What’s going wrong in q-commerce and what we can do about it

Working in a hot market is – not – (always) a good thing

Quick Commerce (q-commerce) is “hot”. Having worked in the field as part of Munchies for quite a while now, I like to think I know a thing or two about it. While there is such a thing as being too close to comment, the purpose of this piece is to present my observations with as little bias as I possibly can. While I realise some of this might be attributed to “sour grapes” – I will let the reader be the judge of that. 

In the interest of remaining unbiased, I won’t be naming any competitors, even though the references may make it very obvious who these unnamed companies are. But that said,  I am really not digging at any specific player, and to a large extent generalizing the problem — I am sure all of this is not true for all players. In fact, while my experience is with q-commerce in Pakistan and hence I am primarily addressing the Pakistani audience, I can imagine all of this is also increasingly true for the rest of the world. 

To begin with, working in a hot market is – not – (always) a good thing. The largest drawback is that there is a lot of competition and more importantly a lot of (VC) money. VC’s as well as entrepreneurs are chasing crazy valuations at the expense of creating even a half decent product. Chasing crazy valuations means one must grow 30% MoM or more. With a strong product-market-fit (PMF), that may be possible, but I can almost assure you that for the large part, there are few products in the market with a strong PMF. They may, down the road, but they don’t at the moment. 

If your GMV ARR (Annual Run Rate) is $5M today, and you are valued at $20M, your next valuation better be at least 2x, but likely more like 4x or more! This results in selling dollars for pennies. Even if there is a product in the market that is better, it does not mean it will win. While that is true in any market, this is especially true in Pakistan’s q-commerce space. 

Most (all?) products are largely the same with almost zero differentiation in terms of what they offer. The only difference is how well they execute (good), and… how much money they throw at the problem (not good). End users are rarely loyal, and is it any wonder? Launch a new app, offer them a bigger discount, and they are gone. Products are barely (inherently) sticky if at all.

Sadly (and this is also very true for the B2B space), 30% or more of the orders are “fake”. To me a fake order is either one that was actually not placed by an end user at all, or one that was placed by a “wrong” customer. For example in a B2B marketplace the goal is to sell the product to retailers. However in order to meet crazy GMV growth rates, much of the volume ends up upstream (to distributors!) or in the case of B2C, to retailers. Most companies I know of are aware of this but let this dirty business go on because if they aggressively stop this, their growth will fall tremendously. Moreover, in the case of B2C, orders to retailers end up increasing the Average Order Value (AOV) substantially – and voila, you have another impressive metric for investors.

Then there is a matter of massaging numbers. I can come up with at least 10 different ways of calculating unit economics and CAC. Generally there is a tendency of lowering all costs of course (in real but also in decks!), but if one can’t, then the focus is on finding creative ways of lowering unit economics even if at the expense of increasing CAC. For example if you give a welcome discount to a first-time user, another but smaller discount on their second order, and so on – where would you account for this – in unit economics or CAC? Some of these answers are not that obvious.

The same is true for retention. I can easily count 5 different ways of calculating “monthly retention”. It is very important that investors ask the right questions and know what different sorts of retention numbers may look like, and compare apples to apples.

Show me any numbers and decks, and I can easily decipher anything and read between the lines. I can easily tell if numbers are being fudged or not. I am shocked that investors can’t (or don’t want to) tell that in their due diligence! 

It absolutely makes no sense especially in Pakistan to run after less than 30 minutes delivery, or less than 10 minutes. That is an absolute waste of – wait for it – time, and money. Nobody can claim they can deliver in 10 minutes and their competition can’t – anyone can deliver in 10 minutes (or 5?) if enough money is thrown at the “problem” – which sadly is not the problem at all; a vast majority of end users will be happy to experience a better (and reliable) product as opposed to getting their stuff delivered in 15 minutes vs 40 minutes for example. But since 10 minutes (and soon, 5?) is the fad, VC’s fall for it, and entrepreneurs follow (or vice versa).

When one is trying to disrupt or innovate in a space there is going to be “noise”. If there are five players today, there will be less than three in five years, but more likely 1 or 2, even if it’s not a winner-takes-all market. The noise is healthy and unavoidable. While I have pointed out many (obvious?) problems, my intention is not to let anyone down. In fact, if you (VC or entrepreneur) are looking for any help or concerned about any of the above, I’d be happy to chat.

My only hope is as follows:

  • There is focus on building a superior product, not just another copy cat.
  • Find a strong PMF – then let the growth come to you. Do not chase after it heedlessly.
  • It can be difficult not to fudge numbers or let the “fake” orders continue, but I hope there is a collective effort to strongly shun this practice. 
  • A lot of this is driven by “peer” pressure (read VC pressure and expectations), so anything VC’s can do to course correct this will go a long way.
  • Focus on product and tech — you will be in a very bad place if you can’t solve growth with a better (for example, more automated) platform. No amount of focus on operations will help you grow the way you need (or want) to grow.

Last but not least — as the world goes into a recession, which it surely will — money will dry up first in the emerging markets and for startups whose unit economics are very questionable. So if you are in the q-commerce space, you better differentiate now than tomorrow. While chasing crazy numbers may help you reach the vanity metric of great valuation, the rat race will not last long. It does not matter whether you are in seed, Series A, or a later stage. All this will come to bite you. 

I understand this can be difficult in an environment where you already have a high valuation (it is true for all startups in the space who have raised a VC round) and your investors expect you to of course increase it and not do a down-round.  And in some cases, your money moat will serve you well, but more likely than not, it won’t be enough. Work on building a strong product moat, not money moat.

Saad Fazil
Saad Fazil
Saad is the CEO and co-founder of Munchies, a q-commerce startup. Prior to Munchies, Saad was co-founder at VentureDive and led products at Careem through 2017. He is an MIT alum.


  1. Quick Commerce (q-commerce) is “hot”. Having worked in the field as part of Munchies for quite a while now, I like to think I know a thing or two about it. While there is such a thing as being too close to comment, the purpose of this piece is to present my observations with as little bias as I possibly can. While I realise some of this might be attributed to “sour grapes” – I will let the reader be the judge of that.

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