Table of Contents:
- What is Quick Commerce
- What are the Differences Between Quick Commerce and Traditional E-Commerce
- Understanding the Different Quick Commerce Models
- Benefits of Quick Commerce
The COVID-19 pandemic and the lockdowns that came with it helped give rise to a new category of e-commerce – quick commerce (or q-commerce) – characterized by ultrafast delivery speed generally within two hours or less. Roughly valued at $25 billion in 2021, the Q-Commerce industry will expand to $72 billion by 2025.
So – what is q-commerce, and what sets it apart from traditional e-commerce?
What is quick commerce?
As the name suggests, quick commerce or q-commerce is all about speed and convenience. It may not be DC’s Flash-fast (2,532 miles per hour), but it is far faster and more convenient than traditional e-commerce.
The term refers to e-commerce businesses that deliver goods within a couple of hours or even minutes, as in the case of some fast grocers.
Although the term is sometimes used interchangeably with “on-demand delivery” or even terms like “instant commerce”, the idea of quick commerce isn’t a new one. It’s been around in the food industry for ages now, and it’s merely been ushered into the mainstream by evolving consumer preferences.
Many q-commerce companies, including many that focus primarily on groceries with a marketplace model, like GoPuff, Weezy, Jokr, Glovo, Delivery Hero, and Instacart, have seen increased interest over the past few years. These instant commerce businesses focus mainly on products intended for immediate consumption that customers often need or want instantly delivered. (More on product fit later.)
What are the key differences between quick commerce & traditional e-commerce?
From product fit to delivery speed and warehousing, quick commerce and traditional e-commerce are worlds apart. Here’s a detailed overview of how q-commerce is different from conventional e-commerce.
1. Delivery speed: minutes & hours versus days
The most distinctive feature that sets quick commerce apart from traditional e-commerce is delivery speed/time. Quick commerce businesses typically have micro-fulfillment centers (MFCs) positioned within densely populated areas, enabling ultrafast deliveries, i.e. within 15 minutes to two hours after placing an order.
With micro-fulfillment centers and requisite supporting technology for demand forecasting, inventory allocation, and last-mile courier delivery in place, q-commerce businesses are able to pick, pack, and dispatch orders near instantly.
In contrast, traditional e-commerce stores deliver in 3 to 5 days, with expedited delivery sometimes available for delivery in 1-2 days.
2. Micro-fulfilment centers vs. traditional warehouses
As discussed, one key feature that sets quick commerce apart from traditional e-commerce are the micro-fulfillment centers or micro-warehouses.
Traditional warehouses can be massive spaces – typically as large as 300,000 square feet. For example, the typical Amazon warehouse is around 800,000 square feet.
Since these warehouses are so big, they tend to be located on the outskirts of cities, in industrial or rural areas where there’s more space for such large buildings. Because these warehouses are outside of big cities, they are typically not suitable for fulfilling last-mile deliveries into the city, as couriers would have to travel to and from the poorly-situated warehouses, making last-mile delivery both time-consuming and costly.
By contrast, q-commerce orders are typically fulfilled through a network of micro-fulfillment centers that are much smaller – usually 2,000 to 5,000 square feet – located hyperlocal to customers in the heart of major cities. This greatly reduces the distance to the customer and enables ultrafast and efficient last-mile delivery.
A common approach to establishing micro-fulfillment centers is to purchase or lease underutilized commercial spaces in urban areas, where people live and work. Some quick commerce companies are even looking at alternative means of converting rental flats or even shipping containers into micro-fulfillment centers, though these come with their own unique sets of challenges.
3. Sustainability: two wheels vs. truck or air delivery
Another distinction in quick commerce is the mode of transportation used for last-mile delivery. Quick commerce businesses can often use eco-friendly two-wheeled vehicles such as bikes, e-bikes, or scooters for delivery because of the significantly reduced distance from MFCs to the end customer. In very densely populated areas, quick commerce couriers even rely on foot couriers.
With many brands and customers now demanding sustainable practices from businesses they frequent, quick commerce has seen great momentum due to its reduced reliance on traditional delivery vehicles like cars, trucks, and airplanes.
Traditional e-commerce, on the other hand, frequently uses larger delivery vehicles for transportation. For instance, according to CNBC, Amazon owns 40,000 semi-trucks, 30,000 vans, and a fleet of more than 70 planes to ensure speedy delivery of its products.
As an example of the difference between traditional and quick commerce, Stanford research showed that DTC quick commerce provider Ohi’s deliveries were 5x more eco-friendly than standard ground delivery and 22x more eco-friendly than next-day air.
4. Product Fit: Smaller, curated selection of goods versus a wide variety of goods
A typical e-commerce store might carry 15,000 SKUs or more, depending on the size of the business. For instance, Amazon warehouses are located in the outskirts of the city and are comparatively more extensive in the area; therefore, they have the capacity to store around 350 million SKUs, including both fast and slow-moving products.
By contrast, q-commerce businesses rely on micro-fulfillment centers that generally only have a capacity of 2,000 to 4,000 SKUs (total SKU count for all brands within the MFCs) of fast-moving items. Therefore, micro-fulfillment isn’t the best fit for every brand and type of product. Due to space limitations in MFCs, bulky products and products that don’t turn quickly are not ideal in the quick commerce model.
Understanding the different quick commerce models
1. Vertically-integrated instant delivery model, i.e., marketplaces like GoPuff
In a vertically-integrated instant delivery model, q-commerce marketplaces such as Gopuff and Jokr pick and deliver shoppers’ orders from the range of essential items they have in their dark stores or MFCs, typically within 10–30 minutes.
