The Rise of Quick Commerce: Transforming the Food and Beverage Industry in Asia
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Over the past few years, with the rise of quick commerce, the food and beverage industry has been dramatically transformed. As consumer buying behaviour shifts towards online ordering, the demand for quick and reliable fulfilment has become essential. Revenue in the online food delivery market in Asia is expected to reach US$564.70 billion by 2023, with a projected annual growth rate of 11.44% between 2023 and 2027.
Furthermore, Southeast Asia's online food delivery spending is anticipated to grow more than two times faster than the region's total food service spending over the next five years, with a compound annual growth rate (CAGR) of 24.4%.
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In Asia, the pandemic and change in consumer demands have driven the need for quick commerce’s convenience and speed. Platforms like Foodpanda's Pandamart and Grab’s Grabmart have capitalized on this trend, offering fast delivery of groceries and food items, especially with the rise of plant-based products, low-to-no alcoholic drinks, and healthier product innovations.
Let’s take a quick look at the West. The growth of online shopping led to consumers seeking convenient and efficient ways to access their favourite F&B products. Due to the increasing need and demand for near-instant F&B deliveries, the quick-commerce retail space in the US has generated billions of dollars in retail sales. However, in Asia, the approach and focus of quick commerce differs slightly.
In Asia, quick commerce has been driven by the convenience of ultra-fast with a focus on delivering groceries and food items, fuelled by the region's high population density and the wide adoption of smartphone usage. Quick commerce has been an attractive solution for consumers seeking last-minute, on-demand, and same-day delivery options.
Given the development rate in the West, businesses there are poised to accommodate the change in demand preferences without compromising service quality. In Asia, businesses have a learning curve to catch up to the West.
Top Challenges in Asia
Though Asia is progressively catching up to advancements in the West, Asian businesses are still adapting through the following hurdles:
● Difficulty in optimizing delivery schedules: The volatility in the food and beverage supply chain makes it challenging to optimize predictive delivery schedules, leading to delays in delivery and reducing customer satisfaction. Companies need to invest in proper logistics optimization solutions to eliminate scheduling bottlenecks and minimize delivery costs.
Redmart has recently leveraged AI to predict demand and forecast order volumes, giving them the foresight to optimise routes and allocate resources accordingly, improving delivery efficiency and accuracy. Moreover, the company offers flexible delivery options to customers, giving them choices between two-hour, same-day, and next-day delivery windows. This provides customers with more control while also enabling Redmart to optimise demand and capacity management.
The differences in country development in Asia poise a challenge as well. For example, Indonesia’s rural areas are not vehicle-friendly due to the lack of infrastructure in their villages, and technology available for precise tracking are not as well-rounded as the West’s. This impacts the accuracy of location and delivery status monitoring, leading to delays and dissatisfaction. Dagangan, an Indonesian company, has been a trailblazer in tackling this issue as they’ve incorporated a hub and spoke model. This unravels the once tangled issue of accessing deep rural areas as villagers within 20-30 km of the nearest market can now place conveniently place orders.
● Maintaining product quality and freshness: In hot and humid climates, robust temperature control and packaging solutions are necessary to ensure the quality and safety of the deliveries. When it comes to fresh produce, consumers expect 3 things: trust, quality, and freshness. In response, companies like Redmart have implemented SOPs such as freshness indication dates on fresh produce listings and a promise to guarantee refunds for unsatisfactory items.
● Inventory management: The fast-paced nature of the business requires businesses to ensure they have ample stock levels to meet customer demand promptly. Balancing inventory levels to avoid shortages and overstocking is a challenge; this requires advanced inventory management systems and accurate demand forecasting.
"Demand forecasting that maximizes the ‘opportunity for sale’ and minimizes the wastage of product due to ‘unsold stock leading to expiry’ is a key challenge for all F&B brands. Consumers today prefer clean label products, and they have a pre-conceived notion that longer shelf-life F&B products contain preservatives. This is shaping their preference and consumption of perishables such as fresh produce. Usage of AI and ML based tools to predict and forecast demand while taking into account the current stock on hand, closing stock, and thereby recommending an appropriate indent quantity, is being worked account. These tools are being modelled to also consider seasonality in consumption basis such as seasons, holiday, and religious sentiments (meat consumption). Currently, each major brand is using and experimenting with automation tools for inventory forecasting and management. However, concrete solutions are yet to emerge which will become the norm." - Pavangopal Alavattam, CMO, Nandus Foods |
● Competition and pricing pressures: With various players vying for market share in a highly competitive market, this can lead to pricing pressures and reduced profit margins. The proliferation of quick commerce platforms, including Getir and GoPuff, has put pricing pressures on traditional food and beverage businesses, as they often offer competitive pricing, discounts, and promotions to attract customers.
