The past year has seen a surge in quick commerce or on-demand delivery as consumers demand faster delivery of goods. This new model promises delivery of items within an hour of ordering. Several startups have been able to raise significant funding to fuel their hyperlocal operations across major US cities.
CoherentMI takes a deeper look into this new e-commerce trend and what it means for customers and retailers in US Quick E-Commerce (Quick Commerce) Market.
What is Quick Commerce?
The core concept behind quick commerce is delivering items to customers within an hour or less after ordering online. These startups operate micro-fulfillmentcenters located close to dense customer bases in cities. They stock thousands of popular grocery and daily items that customers need quickly. Orders are picked, packed, and then delivered by contracted fleets of cyclists and drivers within the promised timeframe.
Key Players in the US Market
Some notable startups leading the quick commerce charge in multiple US cities include Gopuff, Jokr, and Buyk. Gopuff has raised over $1 billion in funding to date as it expands into over 150 cities. Jokr recently raised $170 million and operates in over 30 cities across Latin America and the US. Buyk raised $25 million to fuel its operations on the east coast. These ventures are heavily funded to rapidly scale their hyperlocal infrastructure across regions.
Benefits for Customers
The key benefits for customers include convenience and speed. No more last minute dashes to stores for those few essential items. Everything from snacks to personal care products can be delivered within an hour. This fits well with today’s hectic lifestyles. Customers also have a wider selection compared to traditional convenience stores. The on-demand model saves time otherwise spent searching multiple outlets.
Challenges Faced
While the quick commerce concept addresses customer pain points, its operations are highly complex and capital intensive. Maintaining fulfillmentcenters close to customers drives real estate costs. High fulfillment and delivery costs also squeeze margins. Hiring and retaining delivery staff is challenging, especially as safety standards rise. Managing inventory across multiple locations also brings its share of difficulties around stock shortage and wastage. High customer acquisition costs from discounts also impact unit economics initially.
Growing Partnerships with Retailers
To tap into existing retail infrastructure, some quick commerce players have partnered with large retailers. Gopuff has agreements with names like 7-Eleven, Rite Aid and Walgreens to fulfill orders from their stores. This leverages existing inventory and staff while expanding the retailers’ delivery footprint. Such partnerships help optimize offline assets as customer expectations shift to on-demand fulfillment. Over time, the relationship is beneficial for both parties to pursue joint value creation opportunities.
Regulatory Hurdles
Quick delivery also faces pushback from local regulators over safety, congestion and labor issues. Regulations around micro-fulfillmentcenters, delivery rider classification, and zoning approvals vary by city and state. Startups need to proactively engage with policymakers to address concerns while scaling up activities. Compliance with evolving labor laws is also a challenge due to the nature of gig work. Navigating regulations will play a key role for these ventures sustainably pursuing their rapid expansion goals.
Market Outlook
Given the current momentum and investment, quick commerce is projected to continue growing rapidly across major global markets. The US currently leads adoption rates driven by density of addressable customers across urban centers. Factors like rising customer expectations around convenience and availability of on-demand services are fueling expansion. While margins remain under pressure, successful ventures are focusing on attaining scale through strategic partnerships and differentiation. Overall, quick commerce offers a compelling value proposition for time-pressed consumers and remains an exciting area to watch unfold. For more details on the quick commerce trend refer to CoherentMI.
