Published Date: Mar 2024


The way consumer shop for daily essentials is undergoing rapid transformation with the emergence of quick commerce platforms in the United States. Quick commerce refers to delivery of goods within a few hours through a dense network of dark stores located strategically in cities and suburbs. Several startups are disrupting the traditional grocery delivery space with their ultra-fast delivery capabilities.

The Rise of Quick Commerce Startups

In the last two years, various quick commerce startups have come up to address the need for instant delivery of items like groceries, medicines, and food. Companies such as Gopuff, Gorillas, Jokr, Fridge No More and Buyk have raised significant funding to rapidly expand their operations across major US cities.

These startups have hundreds of micro-fulfillment centers called dark stores located near residential areas for faster order picking and delivery. Some companies like Gopuff have automated micro-fulfillment centers for sorting and assembling orders using robotics. They maintain an inventory of over 2,000 stock keeping units (SKUs) of daily items which can be delivered within 15-30 minutes of order placement. This level of speed and convenience was never experienced in the traditional grocery delivery model which relied on stores fulfilling orders.

Changing Consumer Behavior

The pandemic has significantly changed consumer shopping behavior with more people adopting the convenience of e-commerce for daily, unplanned purchases. Research shows over 50% of shopping in the US will be online by 2024. Moreover, younger consumers expect quick delivery even for small everyday items. They are willing to pay delivery fees and premium pricing for the ultra-fast experience. This changing behavior has created demand opportunities for quick commerce startups to cater to instant delivery needs.

Traditional Grocery and C-Stores Feel the Heat

The emergence of quick commerce players poses threat to traditional grocery retail and convenience stores. Their large fulfillment infrastructure and speedy delivery model has the potential to eat into the share of small unplanned purchases which were the mainstay for local grocery stores and c-stores. Big retailers like Walmart and Target are also finding it challenging to match the delivery speeds of under 30 minutes. However, certain experts believe that quick commerce complements rather than replaces traditional grocery shops which will still cater to planned bulk purchases. But certainly quick commerce poses long term risks for smaller brick-and-mortar grocery stores if left unaddressed.

Issues around Unit Economics

While quick commerce business model addresses evolving consumer needs, its long term viability remains uncertain due to issues around economics and sustainability. Since orders are often small, delivery costs tend to be very high which eats into company margins. Unit economics remain negative for many players. Maintaining a dense network of dark stores also requires heavy capital expenditure which puts pressure on balance sheets. Moreover, managing complex micro-fulfillment operations and meeting stringent delivery timelines is challenging and operationally intensive. Customer acquisition costs are also high in this competitive market. This raises questions if companies can actually build profitable businesses at scale.

Road ahead for Quick Commerce

For quick commerce to thrive in the long run, companies need to focus on improving operating efficiencies, controlling delivery costs and increasing basket sizes. Adopting next-gen automation and robotics can facilitate order picking and assembly while reducing labor costs. Partnering with local stores is another strategy to leverage their existing inventory and fulfillment infrastructure while expanding delivery coverage. Companies are also exploring 30-45 minutes delivery windows to provide some buffer without compromising significantly on speed. Consolidating fulfillment centers can optimize real estate costs as demand patterns evolve in different regions. If unit economics and profitability challenges are addressed, quick commerce has potential to disrupt traditional grocery retail beyond pandemic influences.

New Era for On-demand Deliveries

Quick commerce has established on-demand deliveries as a service category with potential to transform other verticals beyond groceries. Companies are now exploring 10-30 minutes deliveries for restaurant meals, pharmacy products, home essentials, office supplies among other categories. For example, Jokr delivers stationery and electronic items along with groceries. Fridge No More focuses only on ready to eat food deliveries. The emergence of unmanned drones and autonomous vehicles also holds promise to further accelerate delivery speeds. Quick commerce today represents the tip of the iceberg for on-demand delivery services of future. This new paradigm brings both opportunities and challenges for various industries across retailing, logistics and warehousing domains.

In conclusion, quick commerce has seen exponential growth in major US cities driven by changing consumer behaviors and expectations of instant gratification. While addressing latent demand, its long term success will depend on startups demonstrating robust economics and operational efficiencies at scale. Traditional retailers will also need be nimble to fend off threats. Overall, quick commerce is set to transform the landscape of urban logistics and delivery services for years to come.