While the specifics might differ slightly, most of these vertically-integrated instant delivery services tend to have the following approach:
- These marketplaces have established their own first-party MFCs, akin to dark stores, typically one per neighborhood, and engage employees to pick orders and couriers to deliver them. GoPuff, for example, operates more than 500 micro-fulfillment centers.
- Since dark stores or MFCs are not designed for shoppers, the space can often be utilized more efficiently than traditional stores.
- The cost of running them (at scale) is also typically lower than the cost of renting space in retail stores.
- These marketplaces rely on well-integrated software and IT systems that can effectively track and manage inventory in their fulfillment centers.
- After a customer placed an order, workers (“pickers”) fill it at the appropriate micro-fulfillment center, and a local courier (often on a scooter or bike) delivers it.
This model operates in contrast to third-party platforms like Instacart, which frequently rely on offering substitutes and replacements in the shopping process, due to limitations with real-time inventory tracking and influence over product offering.
2. Third-party delivery platforms, i.e., Instacart
Unlike vertically-integrated instant delivery and direct-to-consumer models, third-party delivery platforms function on a decidedly “asset-light” model. This means they don’t require fulfillment centers, inventories, or supplier relationships to be established before expanding a new city.
Unlike other on-demand delivery services, the third-party delivery model doesn’t involve any warehousing component. So, how does it work?
- These services deliver products directly from third-party bricks and mortar retail stores.
- After an order has been placed, a personal shopper goes to the store (or multiple stores) to pick up everything, then delivers it to you at your doorstep (typically within an hour or two).
- As these delivery businesses do not require fulfillment centers or dark stores, they are able to scale relatively quickly. For instance, from July 2020 to July 2021, Instacart increased its delivery reach from 30,000 stores to nearly 55,000 stores in North America and is presently available to over 85% of US households.
- To expand network density, these delivery platforms simply add new retail partners. For example, Instacart has added apparel (H&M), beauty (Sephora), general merchandise (Big Lots), and prescription delivery (Costco) to its portfolio to attract a more comprehensive set of audiences.
3. Direct-to-consumer quick commerce, i.e., Ohi
With the rise of DTC e-commerce in recent years – as per eMarketer US DTC sales grew by 68.4% from 2019 to 2021.) – it is inevitable that many DTC brands demand an instant delivery solution, too.
In recent years, quick commerce providers like Ohi have built instant delivery and micro-fulfillment solutions specifically for DTC sellers.
Many DTC businesses don’t have their own warehouses or order fulfillment capabilities. Instead, they traditionally rely on 3PLs (3rd Party Logistics companies) to fulfill orders, typically in 3-5 or 4-7 days. In some cases, orders can be delivered in 1-2 days depending on the proximity of the end customer to the warehouse fulfilling an order.
This is where direct-to-consumer (D2C) instant delivery comes into play. Instant delivery providers like Ohi can enable DTC brands to leverage micro-fulfillment with a robust technology platform that handles the requisite demand forecasting, inventory management, and handoff to an optimal last-mile delivery courier.
The result? These DTC brands are then able to offer surprisingly fast e-commerce deliveries, with service levels ranging from sub-two-hour and same-day to next-day, depending on a customer’s location.
While this model may seem operationally similar to the vertically-integrated delivery model, there are a few key differences, for instance:
- With the DTC model, your customers can order directly from your existing website, accessing instant delivery options through an e-commerce platform integration. Ohi integrates with Shopify, Shopify Plus, WooCommerce, BigCommerce, Magento, and Salesforce Commerce Cloud, for instance.
- Your curated DTC shopping experience remains front and center; however, the instant delivery service takes care of the back-end order fulfillment functions and keeps this powerful ROI-generating capability operationally simple.
- However, similar to the vertically-integrated delivery model, DTC instant commerce providers like Ohi also operate micro-fulfillment centers in densely-populated urban locations with high demand.
- These dedicated MFCs are hyperlocal to the consumer, enabling instant delivery in major metro areas such as New York City, Los Angeles, San Francisco, Brooklyn, Chicago, Philadelphia, etc.
As was discussed previously, the use of micro-fulfillment enables Ohi to use eco-friendly transportation for last-mile delivery. Most of Ohi’s brand partners have opted into Ohi’s unique carbon-neutral delivery service, which relies on eco-friendly transport, sustainable packaging, and a carbon offsetting partnership.
Benefits of Quick Commerce
Compared to conventional e-commerce, q-commerce businesses can get goods into customers’ hands in a small fraction of the time. This translates to increased customer satisfaction and has been shown to provide meaningful ROI for e-commerce brands.
In addition, a 2021 global consumer insights survey conducted by PWC also shows that fast delivery is shoppers’ #1 overall consideration when buying online (ranked top three by 41% of respondents).
Many micro-fulfillment-based quick commerce companies like Ohi use advanced technologies (including AI or machine learning forecasting) that provide extremely high inventory accuracy and on-time delivery rates that surpass traditional e-commerce companies.
Platforms like Ohi also integrate with a wide range of last-mile delivery couriers to ensure timely and accurate delivery to the end customer, resulting in increased customer satisfaction and reducing or eliminating “where is my order” CX support tickets.
In a world where nearly 80% of customers say sustainability is important for them, quick commerce can align eco-consciousness with an objectively better delivery experience. Greatly reduced reliance on fuel-based transport, the ability to reduce/eliminate exterior packaging materials, and other provider-specific practices (like Ohi’s carbon-neutral delivery service) make quick commerce worth shouting from the mountaintops from a sustainability perspective.
Given current retail trends, the immense interest in quick commerce from retail and DTC businesses is not surprising. Businesses that want to evolve to meet increasing customer expectations for instant delivery now have an unprecedented range of options, and investing appropriately in quick commerce solutions can provide them with outsized returns for both customer acquisition and retention.
At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.