The Craze for Q-Commerce and the Future of On-Demand Delivery in Berlin
Q-Commerce (Quick Commerce), also known as ‘on-demand delivery’ and ‘e-grocery’ is exploding in Berlin, with competitors such as Flink, Gorillas, and Delivery Hero all excelling in the space. Q-commerce combines all the benefits of e-commerce with speed, with delivery being within minutes rather than days. The formerly niche online grocery sector rocketed during the COVID-19 pandemic as people were advised to socially distance and stay at home were possible. And this change in shopping behaviour looks as though it is here to stay as a McKinsey report suggests that only a “muted return to stores” has been seen to date.
Statista forecasts that the online grocery market in Europe will continue to grow steadily with Germany experiencing a compound annual growth rate of 23.2% between 2018 and 2023. German start-ups in the Q-Commerce sector have experienced record amounts of funding and investment, with Gorillas becoming the fastest start-up to achieve unicorn status after a Series B funding round drew in €245 million to push them to a valuation of $1 billion.
Flink also had huge success, raising $240 from investors just 6 months after being founded and securing a partnership with the Rewe Group supermarket chain, whilst Delivery Hero continues to process millions of orders per day and partner with over 80,000 vendors worldwide, having led the q-commerce space since it was founded in 2011. They recently reported 400% year on year growth. To put this in perspective, Apple’s year-on-year growth is about 11%.
Providers like Delivery Hero have a tough job moving forwards, competing with constantly emerging businesses like Flink and Gorillas. In addition to new businesses, customer expectations around delivery speed, reliability, and customer service have changed, and businesses need to keep adapting in order to meet these expectations.
With new q-commerce companies emerging all the time, especially across Europe, what does this mean for the future of commerce?
Changed Buyer Behaviour: Q-Commerce Is Here to Stay
As aforementioned, there hasn’t been a mass return to traditional modes of shopping despite COVID-19 restrictions being lifted. Consumers are now looking for instant gratification and prioritise speed and convenience over visiting a store in person.
This means that any temporary strategies that have been implemented to meet increased demand during COVID-19 must be evaluated and adjusted for permanence. For many that means embracing a hybrid model in which q-commerce works as a complimentary service to traditional retail. It also suggests that q-commerce businesses are likely to branch out from groceries and pharmacies to other products. Spanish company Glovo have already moved in this direction with a new website tagline “groceries, shops, pharmacies, anything”. As q-commerce continues to expand I expect to see more businesses offering a wider variety of products.
Rising Costs of Q-Commerce: The ‘Last Mile Problem’ will be Exacerbated
The last mile problem refers to the notion that keeping up with quickly rising demand for fast and free shipping is logistically challenging for q-commerce businesses in terms of cost and time, especially if there is outdated technology which causes inefficiencies and thus further costs. Additionally, with an increasing amount of delivery drivers on the road, we are seeing a steady increase in the amount of congestion because urban infrastructure is not designed to cope with such an increased amount of traffic. This brings focus onto pollution concerns as well as the rising costs of fuel and transport.
The costs associated with transport and the increased scrutiny on sustainability will likely be pushed onto the customer as they are pushed further up the supply chain. There is still a lot here for businesses to unpack and address, and technology is likely to play a big part in this solution to the ‘last mile problem.’
Technological Innovation will be Key to Long Term Success in Q-Commerce
Technology is now integrated into everyday life, and it is constantly advancing and adapting. Digital transformation offers businesses the opportunity to reduce costs, streamline processes, and keep up with changing consumer behaviours and attitudes. Using technology innovatively can also give businesses a competitive advantage and it’s likely we will see an increase in the levels of automation and robotics involved in q-commerce to help improve efficiencies and cut costs in the long-term.
Driving the Future of Q-Commerce
What is clear from the statistics and forecasts above, is that q-commerce is here to stay, and as businesses fight to retain competitive advantage, hiring the right digital and tech talent is becoming increasingly more challenging, but has never been more important.
What’s your plan for growth?
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Originally published at https://www.maxwellbond.co.uk on October 28, 2021.
