UAE market holds great potential for q-commerce

Dubai - Q-commerce in the Mena region is currently driven by food delivery, contributing 85 per cent to the total q-commerce sales

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Rohma Sadaqat

Published: Mon 23 Aug 2021, 4:27 PM

Last updated: Mon 23 Aug 2021, 7:06 PM

Quick commerce, or q-commerce, is set to play a major role in the growth of the e-commerce industry in the UAE and Middle East and North Africa (Mena) region, experts noted.

The new business model is a market defined by very fast delivery from local shops, restaurants, and dark stores, and usually characterised by under 2-hour delivery. The most common examples of q-commerce are online food deliveries, typically through aggregator apps, but the concept is now being expanded to other segments such as grocery, pharmacy, gifts, flowers, and courier service; these segments are now seeing increased traction and have the potential to grow 2x the growth of food delivery.

According to research by Redseer, q-commerce has already taken up 20 per cent of the Mena region’s digital economy and will contribute $20 billion in gross merchandise value by 2024.

Sandeep Ganediwalla, managing partner of Redseer in the region, explained that q-commerce is an innovation in the digital economy which builds on the hyperlocal delivery capability developed by e-commerce players in the region. “Given that roughly 40 per cent of online shoppers mention quick delivery as an ‘extremely important’ criteria in their decision-making process, I think we are at the cusp of the q-commerce growth in the Mena region.”

Redseer’s latest report noted that q-commerce in the Mena region is currently driven by food delivery, contributing 85 per cent to the total q-commerce sales.

Jeremy Doutte, vice president of talabat UAE, described q-commerce as a “revolution rather than an evolution” – similar to when the iPod replaced the CD player. “Q-commerce is the introduction of quick-delivery like its name suggests, delivering orders as fast as 20 minutes in comparison to traditional e-commerce which takes, if you’re lucky, one day delivery time from mega warehouses.”

He added that there are several factors that have contributed to the growth of q-commerce in the UAE. The first revolves around consumers today becoming more impatient and looking for instant gratification, which has slowly turned into new consumer habits. A report by Mastercard estimated that roughly 20-30 per cent of the Covid-19-related shift to digital globally is expected to be permanent; the report also anticipates that 70-80 per cent of the grocery e-commerce surge will stick around for good. Another reason revolves around the large strides that have been made towards a digital economy.

“As an online food delivery platform, we have seen a shift in online behaviour as customers have become more reliant on technology,” Doutte said. “While some of this change in habits was accelerated by the outbreak of the pandemic, a good portion of it is expected to continue and even grow. In the first half of this year, talabat UAE witnessed a 90 per cent growth in orders, in addition to over 100 per cent increase in app downloads compared to the same period last year. This comes as no surprise as the UAE is one of the most mature markets globally when it comes to infrastructure for e-commerce and logistics, with Internet penetration and e-payment considered to be amongst the highest in the region and the world, which offers tech platforms the right environment to excel.”

Looking at the current market situation, Doutte says that what we are seeing today is just the beginning of q-commerce. “With q-commerce, our logistics allows us to deliver products in 30 mins or less through well placed hubs throughout the city, backed up with an amazing fleet - and a lot of cutting edge technology. We currently showcase this with our talabat marts, where the majority of our orders are actually in under 20 mins. However, food and groceries are just the beginning of q-commerce. Why not electronics, why not clothing? We’re at the start of this revolution, and we’re looking forward to bringing the best to our customers - and the people of the UAE.”

Additionally, he explained that cloud kitchens are becoming increasingly important as they play a crucial role in enabling further growth and expansion for existing brands, and for supporting new brands to enter the market. A survey conducted in March 2021 by POSist in collaboration with Dubai Restaurants Group, showed that 70 per cent of otherwise dine-in players are now exploring the idea of investing in cloud kitchens to expand their offerings.

“By growing talabat’s cloud kitchen offerings, we are building delivery-only kitchens closer to residential areas, hence, enabling us to deliver food even faster,” Doutte said. “As of June 2021, talabat has seven cloud kitchens in the UAE, with plans to launch 12 more by the end of the year - each catering to 25-35 brands. This allows talabat to support SMEs by facilitating their entry into the market at a lower cost, as well as allow established restaurants to expand their business and reach with reduced costs.”

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