● Regulatory compliance: Quick commerce in the food and beverage industry must comply with various regulations and standards to ensure food safety and consumer protection. Businesses must navigate complex regulatory frameworks related to food handling, labelling, and delivery to operate legally and maintain consumer trust.
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Chapter 1: Quick Commerce Strategy
With various moving gears in the system, it is critical to pinpoint which priorities should precede. Below are key components to consider in building a robust quick commerce strategy:
Tech infrastructure & Solution deployment
Building adequate technological infrastructure and deploying solutions to manage high volumes of orders and deliveries in real-time is essential in replicating the quick-commerce model.
Setting the proper foundation through the company’s tech infrastructure helps streamline order processing and delivery, while offering personalised recommendations for continuous improvement based on consumer behaviour when engaging with the brand. This, in turn, sets the groundwork in motion towards customer loyalty.
"As the categories of products and the SKU count seem to be endlessly increasing on quick commerce platforms and marketplaces, the need for easier in-app navigation, product discovery and hassle check-out needs to be the priority as far as customers/users as concerned. However, the need to make tech easy to use (preferably in a self-serve manner) for brands to manage inventory, visibility, product listing, and accounts reconciliations, is a much-needed necessity that will enable more brands to develop confidence in these platforms." - Pavangopal Alavattam, CMO, Nandus Foods |
Customer experience
Companies must develop an easily accessible and user-friendly e-commerce platform, providing transparent pricing and delivery charges, and managing customer feedback to improve service quality continuously.
For instance, in 2020, Foodpanda partnered with MUJI Taiwan, the global Japanese retailer company’s first collaboration with any on-demand delivery platform. Customers now have access to have MUJI’s snacks, household goods, and even cleaning products to be delivered to their doorstep using the same under-30-minute delivery business model.
Priorities should be determined by the company’s goal and objectives to ensure the strategies align with other endeavours or initiatives within the firm. Resultingly, this enables a more effective allocation of resources in the right direction.
Chapter 2: Tech and Customer Experience
Leveraging data analytics & real-time tracking
To optimise delivery routes, reduce delivery times, and enhance the overall customer experience in the final mile, businesses must consider the following key actions:
● Implement real-time tracking: Equip delivery vehicles with GPS tracking devices to monitor their movements in real-time, allowing visibility to customers and enabling data-driven decision making based on the current delivery statuses. Customers can be informed every step of the way with notifications, including estimated delivery times and delays.
● Optimise route planning: Utilise data analytics to optimise delivery routes and improve efficiency. With real-time information such as traffic congestion, road closures, and weather conditions, intelligent route planning software can help identify the most efficient routes. For example, Foodpanda’s network of cloud grocery stores (Pandamart and Foodpanda shops) serve as fulfilment centres, strategically located in close and convenient proximity to customers, keeping delivery timings low.
"Batch deliveries will lead to a big advantage to brands from a cost optimisation point of view. Route planning for slotted (next day delivery or same day, later time) deliveries and batch deliveries (consolidated/aggregate multiple orders and dispatch at once) is critical. Making last mile delivery cost effective is the key to the success of home delivery." - Pavangopal Alavattam, CMO, Nandus Foods |
● Leverage machine learning and predictive analytics: Utilise ML algorithms and predictive analytics to forecast demand, identify delivery patterns, and optimise resource allocation. By analysing historical data to pinpoint bottlenecks/root causes of delays, and customer behaviour, businesses can anticipate demand fluctuations and proactively allocate delivery resources accordingly, reducing delivery times and improving continually enhance overall efficiency.
Implementing advanced management & order fulfilment systems
Implementing advanced inventory management and order fulfilment systems that align with quick commerce demands ensure product availability and timely deliveries. Key benefits include....
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Digital Food and Beverage Asia 2024 Innovation Brief