Shopping aggregation is now a significant part of future online commerce across the world. Aggregators, also known as third-party sellers, bridge consumers with brands and, increasingly, retailers. New aggregation models and platforms appear in almost every retail sector, from food to financial services.
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The first marketplace and aggregation models appeared in China. E-commerce’s first mega market was powered by tech giants Alibaba and Tencent. Outside China, globally Amazon is the world’s largest aggregator through its online marketplace and has a brand value estimated at $350bn. There is no doubt that marketplace aggregation has transformed where and how we shop.
While Amazon continues to dominate online marketplaces in most parts of the world, the model is continually transforming to adapt to consumer shopping behaviours and how they affect everyday life, with what is now being coined q-commerce aggregation.
The pioneering UAE
In the area of quick-commerce, specifically within the grocery category, the UAE is a world leader and accounts for a significant portion of the region’s market value, with quick-commerce being estimated to be valued at $20bn in gross merchandise value in MENA by 2024. Originally inspired by food delivery aggregators, the UAE has led the evolution of online grocery aggregation. This is partly because the country has for many years had high internet penetration, enjoying a well-developed and relatively cheap logistics system and a tech-savvy affluent population that demands convenience and service at a touch of a button.
Unlike western Europe, where online grocery shopping was dominated by the large grocery retailers and, for the most part, replicated the model of the weekly grocery shop, the aggregator pioneers in the region, such as Instashop and El Grocer, realised that shoppers in the UAE were more inclined to use their phones and devices when placing an order for groceries. As it became a norm to call local stores and request immediate delivery of what was needed, online was the next logical step.
The first players leveraged this shopping behaviour, established a shopper-experience-led tech back-end to support it and effectively transformed ‘on-demand’ grocery shopping into an app-based online activity. Simply put, the pioneers discovered that whoever owns the means of shopping and delivery owns the shopper and the sale. The technology-led quick-commerce model is one we are now seeing pop up in other markets. So, by understanding the evolution, we can predict the future of q-commerce elsewhere.
How it started
Starting with a small number of physical retail partners in key neighbourhoods, the q-commerce fulfilment store network in the UAE grew to total geographical coverage across the country,.
Initially, the battle was for customers, with ubiquitous advertising for aggregators encouraging the download of an app. Aggregator apps, including Instashop and El Grocer, were making substantial progress in recruitment and usage by 2019. However, in 2020 as the Covid-19 hiatus hit, the game changed.
As shoppers faced unprecedented restrictions, including access to physical stores, the tangible benefits of online grocery shopping became prominent; thus, sales via aggregators more than quadrupled in some categories, and the value of the UAE’s overall retail e-commerce market hit a record $3.9bn in 2020. Downloads of apps and traffic to the aggregator platforms increased, so brands were forced to take the channel much more seriously. As a result, brands even started competing to buy in-platform media slots for brand advertising and shopper marketing.
New behaviour and expectations
Most shoppers in the UAE expecting products delivered the next day – and 20 per cent wanting products delivered to them the same day they order them – has attracted new entrants into the q-commerce channel. Competition has become increasingly fierce, but interestingly the more established platforms have responded with an expanded offering and shopper-centric innovations.
El Grocer, for example, continues to innovate around speciality products, basket growth initiatives, such as its recipe boutique, and loyalty scheme redemption through the launch of pay-by-Smiles-points. Instashop, on the other hand, continues to build its content functionality by providing product education and making products easier to shop for.
Prominent players are moving far beyond just packaged groceries into other ‘quick’ delivery category options, including pharmaceuticals, pet supplies, fresh goods, cosmetics and even electronics. Instashop claims to have more than 1 million products now available on the platform.
As a result, more retailers in other categories are being added to q-commerce platforms and, in an exciting development, in some cases the platforms are establishing their own warehoused retail fulfilment solutions and creating ‘dark stores’ that offer unique stockkeeping unit (SKU) lineups and bundles that may not be available elsewhere; a case of aggregators becoming actual retailers in themselves.
This benefits shoppers because, with all these innovations, aggregators are offering convenience, quality, range, safety and value.
As we see the aggregation evolution model rolling out elsewhere, here in the UAE aggregators have become more diverse in their offerings. We will definitely see more focus on relevant content functionality. Because you really can’t sell a television online as you would sell a can of beans.
Pressures on fuel and delivery costs will undoubtedly affect the competitiveness of all forms of e-commerce and platforms. Aggregators will need to face that challenge by concentrating on factors other than simply value and convenience, and localised delivery will become more critical.
Finally, while q-commerce and grocery aggregation will grow, there will likely be a rationalisation and reduction of the key players. While that’s good news for brands that need to spend effectively on media, it’s also good news for shoppers, as the platforms that will win will be the ones that put the shopper experience and usability at the heart of their future operating models.