Why has Q(uick) commerce succeeded in India, but might not meet similar success in US or UK or many other countries?
The answer does not lie in Technology or Start-up ecosystem or PE funding. These are important, but not the most necessary ingredients for Q-commerce to succeed
What is Q-commerce?
Ecommerce is well known across the world and one of the earliest pioneers is Amazon. Q-commerce in contrast has found success in India and by local entrepreneurs and Amazon and Walmart(Flipkart) have joined the bandwagon after a long wait and watch of over 2 years. Q-commerce is exactly similar to Ecommerce in most ways for a consumer, with the exception of orders delivered in 10 to 20 minutes instead of 2 hours to 2 days. The number of SKUs (Stock keeping Unit) being delivered through Q-commerce was less than 1000 when it started in March 2022, but today most Q-commerce companies deliver between 15000 to 25000 SKUs. A large part of this expansion in selection has happened outside traditional grocery segments of FMCG, fruits & vegetables and staples and now range from Electronics to Shoes to Swimming costumes to Beauty & make-up to pet care and toys & games. All delivered in 10 to 20 minutes in over few hundred cities and over 2000 locations. Most Urban India today is already hooked onto Q-commerce though penetration is semi-urban and rural areas is quite low.
And for most orders of over Rs 199/- (US$2.5) delivery is free and instant!
And orders delivered 24X7x365!
But what are the drivers for the success of Q-commerce in India and more importantly, why it may not witness a similar success in US or UK or many other countries? It has nothing to do with Technology as Amazon/Walmart probably invest more in Technology that most Indian Q-commerce companies. Technology is essential, but hygiene element and similar is PE funding.
What does India have that US or UK or even Brazil does not have for this Business model to succeed as much as it has in India?
India is world’s most populous country at over 1.5 billion people
40% of India’s population is in the age group 18 to 35 years making it the largest number of millennials and GenZs at over 600 million
A large number of the youth are unemployed or under employed
India has smartphone user base of over 900 million
Over 40% of India’s population stays in Urban areas
Most Urban areas have very high population density (Population staying/working in a sq. km area) with many cities having population density of over 15000 people per sq km.
31% of India’s population is middle class (Some studies define middle-class individuals as those with an annual income between INR 500,000 – 3 million). It is this segment which is driving the overall growth of the domestic consumption on the Indian Economy.
India is the world’s largest market for 2 wheelers for many years now, with domestic annual sales in excess of 17 million in 2024. As per some data sources, India has over 250 million 2 wheelers in active use
India has lowest charges for monthly mobile usage with 4G data and unlimited voice, starting at Rs 300(US$ 4) per month and extensive urban coverage of 4G for faster data transmission.
On an individual parameter basis, many countries would probably be better than India. For e.g. Manila or Kathmandu has higher population density than Kolkata or Mumbai, but it does not have many cities with high density or Income or 2 wheeler ownership. Similarly Sri Lanka has highest per capita of 2 wheelers, but overall population is low and population density is much lower.
Q-commerce has succeeded in India because India offers all the 9 ingredients as a integrated package. Let me illustrate this a bit:
Very large number of urban pockets of high population density with ability to consume(middle class) and smart phone ownership makes it a strong business case for Q-commerce. Most of the Q-commerce companies have individually over 750 to 1000 (and growing by the day) “dark stores” (fulfilment centres) with each catering to population within a radius of 2-3 kms from the store. This gives each store economies of scale and to the Q-company large scale of operations to negotiate with manufacturers for bulk pricing ( Mfrs save on margins to Distributor, Wholesaler and Retailer which can be combined upwards of 30 to 50% of MRP) and thus offering discounts to consumers or free delivery
Large volumes in many concentrated areas lead to lowering the cost of operations for the Q-commerce company a very critical ingredient to offer low or zero delivery charges.
A large population of young people, either unemployed or under employed, owning 2 wheelers and smart phones. making it the perfect target audience for delivery executives (A deliver executive supposedly earns Rs 16000 to 24000(US$ 200-300) per month(As per the companies) combine with opportunity to work flexible working hours (Q-commerce is available 24*7). Many other jobs offer lower earning potential than this. Combine this with large 2 wheeler (ownership), which are perfect for delivering small orders in quick time even in traffic conditions and also very economical to operate. Combine this new smart phones starting at Rs 5000 (US$60) and refurbished smart phone starting at Rs 2000 (US $ 25). Combine this with low monthly charges for 30 GB data. And you have the perfect recipe for a very large pool of delivery executives, a very critical ingredient for 10 to 20 minute delivery at near zero delivery charges.
Can Q-commerce succeed in US/UK? Possibly,
but will they be able to offer this across large part of Urban USA,
delivering at very low cost for itself and hence low delivery charges to customers while delivering in 10 to 20 minutes across locations and SKUs?
Delivery through drones has already been experimented, but costs are higher.
So, the success of the Q-commerce Business model in India is not due to Technology, but other essential ingredients all mixed (And executed perfectly in operations) in the right proportion 24X7X365. India's demographics which many economists feel will lead to disaster on many fronts, is however proving to be demographic dividend for the Q-commerce.
The moot question however is “Is Q-commerce resulting in increased consumption or is it merely a shift from one channel of purchase to another one”. It is more likely the latter and in such situation, one side of economy is benefiting and simultaneously the other side is hurting almost equally.
On a parting note: Will the free delivery or very low delivery charges continue or once the consumer is “addicted” to 10 minute delivery, companies start charging Rs 30 to 50 or more as delivery charges for “instant gratification”? Food delivery companies like Swiggy/Zomato today levy delivery charge of Rs 40 to 50 even if the restaurant is just 1 km from the customer. All the Q-commerce companies are already charging Rs 8 to 11 per order as “platform fees” on all orders without exception!
As they say, all good things must come to an end and let us make hay while the sun shines and get instant orders for free!
We do hope you have enjoyed reading this issue of the Chai and Charts Chronicles. Do share your feedback in response to the post or directly to the author at menghrajani1@gmail.com
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Other success factors for Q commerce could be - 1. The need of small nuclear families to buy small quantities to avoid wastage 2. Insufficient space in Metros to store in good quantities 3. Lack of time or willingness to spend time on shopping for basic needs