How quick commerce can become a game-changer in the ecommerce business in India

Understanding the true urgency of customers and finding the right balance between delivery promise time and availability of resources would help the Q-commerce service sustain and grow in the long run

By IIM Ahmedabad

Published: May 2, 2022 11:40:40 AM IST

Updated: May 2, 2022 11:56:18 AM IST

Today, with a few taps on the mobile phone application, groceries are delivered to the doorstep within 15-20 minutes, or even as quickly as 10 minutes Image: Shutterstock

Fading are the days when people drive to a nearby store, search for the required item on the racks, and wait for the payment to buy groceries. Today, with a few taps on the mobile phone application, groceries are delivered to the doorstep within 15-20 minutes, or even as quickly as 10 minutes. This is the power of quick commerce or Q-commerce, which has disrupted the ecommerce industry. Players such as Swiggy, Blinkit, Bigbasket, and Flipkart are establishing robust business processes for just-in-time delivery of products.

Why is quick commerce on the rise?

The traditional approaches to buying groceries have evolved from local Kirana shops to self-service supermarkets to online grocery shopping to a newly coined concept, quick commerce. Convenience, urbanisation, and busy lifestyles have altered consumer buying behaviour. Additionally, with the onset of the pandemic, social distancing and work from home norms have prompted consumers to opt for home deliveries. This change in buying patterns has incentivised ecommerce firms to develop express delivery business models.

The quick commerce business model

The quick commerce business model typically involves a mother hub, distribution centres, and last-mile delivery stores or dark stores. These dark stores, or micro fulfilment centres, are small warehouses, 250-5000 square feet in area, carrying around 500-2000 unique items. These stores are strategically located closer to the consumers for rapid order fulfilment.

Once the consumer places an order, fulfilling that order rapidly (for example, within 15 minutes) necessitates both upstream coordination of the dark stores with distribution centres and downstream coordination with the delivery logistics team. When order fulfilment process delays are costly, using data-driven demand estimation models and planning for warehouse receiving, put-away, picking, packaging, and delivery staff using demand estimates have become the norm to manage customer experience.

How can a dark store be more efficient?

In a typical warehouse setup, high-level activities include storing the items at the right location, replenishing the stock, picking, and packing the components as per the order, and final dispatch. In dark stores, order arrival to dispatch time should ideally not exceed five minutes (for a 15-minute promise time) so that sufficient time is left for the delivery agents to reach the consumer. Therefore, designing a lean system to avoid time losses in all process steps due to excess operator movement or item search becomes necessary for an efficient, quick delivery dark store.

A basic warehouse management system (software either bundled with smart sensors or manually managed) can assist in managing and tracking live inventory levels across warehouses, distribution centres, and dark stores. It could also assist in managing sudden surges in demand for certain items and triggering auto inventory replenishments.

A good layout for the dark store is very important. Dark stores differ in design parameters compared to the regular supermarkets, which have longer aisles for customers to spend more time and shop longer. Dark store lanes should be smaller so the picker can pick up the required parts and quickly reach the packaging station to complete the order.

Also, clustering high-frequency parts and storing them near the dispatch stations would reduce excess picker movement. Intelligent racking systems also assist pickers by making parts easily accessible. Dark store operation time can be optimised if packing is reduced or even eliminated altogether. To reduce time, reusable containers and innovative packaging bags can be used instead of traditional packing.

Is there a scope for automation?

Currently, most dark stores operate manually, unlike big mother warehouses, which are run more effectively by integrating automation in their put-away and pick-up processes. Dark stores should have a flexible capacity to manage demand fluctuations. Demand surges could constrain manually operated dark stores and affect the provider’s delivery time sharpness. Several automation service providers such as Swisslog’s AutoStore and Affordable Robotic and Automation Limited’s subsidiary ARAPL RaaS are offering dark store solutions to minimise store turn-around times. The use of automation is not to replace humans but assist them in handling larger volumes and variety in a shorter time. Also, going forward, warehouse space is going to be a constraint. Hence, dense storage will be another requirement.

What is the future of Q-commerce?

Industry trends show that Q-commerce will grow exponentially in the coming years when multiple retailers will embrace the use of micro-fulfilment solutions. The warehouse and logistics industry has been disrupted by the democratisation of mobile internet, the rise in an ecommerce business, and just-in-time expectations. Change in consumer behaviour post-Covid-19 is fueling this growth. Customers will expect more product variety such as electronics, clothing, and cosmetics to be delivered in a short time. One way to attend to the rapid change in the market is to integrate technology and automation in warehouse and logistics. Also, the firms need to estimate a sustainable delivery promise window for Q-commerce. It would be fascinating to see the future of this business.

Is this the end of brick-and-mortar retail?

Not really. Few e-grocery providers already partner with local kirana stores and general grocery stores to increase their reach. kirana stores will also have to partner with delivery services to increase reach. Many customers, at times, prefer an in-store purchase experience and expect their service providers to give them the flexibility to choose between online and in-store purchases. Therefore, omnichannel retail will continue to flourish.

Need for safety, speed, and sustainability

The safety of the delivery partners is a crucial factor. The riders should have a sufficient cushion to absorb the delivery time variance due to external conditions. Therefore, understanding the bottleneck in the order fulfilment process, understanding the actual customer demand, and taking care of the safety of human resources would be the success mantra for the Q-commerce firms. It is essential to understand that the business would sustain itself in the long run if everyone in the value chain is incentivised, not just the customers. Therefore, understanding the true urgency of customers and finding the right balance between delivery promise time and availability of resources would help the Q-commerce service sustain and grow in the long run.

Gauri Ranjekar, PGPX student, IIM Ahmedabad

Debjit Roy, Institute Chair Professor, IIM Ahmedabad