Q-commerce is “in”. I’d like to think I know a thing or two about it, having worked in the industry for Munchies for a long time already. The goal of this post is to give my observations as objectively as possible, despite the fact that I am too close to comment. Sour grapes? I’ll let the reader decide.
The allusions may make it extremely clear who these nameless companies are. While I am not aiming my ire at a single player, I am generalising the issue. I am addressing the Pakistani audience because I have expertise with q-commerce, but I am sure this is true globally.
A hot market isn’t always a positive thing to work in. The main disadvantage is competition and, more significantly, money. VCs and entrepreneurs alike are chasing insane valuations at the price of building even a half-decent product. It takes 30% MoM growth to chase outrageous valuations. Maybe, however I’m very sure there aren’t many things on the market with a powerful PMF, therefore I doubt it’s true. Maybe later, but not now.
To be valued at twice as much as you are today, your GMV ARR (gross margin annual run rate) must be at least twice as high. As a result, dollars become pennies. Any product that is better than the competition does not necessarily win. True in any market, but particularly true in Pakistan’s q-commerce market.
It’s hard to tell what most (all?) products offer. That they execute well (excellent) and spend money on the problem (bad) (not good). Is it any wonder that customers are fickle? They’ll go if you launch a new app or increase your discount. Inherently sticky products are rare.
Despairfully, 30 percent or more of orders are “fake” (and this is also true for B2B). Unrealistic orders or orders placed by the “wrong” customer are fraudulent orders in my opinion. To sell a product to a retailer in a B2B marketplace. The volume goes upstream (to distributors!) or downstream (to retailers) to satisfy the insane GMV growth rates. It’s a dirty industry, and most corporations I know are aware of it, but they don’t want to stop it. Also, in B2C, orders to retailers result in a significant increase in Average Order Value (AOV), providing another excellent investor metric.
Then there’s the math. I can calculate unit economics and CAC in at least ten different methods. Aim for lower unit economics, even if it means increasing CAC. To illustrate this, consider a first-time user receiving a welcome discount, followed by a lower but still significant discount on their second order, and so on. Some of these answers aren’t so clear.