The first product to start retailing online, which introduced e-commerce to the world in the late 1990s, was books. Global customers steadily started using this as a reliable channel to fulfill their needs across categories. Fashion and lifestyle categories soon began to dominate, and may continue to rule in terms of consumer wallet share. However, the most critical category, the one with the largest spend globally – food & grocery or the ‘convenience’ category – has missed out.

It was some time in 2010 when leading global retailers like Walmart, Tesco and others started exploring online options seriously. One of their key reasons was to protect their customer base from the emergence of multi-category pureplay online stores like Amazon. Despite investments in technology, management focus and captive customer base, they have struggled to get even 20% of their revenue through online sales during the decade past. Still very low!

These brands are used to a profitable trading at their stores. Taking their business online would require huge investments in customer acquisition and initial marketing to drive traffic and retention. Since their business model doesn’t allow them to continue trading at a loss, they haven’t been able to leverage their huge customer base for online trading.

Building an online business for the convenience category has been very tough globally, because of the nature of this category. The customer experience is largely driven by two key factors: (1) Availability across the width of the category, and (2) The right price of the brand and pack size of choice.

On top of that, unlike other categories, the weight and value ratio are not in favour of absorbing the cost of delivery. The cost of delivering a Rs 500 basket is much more than the gross margin. Pureplay online brands push sales by offering deep discounts and offers and this is a major roadblock for established brands to grow their omni-channel business with their own customer base.

Late 2019, as the pandemic started unfolding, safety regulations and movement restrictions disrupted the overall retail industry in many ways. Consumers had no choice but to start exploring online channel to fulfill their daily needs. This started creating new online growth opportunities for this category. For all the established supermarket chains online offerings became a hygiene factor and pureplay online players started tweaking their business models to cope up with the demand as well as create a differentiator. Over these two years, a large base of consumers moved online, and it is estimated that up to 70% will stick to this channel even after the pandemic is over.

The parameters convenience shoppers globally seek are: range, availability, freshness, health/hygiene, range of pricing substitutes, delivery costs, promos and better service. These are overall value propositions, and they will not hesitate to switch unless they get this as a package from a retail brand. A recent study revealed that 28% consumers in China and 34% in the US switched to another store or website to shop.

Established brands are now investing in creating this value proposition through improved processes, use of technology and deeper understanding of their customers’ needs. There is a lot of focus on building efficiencies in their systems to deliver the value their customers are looking for.

This disruption in procuring daily needs by consumers also gave a boost to cooked food home delivery aggregators. Investors signed big cheques to push this segment and tried converting the opportunity into a permanent change in customer behaviour, by trying to advocate that they don’t need to cook food at home any more. The aggressive marketing across all possible channels, supplemented by discounts and offers, has worked to a large extent. Having led consumers to believe that they don’t need to cook food at home, they are now using the same platforms to promise 10-19 minutes for quick delivery of food and grocery at the doorstep. This new concept called Q-Commerce is developing into the flavour of the year and it looks like the deep pockets are budgeted to transform consumer habits to this new form of commerce.

Is the consumer only looking for quick delivery? Are range, availability, freshness, hygiene and quality no longer required?

These q-commerce brands have partnered with FMCG brands to push their products, without bothering to understand what these consumers actually need. Is this 10-minute delivery feature good enough for consumers to shift from their existing grocery supplier, who understands their needs and plans their assortment accordingly? Will consumers switch their entire basket to q-commerce or only use it to get some discounts on their chips and soft drinks?

Venture capital funds are supposed to invest in solving the hardest problems. Here, though, they appear to have collectively decided that the world’s hardest problem is getting groceries in 15 minutes! A quick social survey indicated that this is not a real problem but a campaign to change customer habits. As I mentioned in my last piece, even the neighborhood ‘kirana’ is capable of delivering in 15 minutes – along with all the other value propositions. Some of the existing online grocery brands continue to offer 90 min to 24 hours delivery and their daily order rate hasn’t declined yet.

Is q-commerce discovering a new customer base which is happy enjoying cool offers to get their knickknacks as long as they can? Is the delivery cost of this model viable, and will the consumers be willing to pay the delivery cost for this ‘convenience’?

The jury is out on whether q-commerce is here to stay and will actually develop into an organised grocery shop which can align their assortment plan to their customers’ needs and also offer value through freshness, quality, hygiene and other services.

This article first appeared in The Business Guardian on 11 July 2022.