Modern consumers need speed, are ready to pay extra and are happy once the purchase is in their hands within minutes. Urbanization, congested roads, nuclear family, busy lifestyle, and the smartphone in hand all acted together towards the emergence of last-minute delivery. Convenience and speed are valued more than a wide assortment of products or a fascinating shopping experience.  The change in consumer behaviour was observed during Covid time when for buying daily necessities and groceries, consumers opted for convenient and fast delivery options and preferred safe and easy accessibility of goods. Weekend shopping for groceries and vegetables at physical stores was replaced by online ordering or e-commerce. In the e-tailing era, this mobile-only grocery retail has emerged as a segment of last-minute delivery of an order to a customer (Yuen et al., 2019). However, in the mid of the pandemic, traditional e-commerce revolutionized the delivery landscape where consumers preferred to get small quantities and few orders almost instantly. The transformation is visible in the promotional messages from the quick commerce companies, when we observed the ad “Ab fridge ka kya kaam hai where Dunzo Daily offered fresh vegetables and groceries within 19 minutes.” The two-year-long pandemic accelerated the growth of the innovative last-mile delivery business model which was positioned at the juncture of e-commerce and long waiting time. Within a short period, the Indian market was flooded with many last-minute ultrafast delivery companies and gave birth to a new business sector called Q-commerce. This revenue of the Q-commerce sector is expected to grow at a CAGR of 49.52% (2023-27) and is estimated to be a $5bn business by 2025 (Statista.com). Swiggy Instamart, Dunzo, Zepto and Blinkit became very familiar names to the urban population and the delivery personnel in green/red uniforms on a motorbike are common sights on any congested road in Indian metros.  The penetration of Q-commerce groceries continues to grow in tier 1 cities and is eventually capturing the tier 2 cities of India.

The wheel of retailing and the Q-commerce

The wheel of retailing theory has a significant contribution to explaining the life of cycle of retail enterprises. Retail enterprises go through the cycle of introduction, growth, maturity and decline (McNair, 1958) and the evolution of any retail model is influenced by multiple factors like consumer preference, changing consumer behaviour, technological advancement, and regulatory changes. A new business model or retail format starts with less reputation, minimum services, maintains low operational cost and offers products at low prices and price discounts. Once gaining popularity, the retail store matures and establishes its brand name. It starts expansion, adds frill services, and differentiates with added features and charges higher margins. The success of the enterprise attracts other competitors towards the business model. As the competition intensifies, price rivalry forces to reduce price and profit margins. The retail enterprise is challenged by a new innovator and the evolution of the retail model continues and the wheel of retail keeps spinning. Significant disruptive innovations interrupt the spin of the wheel (Hollander, S. C, 1960).

The recent pandemic has accelerated the growth of e-commerce due to high concern for health and safety among consumers. The advent of technology especially artificial intelligence, Virtual reality, augmented reality, IOT and Micro-cloud computing has broadened the scope for personalised shopping experiences. Other technological innovations like online tracking, order-by-click, recommender system and anticipatory shopping have given rise to OSG (online grocery shopping) (Shankar, Venkatesh, et al., 2020). Interactive marketing, a paradigm shift in marketing is being observed as a result of the convergence of direct marketing and the evolution of Web 2.0.  During the pandemic, the disruption in the supply chain and the huge demand for online groceries caused long waiting times and dissatisfaction among consumers. This has created a gap for a new business model to emerge. Mobile-only, digital-first, ultra-tech, and the last-minute delivery business model provided an opportunity for to Q-commerce or Quick-commerce sector to emerge and grow. The tech-savvy generations- gen z and millennials adopted the new business model rapidly and the wheel started rolling (Gauri et al., 2021). Many physical retail stores were forced to either shut down or move to delivery automation technologies (Shankar et al., 2021). Work from home and domestic lifestyle acted as a catalyst for the Q-commerce sector in the post-covid era.

“Value creation” and “Value appropriation” are two primary motives for any innovative business model (Sorescu et al., 2011). This idea is reframed as ‘Enhancing the shopping experience’ and ‘Reducing friction’ by Gauri et al., 2022. Q-commerce offers the closest match to customers’ needs at zero hours and enhances the shopping experience. On the other hand, it reduces friction by eliminating customers’ hassled journeys in traffic and long waiting times at the checkout counters.

Is the wheel of Q-commerce retail spinning?

The management consulting firm ReedSeer has predicted that the Q-Commerce market will grow at 15 times of current growth rate. The current valuation of Indian Q-commerce is $700 million.  Despite the high projected market valuation, many Q-commerce enterprises are struggling to reach EBITA profit and suffer from high cash burn. The rent of dark stores in dense areas of the city is typically high; employing a large number of delivery people and high-tech labours, the cost of the latest technology adoption and inventory procurement all add to huge operational costs.  The differentiating factors among the major players are restricted to i) the delivery time, ii) the wide assortment of products, iii) the pricing and discounts, iv) the ease of ordering and payments, and v) the lucrative return policy. Revenue per basket size is low as most of the orders are for impulse buying and spill over items and Indian price-sensitive consumers still hesitate to pay extra delivery charges. Intense competition doesn’t allow the players to raise delivery fees. In each transaction, most Q-commerce players lose Rs20-50 approximately. A majority of the companies are startups and lack prior availability of cash. Achieving economies of scale is a big challenge and a trend in acquisitions of popular small startups by giant retailers or a new venture created by big retailers is being observed recently. Swiggy Instamart by Swiggy, Big Basket from Tata, Jio Mart from Reliance, Amazon Fresh from Amazon, Flipkart Supermart from Walmart, and Blinkit by Zomato and core players like Dunzo and Zepto are major key players in the Q-commerce sector.

Conclusion

Changes in consumer behaviour and technological advancement constantly transform retailing and throw challenges towards the sustainability of any new retail business model. Whether Quick commerce retailing would be a sustainable business model or would it fade away quickly?

The success of any retail business depends on the innovations that are associated with value creation appreciated by the customers.  As many customers expressed that they would prefer to order any item for a 30-minute delivery option for a reasonable delivery rate. To keep the delivery rate low, either a firm has to achieve cost economies in the operation or invest in technology to optimise the supply chain and logistics. The customer lock-in effects or the stickiness to any Q-commerce app should be high enough to generate long-term relationships and enhance loyalty. A few viable options for the Q Commerce players might be a more intuitive recommendation of products, reminders on regular purchases, and more customized offers based on past purchases. Special event offers like Birthday offers, chat options with stores from where orders are picked up, voice assistance, and the shared cart are other attractions to retain and expand the customer base Value added services based on continuous feedback from customers and upgraded technologies will guarantee the sustainability of the Q-commerce business model and ensure that the wheels of retailing will be spinning.