are neither empowered nor having the time or authority to deliver the required correction.
Undervaluing the local retail merchants - All this while, these were the daily use products that the consumers might have purchased from the nearby store as well without the irritation caused due to wrong items or late deliveries. In traditional retail, WYSIWYG (what you see it what you get), but here you may be receiving raw green bananas while the app product showed it is ripe and yellow. Some consumers are adopting a hybrid approach - buying essentials online while buying more expensive items at shopping malls. Some consumers only buy via quick commerce when the need arises and continue engaging with their local supermart for regular options, thereby valuing the human relationship and support.
Hence, the debate in the market is about the sustainability of quick commerce models, the safety concerns it entails and the ever changing behaviour of the Indian consumer.
That’s a quick wrap for this week. You can also view and share the transcript blog of this episode at the link given in the description. If you’re interested in being on our podcast to share your retail experience or reflect on the new developments, you can tweet or DM me over Twitter at @geekprateek . Keep listening to us and do share with your peers in the retail ecosystem.
See you in the next one.
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