Aggressive Innovation in Q-Commerce: Impact on Consumers and Sustainability

Q-Commerce operates on the back of ‘Dark Stores,’ mini warehouses located close to residential areas with automation and digitisation at their core.

commerce
With big brands vying to satisfy every whim and fancy, an evaluation of the consumer mindset is necessary to chart the progress of this fast-moving industry. (Photo credit: Reuters)

By Harsha Razdan

As consumers, today we have grown to adopt excessively high standards. We are value-seeking agents wanting quality products and quickly. With brands aggressively innovating to present us with new conveniences almost every day, there is no doubt that consumers are being spoilt with choices and expectations. Customer behavior and purchasing habits have undergone a change as convenience, urbanisation, and busy lifestyles have transformed shopping. Additionally, the onset of the pandemic and introduction of social distancing forced shoppers to opt for home deliveries. Today, the “quick delivery or free” claims seem passe as the Quick Commerce industry (or Q-commerce for short) has made “ten-minute deliveries” and “no minimum order” the norm. All of this is an outcome of massive transformations in the logistics and supply-chain practices and breakthroughs in technology.  With ever-growing consumer aspirations, these are a great hook to new customer acquisitions, but the question remains on how sustainable these business models are, and how they impact our consumer experience in the long run.

So, does Q-Commerce function?

Q-Commerce operates on the back of ‘Dark Stores,’ mini warehouses located close to residential areas with automation and digitisation at their core. With limited inventory and a large, fast-moving workforce, companies can ensure orders are processed and delivered quickly. Innovations leveraging technology are constantly being introduced by companies in this space to gain dominance in this industry.

The cost of innovation

With brands battling it out to gain dominion in this sector, one is compelled to wonder “where does it end?” and “who is really paying for these conveniences?” There have been instances when ten-minute deliveries have proven to be unsustainable. This has compelled some brands to refrain from assigning a quantitative number to their delivery times when they market their services. Many have also questioned the safety of delivery partners as they race to deliver orders in time. Furthermore, of late the sector has been plagued by rider shortages and piling operating expenses, resulting in companies burning money to stay afloat and running razor thin margins. As the unit economics of Q-Commerce crumble, we wonder what the next step is in the evolution of this industry. So, what will drive future growth in this space? Is it advancements in SaaS? Implementation of robotics and drones? Whichever direction it takes, companies would have to devise new systems that can ensure efficiency, safety, and sustainability in the long-term.

Navigating the consumer mindset

With big brands vying to satisfy every whim and fancy, an evaluation of the consumer mindset is necessary to chart the progress of this fast-moving industry. We as shoppers are not accustomed to thinking about the consequences of the conveniences offered to us. Consumer-centric culture has allowed institutions to run amok without considering the impacts on various stakeholders — workers, the environment, and maybe consumers themselves. We as patrons get used to a certain level of service. So, when things change, crazy discounts dry up, orders run behind schedule, and quality is subpar, we see it as a violation of our expectations, causing disappointment and stress. For e.g.: When it comes to product deliveries, at first, we were satisfied with a 5-7 business days delivery since that was the status quo. Now, owing to the advent of brilliant new technologies and impressive breakthroughs in logistics and supply chain, we feel flustered when the desire for instant gratification is not fulfilled. 

Going Forward

Consumers are averse to loss. Once promised something that will make lives easier, it will be hard for the industry to backtrack. Going forward it will be imperative for Q-Commerce companies to leverage economies of scale and invest in customer acquisition. Economies of scale can be unlocked through various strategies, such as better inventory and supply chain management and more strategic dark store locations. Additionally, the Indian consumer is a value seeking one. Brands will have to deploy effective customer retention tactics, such as diversification of inventory, to ensure growth. Finally, to appeal to the modern-day responsible Indian consumer, companies should also be looking at sustainability and eco-friendliness as a USP of their services. Therefore, by effectively lowering costs and focusing on the customer experience, the future of Q-Commerce can be made dynamic and sustainable.

(The author is Partner and Head, Consumer Markets and Internet Business, KPMG in India. Views expressed are personal.)

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