3 Important Notes in Building a "Quick Commerce" Service

In the last two years, Indonesia has experienced online retail growth which is quite significant. Indeed, its contribution is still very small, around 10% of total national retail sales, but this growth is quite significant when compared to several years ago, which contributed only 2%-4%.

This growth was also driven by increased demand for on-demand shopping during the Covid-19 pandemic. People are starting to use digital platforms to shop for products, especially for daily needs or (Grocery).

Along with the growth in demand, people's expectations of product delivery also increased. Startup players are starting to develop innovations to accommodate the needs of fast online shopping or referred to as online shopping quick commerce.

In this #TuesdayStartup session, the Co-Founder and CEO Astro Vincent Tjendra shares his views and experiences in building a business quick commerce in Indonesia. Here's the full summary.

Speed ​​element

Talk quick commerce, basically this term has a similar concept to e-commerce. The difference is, delivery of goods in quick commerce done instantly, at least within an hour.

Referring to the report RedSeer, quick commerce defined as delivery of consumables within 45 minutes at normal shipping costs. Main driving factor quick commerce Among these are the increase in demand for delivery of daily necessities, impulsive or unplanned shopping behavior, including changes in consumer behavior due to Covid-19.

In developing Astro, Vincent emphasized the element of speed by making deliveries in just 15 minutes. In contrast to instant delivery or same-day delivery which took more than an hour.

According to him, the determination of the 15-minute delivery time is in accordance with the research that has been carried out to accommodate needs on-demand people who really need their products right then and there, for example cooking ingredients.

However, the commitment to fulfill deliveries within 15 minutes is considered quite difficult because Jakarta and its surroundings are prone to traffic jams. He considered that one of the keys to overcoming this is to build a point (hub) storage of the product so as to allow its delivery to the user's nearest location.

"In Jakarta alone, it seems impossible to deliver goods in 10-15 minutes. However, from the transactions made by consumers, 15 minutes is quite the right time to reach a certain radius. We also see that, although this concept is relatively new, consumers appreciate the service [quick commerce] he said.

Product curation

One of the things that makes e-commerce quite attractive compared to physical retail stores is the availability of more diverse products. Then, how about the platform quick commerce can reduce products that can be delivered quickly and according to people's needs?

In Astro's case, his party chose to focus on accommodating daily needs, such as fresh products, staples, food and beverages, to emergency supplies. According to him, product curation keywords are based on items that are really needed at that time.

"With this curation, the platform can ensure product availability because the stock is definitely accurate, the service becomes more efficient because it reduces the time to ask for product availability. The platform can focus on shipping only," said Vincent.

However, exceptions are granted for fresh produce. According to him, stock availability is not always available equal with quality. Stock may exist, but not necessarily fit to be shipped. Considering that fresh products are always catching up with consumption time, it is important to store them in the refrigerator and check regularly every time hub. This is one of the challenges in undergoing service quick commerce for fresh produce.

In addition, Vincent also highlighted the importance of applying the right product price in running this business. Even though it brings speed, it doesn't necessarily have to be cheaper or more expensive than similar platforms.

"Pricing being competitive is important, but the main thing is to apply a fair price for buyers," he added.

Market evaluation

Furthermore, Vincent judged that the room for growth quick commerce still very big considering the penetration e-grocery only 0,4% of the total e-commerce penetration in Indonesia. According to him, this is also a momentum to evaluate new opportunities.

"Astro does focus on value speed to consumers. However, we need to see if speed becomes something that matters to the market in tier 2 and 3? Could be markets outside tier 1 is more concerned with price or product quality. This is something that needs to be thought about to be able to reach more consumers," he said.

Still referring to the report RedSeer, at the moment quick commerce still dominated by consumers in metropolitan cities. Middle to upper income household segment in the city tier 1 is predicted to be a growth driver, especially the consumer segment who chooses convenience and fast shopping on consumables.

RedSeer project market penetration quick commerce of $0,3 billion in 2021 and will grow 10-15 times to $5 billion in the next five years.