Q-commerce can speed up growth prospects for UAE retail

Instant food delivery gained its popularity at the time of the pandemic. Now as the rush for delivery has subsided w, people have started to view the fast delivery model in a more skeptical way. Several failures of major market players have also worsened the situation: American GoPuff and German Gorillas are cutting employees around the world, and Turkish Getir has abandoned plans for aggressive expansion.

Today, scepticism about business models in q-commerce seems superfluous. Startups in the fast delivery segment have proven that they can be profitable at the unit economy level. Saudi unicorn Jahez, (founded in 2016), was able to conduct an IPO in January last with an estimation of $2.4 billion. So far, the company is meeting investors’ expectations: in the first-half of 2022, Jahez’s profit increased 85 per cent.

The secret of successful Q-commerce is fine-tuning managing parameters as it allows startups to pay off the opening of new dark stores and to scale in the most effective way. Let’s analyze three factors which can provide for stable profit for a business in the q-commerce field.

Choosing the right market

Some countries are literally created for business in Q-commerce, but others are unlikely to develop an instant delivery service that can pay off within 5 years. The most profitable choice for the Q-commerce business model is the MENA market. The fast delivery segment in the region is expected to grow by 24 per cent and reach $20 billion by 2024.

MENA is the world leader in the Q-commerce market. This market accounts for 20 per cent of the entire digital economy of the region.

The US, Canada and Western Europe markets, on the contrary, are poorly adapted for fast delivery services. First, you should pay attention to the key factor for Q-commerce — the delivery cost. In Western Europe, you have to pay 15-30 euros for one hour of courier work, while in the Gulf countries it is only $3.

Aggregator companies provide businesses with workers from MENA countries who have ready-made work visas. It is also worth considering the cost of attracting a user: marketing costs traditionally depend on the ‘value of the audience’.

As a rule, ads targeted at users in the US, Canada and the EU are more expensive. In the US, an average cost of attracting one customer to the delivery application is about $150, while in the Middle East it is $50.

Geographical indicators (for instance, urban population density) are also important for Q-commerce. The more densely populated a city is, the bigger number of potential buyers can be reached by one dark store.

Digitalization of everything

During rush hours, Q-commerce may become not quick at all. Tedious waiting for an order for 40 minutes instead of the promised 15 seriously worsens the user experience. It is possible to achieve 99 per cent fulfilment rate (an indicator showing that all items are delivered within promised time) through accurate demand forecasting models and inventory management.

To be successful in Q-commerce, companies have to invest in their own IT solutions or modify those purchased from partners to suit the specifics of local market. An AI-based neuronet, which works with a large number of parameters, allows you to bring certain items from your distribution hub to dark stores in the required amount.

Using AI, you can also optimize couriers’ work, especially if the region law allows you to make contracts with hourly wages. Thus, the forecasting model allows you to predict the hours of increased demand and provide specific areas with larger number of couriers.

Development beyond B2C

Users are getting used to super-fast delivery, and many retailers and restaurants are trying to meet this need through partnerships with q-commerce services that provide well established infrastructure. With a monthly subscription, shops and cafes get Q-commerce logistics for rent.

For fast delivery apps, it is not only a chance of having yet another source of profit, but also an opportunity to expand product categories by cooperating with pharmacies, cafes or pet stores. The market is moving towards aggregators and super-apps that will provide instant delivery, where in just 15 minutes you can get on anything from a screwdriver to olive oil delivered right to your door.

Q-commerce infrastructure capabilities can also be sold to companies as a last-mile delivery option. For large marketplaces and retail chains that are interested in improving user experience and are able to ensure a stable flow of orders it is beneficial to organize 15 minutes delivery logistics right to a customer’s door.

More than 100 retailers, including Apple and Walmart, are already cooperating with Uber. At the same time, DoorDash is building warehouses and providing drivers for the Canadian retailer Loblaw. If a business prefers to develop its last-mile delivery infrastructure, then Q-commerce, as pioneers in the market, can offer their SaaS solutions to them.