Competitive Advantages in Quick Commerce | Insight
What will it take to survive when the free flow of capital stops?
Quick commerce, also known as q-commerce, refers to the rapid delivery of goods, often within minutes or hours of placing an order. It leverages advanced logistics, technology, and localized delivery networks to meet the immediate needs of consumers.
A competitive advantage is an attribute that allows an organization to outperform its competitors and prevent new ones from entering.
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We are doing a series on ‘Quick Commerce’ as it is truly an idea which is shaping Indian commerce in many ways. Check out this series at
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Quick Commerce Competitive Advantages
Let's examine the mind map outlining the competitive advantages in quick commerce.
Scale
Scale is a moat because it provides companies with certain advantages that smaller companies don’t have. Now, these advantages are of different types. Generally, two major categories are there. One cost gets reduced and the second is product quality becomes better.
Let’s now see what are the advantages a company can have in terms of scale at different levels.
PAN India Level: This refers to having a nationwide presence across India. Advantages at this level are applicable to all operating geographies within India.
Digital Infrastructure: Having strong online platforms and technologies. For example, having a robust app and website that handles high traffic efficiently. This asset is available to be scaled at a very marginal additional cost (per user operating cost). Any new entrant has to invest highly in setting up such infrastructure.
Customer Acquisition Engine: Strategies to attract new customers. This could include marketing campaigns, discounts, or referral programs. Once a company successfully builds this engine, the marginal cost of adding a new customer keeps getting reduced. Expansion will become cheaper for the company as compared to its competitors.
Number of Sellers: Having a large network of sellers ensures product availability and variety. For instance, Flipkart has many third-party sellers offering products. Onboarding sellers is a slow process and competitors will take time to achieve the scale. More availability and variety directly lead to better customer satisfaction.
Access to Capital: Having strong financial backing to scale operations, invest in technology, and enter new markets. Companies like Reliance Jio benefitted from significant investments. With capital many growth-related actions become easy to execute.
Access to Discounted Supply: Having strong demand allows a company to negotiate better with suppliers and increase their profit margins. Walmart does this in the USA market. With huge margins a company gets the freedom to capture the market by giving discounts or lowering the prices in general.
Region Level (e.g., North): Here we will cover advantages which happen at regional scale like big states in India or north, south, west regions of India.
Supply Chain Infrastructure: This means a system of warehouses and mid-mile logistics to ensure timely replenishment of dark stores. For example, BigBasket has regional warehouses. Such infrastructure reduces inventory costs. All-time availability with the lowest inventory costs is a big advantage.
Reduced Risk of Entering a New Geography: Entering into a new pin code is always risky. We always take a calculated bet but we never know whether a dark store will become EBIDTA positive or not. Strong regional supply chain and PAN India level scale advantages, it becomes cheaper to take risk. The cost of trying a new geography with a dark store remains low in this case. This leads to agility in expansion.
Pin-code Level: Drilling down to the local level.
Last Mile Delivery Infrastructure: Ensuring fast and reliable delivery is a strong competitive advantage as it affects customer satisfaction the most. Once a company builds this in a locality, they can easily serve multiple new customers with that at a marginal cost.
Number of available SKUs: Offering a vast variety of products to cater to diverse customer needs. Think about how Amazon offers everything from electronics to groceries. With diverse options, customer satisfaction increases as they don’t need to go to multiple places for their multiple needs. For competitors, it will take time to onboard an extensive range of SKUs.
Number of Active Customers: A large customer base indicates trust and popularity, like how Swiggy has millions of active users. In the case of quick commerce, it is also important to have a high number of active customers per dark store to make them profitable.
Special Know-How
If a company knows something which their competitors don’t, then those advantages are called ‘special know-how’. In case of quick commerce, these advantages can be:
Demand Forecasting Algorithms: Using data and AI to predict customer demand accurately. This helps in stocking the right products and minimizing waste. It significantly reduces the cost of operations.
Supply Automation Algorithms: Automating supply chain processes to reduce errors and improve efficiency. Think about how warehouses use robots for sorting and packing. Again, it reduces the cost of operations.
Past Experience of Building for India 1: Leveraging previous experience in catering to the affluent, urban population to better serve them. Both Zomato and Swiggy have this experience.
Fulfilled Demand Data: Using historical data on customer purchases to improve inventory and supply decisions. For example, knowing that certain products sell more during festivals can help in planning stock levels.
System Rigidity
When a customer becomes part of a system and when they think of leaving the system if the total cost of the change outweighs the benefits, then we can say that company has achieved the system rigidity. Cost here can be emotional, monetary, social, etc. In the case of quick commerce, let’s see some of them.
Personalized Feed Based on Past Purchases: Customizing the shopping experience based on a customer's previous purchases. For example, Amazon recommending products similar to what you've bought before. If I get used to my feed on BlinkIt, and I decide to move to Instamart, I will feel certain discomfort which will push me back towards BlinkIt.
Shopping Lists: Allowing customers to create and save shopping lists for convenience. If I have my shopping list saved with BigBasket, I am less likely to move to Zepto and make a list again there.
Ethnicity Friendly Supply Chain: Offering products that cater to diverse ethnic preferences. For instance, including regional snacks and groceries. If I am a Marathi person, I will choose the company which can fulfill my Marathi related needs well.
Loyalty/Subscription Program: Implementing programs to reward repeat customers. For example, Swiggy Super offers benefits to frequent users. If I have 500 points in my Zepto pass, I am less likely to move to Dunzo and lose my points.
Bundling of Services: Offering combined services for better value. For instance, a subscription that includes grocery delivery and streaming services. Swiggy is giving me food delivery and groceries in the same app. I am less likely to download and use two apps for this.
Brand Loyalty: Building a strong brand that customers trust and prefer over competitors. BlinkIt is playing this game. Having a strong hold of customer mental space gives you an edge over competitors.
References:
Discounting wars in quick commerce; tax relief for ecommerce suppliers (indiatimes.com)
Quick commerce: ETtech In-depth: Quick commerce is diversifying fast. It won’t be easy - The Economic Times (indiatimes.com)
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ABOUT THE AUTHOR
Hey everyone, I'm Garvit Sahdev 😎. I'm on a mission to gain a deeper understanding of the world, and to develop solutions that can trigger significant global change.
My curiosities span various domains including food, business theories, material science, market size calculations, economics, politics, and sports, etc. 🧐
Professionally, I have a diverse background spanning startups, consulting, policy development, market research, system building, ISO, colour physics, nanomaterial synthesis, textile chemistry, etc. 🐘
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