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Impact:
Mild
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< 5 Years
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The new baseline for deliveries may be 2-3 days, but food delivery apps may be cultivating new future expectations from customers with their instant delivery services.

Relevance to the Future of Logistics

Expansion of Dark Stores

The hallmark of quick commerce is super-fast fulfillment and delivery. With last-mile delivery being the most expensive segment of a fulfillment supply chain, large, traditional warehouses – set up to achieve economies of scale – are usually a barrier as they are typically located on the edge of a city, far from the primary customer base.

As a result, many quick commerce providers are opening and operating so-called ‘dark stores’ (micro-fulfillment centers housed in what used to be retail space) in central neighborhoods or at the back of large suburban retail stores. By opening many dark stores, a quick commerce provider gets closer to customers and ensures promised delivery times. This significant shift towards decentralization is reflected in the growth of a dark store ecosystem offering specialized services specifically for these facilities. For example, Mapbox helps companies pinpoint the perfect location for their next dark store.

Overall, dark stores allow for faster picking and delivery, as well as lower costs per pick and delivery, with their more specialized product assortment and closer proximities than larger traditional warehouses. While dark stores may have higher fixed costs when renting these centrally located properties, their savings can make all the difference in last-mile delivery.

Meeting New Customer Expectations

E-commerce surveys consistently find that repeat customers are closely associated with positive delivery experiences, which shows how logistics providers now act as key differentiators among online marketplaces and platforms. Therefore, supply chain teams must analyze customer expectations and adjust strategies and operations to meet them. That is why quick commerce is the ultimate discipline for designing an outstanding end-to-end customer experience.

An analysis of end-customer data by instant-delivery startup Ohi found that orders delivered within 2 hours had a 61% higher repurchase rate than standard shipping and even 24% higher than same-day delivery.

Implementing a seamless, hassle-free online shopping experience within a time span of one hour from order to delivery helps companies build customer retention and loyalty. The switch to quick commerce, however, carries risk that should not be underestimated. The transition is costly and, once a company promises to meet the customer expectation of hassle-free delivery within an hour, failure to deliver on that promise risks loss of business, competitiveness, and relevance.

In addition to fast, on-time delivery, most customers today also demand live shipment status tracking and updates. The ability to track the path of the quick commerce delivery from goods packing in the dark store to the mapped delivery destination adds to a positive customer experience, involving the recipient virtually with their order in the supply chain. Logistics providers can facilitate this through efficient inventory control, effective demand forecasting, optimized delivery routes, the installation of sensors, and other digitalization tactics.

Everything & Anything Delivered Quickly

Quick commerce providers currently specialize in delivering food and groceries, but some are expanding into other fast-moving consumer goods (FMCG) like beauty products, clothes, and office supplies. Japanese fashion and home goods company MUJI, for instance, is a frontrunner in this space, partnering in 2022 with Meituan, China's leading food delivery shopping platform, to offer instant delivery services within China for its product line, from fashion items to kitchen appliances.

We here at DHL anticipate a future where most FMCG retailers and even companies providing many luxury and specialized goods, like expensive handbags and large furniture, will offer quick commerce options to customers. With this rising trend, retailers will have two possible strategies to stay competitive. They can either follow MUJI’s example and partner with an existing quick commerce provider or create their own in-house fast-delivery solution. In both scenarios, as more and more different product types are offered for delivery in shorter time spans, supply chain teams must anticipate how their supply chains will change not just in the last-mile, but also in upstream supply chain segments as well, to accommodate quick commerce.

Challenges

Just one negative delivery experience, like failing to deliver on time, can lose a customer.
The profitability of quick commerce delivery remains unverified; many players currently operate unsustainably using high levels of investor finance.
As dark stores increase in number, neighborhood residents are pushing back and advocating for tighter regulation; this may limit the service potential of dark stores.
With more products flowing to distributed and specialized urban micro-fulfillment centers, cost and operational effort are passing up the supply chain to the middle-mile logistics providers that have to travel deeper into urban areas.
Reconfiguration of the supply chain may be essential as consumers increasingly expect 1-hour delivery as the norm.
Setting up an in-house quick commerce solution without any collaboration carries higher risk and investment for retailers.

This trend should be CLOSELY monitored, with implementations available for many use cases today.

Outlook

Quick commerce will continue to grow as post-pandemic e-commerce increases and retailers across consumer goods segments seek to meet new customer expectations. The dominant players in this crowded and competitive space remains to be seen, however. Success in the trend of Quick Commerce will likely depend on one’s ability to provide delivery services across multiple retailers and product types while continually striving to bolster brand loyalty.

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Sources
  1. Forbes (2022): What’s next for Q-Commerce: the golden child of e-commerce
  2. Ohi (2022): From Fast to Instant Delivery
  3. Internet Retailing (2017): Fulfilling the customer experience
  4. Retail Industry Leaders Association (2021): Retail speaks – 7 imperatives for the industry
  5. Retail Dive (2020): Where’s my package?
  6. McKinsey & Company (2021): Retail speaks