#CartToCouch: Optimising delivery for faster service

If anything, the Middle East market is excited about quick commerce – which refers to online orders delivered to the doorstep within 20 minutes. Currently it is taking the grocery retail market by storm. Quick commerce players have a razor-sharp focus on delivery timelines tracking every second spent on every single delivery. At the same time, access to a wide range of products and a personalised service remain crucial to gain customer loyalty. To ensure all this, coupled with growth in a competitive landscape technology plays a pivotal role.

Customer expectations drive the need for faster service and delivery, observed Roy Hintze, Deals Strategy & Operations Partner, PwC Middle East while opening the panel discussion at the recently concluded Food Business Forum 2024.

So, what can companies do to improve supply chain? How can they drive success in order fulfilment and last mile delivery? What do companies need to do to remain relevant and compete in an ever changing and growing market, he asked.

“Quick commerce is quite a new concept, youngest of the current delivery models. Since 2020, when it started, we’ve already seen an evolution in consumer behaviour. Earlier it was driven by impulse buying, which has now changed to the entire shopping experience being rendered quick,” explained John Noja, General Manager, Talabat Mart UAE. “This evolution requires a lot of adaptation because along with speed, users now expect a large assortment with best prices and all year long promotions.”

There’s been a tremendous shift in what quick commerce has been used for over the last four years, very much starting as a top-up impulse offering and then transitioning into a full weekly shop, agreed Chase Lario, VP of Groceries, Careem. Consumer in this region and young, incredibly tech savvy where almost every other aspect of their life is delivered on demand, instantly. That’s why quick commerce as a segment, is growing at about 10X the rate of the rest of e-commerce in at least the grocery space.

As consumers are using quick commerce more and more, operators are investing in tech tools to anticipate their needs, Hintze added.

To anticipate and forecast what consumers want before they actually need, its crucial to understand their journey, which comprises multiple steps, stated Mahmoud Bahaa, General Manager, Rabbit. “At Rabbit we follow a neighbourhood centric approach, wherein we divide the areas into small neighbourhoods and try to identify customer needs leveraging our in-house artificial intelligence (AI) and machine learning technologies to personalise the shopping experience for our customers. Our assortment is also planned based on these data.”

Not exactly a quick commerce player, Kibsons is a bit different, Halima Jumani, Founder & Chief Executive Officer pointed out. “We are a family-owned business, extremely passionate about the fresh produce segment of the business because we’ve been importers and wholesalers of fresh fruits and vegetables for nearly 40 years now. Even though we’re in the space of delivering to the door, our focus is on fresh produce and that’s not an easy segment to deal with and convert customers. So, for us delivering quality products at a good price ensuring quick fulfilment are crucial. We aim for about 99% accuracy in fulfilment for 150,000 deliveries per month. It takes consistency to achieve this.”

Echoing Jumani, Raed Hafez, Chief Executive Officer, el Grocer by Smiles (part of e& Group) said, “There are many consumers and many shopping missions. At erstwhile el Grocer, now Smiles we target shopping behaviour and shopping missions of families, doubling down on quality of service, a large range and customer feedback to understand their personalised needs which enables retention and loyalty.”

Customers will always demand different things and will want them immediately. So, how can businesses balance out quick fulfilment while ensuring return on investment (ROI) on strategies and tools, Hintze asked.

“The first things we look at are aspects having a direct impact on the shopper, their retention and loyalty,” Hafez responded. We test several things, measure the impact and sometimes move on if it doesn’t work. For instance, we were one of the first ones to enable click-and-collect service but found that the customer base here doesn’t appreciate it, so we got rid of it. At the end of the day, the customer will give immediate feedback by placing the second order and that’s the ROI.”

“Our investment is always prioritised internally. The first app we created was for our delivery personnel, prioritising fulfilment,” Jumani added. “We’re very hi-tech internally; 100% of all our local FMCG orders are completely automated, with machine-driven purchase orders reducing food wastage. The tech that we are focusing on is not necessarily prioritising how to sell more products, but how to reduce the cost internally because that will ensure longevity of the business.”

Staying with cost management, one of the important drivers of cost is inventory. How can platforms ensure real-time inventory management, Hintze asked.

“It’s important to strike a balance between supply and demand to avoid excess inventory and therein locking in capital that we’re not using. At the same time, we don’t want to have low inventory levels. One of the most important KPIs we use is the return per square metre used within our warehousing systems. So, everything that we stock needs to have its value to bring in ROI. We do that by linking the end-to-end value chain – our e-commerce platform and app with the supply chain & inventory management side of the business and the last-mile and logistics,” Mahmoud explained.

“Our centralised warehouse has 15,000 SKUs, making it crucial for us to optimise every single part of the space. Our forecast is automatically generated and the sell through is calculated daily. The other thing we look at is speed. What differentiates all of us from physical retailers is the use of technology; every single step that we take is driven by data. And we’ve to manage data daily so that nothing sits in the warehouse or store for too long,” Hafez elaborated.

Quick commerce in the Middle East is very different from elsewhere and very different from the supermarket business, Lario added. “Instead of storing 2,500 SKUs in 250 square metres, we store 8,500-9,000 SKUs in the same space and must turn it over very quickly. The fact that we’ve been growing 20% a month for the last three years creates volatility in the supply chain and demand patterns. So, we’ve had to invest disproportionately to get algorithms that can predict accurately what’s going to happen next week so we can grow sustainably.”

“Demand planning is one of the most critical functions for our business,” Noja agreed. “What makes it even more complex for dark stores is that not only you need to maintain the right level of inventory in not just 1 but 30-plus locations every day of the month. Further, since our assortment is different by area and trends the model is more complex. We are getting better at this by pairing external data with our internal forecasting methods, bringing in AI and predictive model into the equation. With more data, the system will become more accurate.”

At this point, Hintze asked if the panellists have implemented automation within their businesses.

Hafez shared that Smiles has implemented automation in processing information, data, forecasting, demand planning, order placement and even at the warehouse without “losing the personal touch” with customers.

While Jumani feels automation might be “too early” in this part of the world and for Kibsons where she feels the need to do “a qualitative eye check” especially in the fresh segment.

Meanwhile, Talabat has started experimenting automation with Talabots or robotic deliveries. But Noja agreed that the market perhaps “isn’t ready” yet. He also shared how Talabots are stopped because people want to take selfies with these robots. More experimenting and optimising is needed before moving into the full automation mode. 

Sharing how Rabbit operates efficiently, Mahmoud said that they “measure everything in seconds” to understand if their tech integration is aligned with the layout of the warehouse to ensure optimum efficiency for pickers to reduce pick and pack time.

In summation the panellists touched upon the need to optimise last-mile fulfilment.

“We use very advanced route optimisation based on geolocation, coupled with traditional route planning and ensuring the driver has the right capacity to do enable timely deliveries. What is yet to be seen in this market in terms of last mile is the introduction of EV fleets,” Jumani stated.

Proximity with customers is a huge advantage of quick commerce, Lario observed. “On average our drivers are on a trip for 10-12 minutes at most. Hence, efficiency and speed play a big role in achieving unit economics.”

It’s all about the fleet optimization, Noja agreed. “At Talabat, we use the same fleet across all verticals. The same driver delivers food, groceries etc. With more than 10 million orders delivered per month, it really comes down to optimising the fleet at scale.”

In the upcoming years, personalising the experience for every customer will be crucial. That will require razor sharp focus on efficiency, effectiveness and profitability, Mahmoud added.

Extremes expedited the adoption of AI, and it will be interesting to see how it changes customer interaction with online grocers, Hafez concluded.