No Longer An Easy Way To Make A Fast Buck?

Quick Commerce (q-commerce) companies are ruled by the clock, with some promising grocery deliveries within 10 minutes. But in a post-pandemic world, is the clock starting to run out on the category?

Just this week, “instant” grocery provider Send collapsed in Australia, essentially leaving two players, Milkrun and Voly to tussle for supremacy. What happened? The money ran out. Send’s founder Rob Adams told the Sydney Morning Herald that capital had been easy to raise in October last year, but just six months later, the position “was a totally different story”. And rolling out a q-commerce business is capital-intensive.

U.S. q-commerce pioneer, Softbank-backed GoPuff, was looking at an IPO and a valuation of $40 billion in January this year, according to the New York Post. But by March, the IPO was “dead in the water” and investors have been struggling to sell their stakes at as low as $15 billion. (Echoes of Softbank’s “We Work” debacle – where the valuation crashed from an expected $47 billion to an IPO at $9 billion?)

The market performance of food delivery platform DoorDash hasn’t helped investor sentiment. After going public in 2020 and the stock rising to $245.97 last November, shares have slumped 60% to $81.64 as at early May.

In Western Europe, q-commerce players have launched and then consolidated at a dizzying pace. In September 2021, Euromonitor counted 30 companies competing in the super-fast, hyper-convenience space, “most of which were established in the past 10 months and…mainly focused on grocery deliveries”. GoPuff purchased Britain’s Fancy and Dija, then re-branded as GoPuff to enter the UK market. Turkish start-up Getir bought London-based Weezy and Barcelona’s Blok, expanding into the UK and Spain. Berlin’s Gorillas picked up France’s Frichti. (Seems if you could find a goofy name, buy some e-bikes, rent a corner store and call it a “micro fulfillment center”, then you could flip your business quickly and walk away handsomely in a very short time.)

Germany’s Delivery Hero, listed on the Frankfurt stock exchange, snapped up Spain’s Glovo, and despite reasonable performance, has seen its share price crater from 128.30 Euros as recently as November 2021 to 35.04 Euros as of writing this article.

So why has the market soured, almost as rapidly as q-commerce companies can deliver?

Firstly, the real rush for q-commerce started in 2020 when many parts of the world were locked-down for COVID. There is just not the same urgent need for delivery as there was in the depths of the pandemic.

Secondly, economic circumstances have changed drastically, and the era of cheap money is over. GeekWire calls it “the great startup reset” – a “systematic repricing of capital and risk” at a time of high inflation and rising interest rates. Simply put, things ain’t what they used to be worth even a few months ago, and quick commerce will no longer be an easy way to make a fast buck. Investors will be looking more scrupulously as to whether a company makes commercial sense. And for many of the q-commerce businesses, the model right now is growth over profit as they scramble for market share.

Thirdly, authorities are starting to regulate advertising extraordinary delivery times. In New York City, a bill has been proposed to stop companies promoting 15-minute delivery, because it could encourage “drivers on e-bikes and scooters to move fast and break things”.

Still, when the dust settles, there is no doubt that a few q-commerce platforms will be here to stay – most probably global operators, the Ubers of the q-comm world. Customers love fast delivery services, and their expectations keep increasing. As McKinsey reported, 30% of consumers expect goods to arrive same-day and they are no doubt delighted when delivery “soon” shortens to delivery “now”. That just closes the gap between the instant availability of goods in physical retail (supply chain permitting) and the convenience of online.

Which businesses survive and what constitutes an acceptable delivery window (for both customer and company) will be fascinating. Famously, a customer in India tweeted last December that he received his order in 2.5 minutes. Technology like robots and drones will help the economics of q-commerce. And broadening the offer into, for instance, private label and health and beauty will assist margins (as the descriptively named Californian company FastAF has done). New sub-categories will also emerge, as has happened with, for instance, New York City-based “meds made easy” service, Capsule.

As the q-commerce world spins ever faster, watch this space.