- ByVinayak Shete | February 8, 2024
If you have ever bought anything from a quickcommerce (Qcom) portal with 10 mins delivery you would realize how easy and lazy it has made our life than it was a few years back. This comfort is like an addictive drug. But once the customer comes out of this comfort and decides to go out in the sunshine like old school shopping, reality strikes.The rift between the commodity prices online and offline looks wider than it was speculated, leading to rise in cognitive dissonance. Are we been looted intentionally or its just an unforseen effect. The purpose of this work is to explain this phenomenon through economic and strategic concepts, elucidating how Qcom companies, instead of distributing value to customers, vendors, and themselves, end up creating economic value only for vendors and themselves at the expense of the customer, using the drug of convenience.
The “Almost” Perfectly Competitive Market: “Sabji Mandi”
Most of us use Qcom services for buying vegetables. The vegetable market (Sabji Mandi) is an example of an almost perfectly competitive market. A perfectly competitive market has many buyers and many sellers. Buyers are allowed to make decisions on what to buy, and sellers are free to choose what to sell, both acting in their self-interest. Supply and demand determine what buyers will buy, what sellers will produce, and at what price these transactions will take place. Usually consistent in a perfectly competitive market. For example, if one wants to buy onions, they may observe that every seller in the market has almost a consistent price. How do you know this for sure? Did buyers visit every shop? The buyer goes to the market, observes what is in abundance, knows what they need, and vice versa for the sellers. Both negotiate and end up at a common price point, which happens across multiple buyers and sellers, letting the supply and demand curve act and bringing an equilibrium price. This phenomenon, or the market forces that govern markets, is described as the “Invisible Hand” of the free market by economist Adam Smith. So, we see that for the lowest prices to be available in the market, and for the benefit of society, the free market with traits of a perfectly competitive nature is foremost, with information being shared freely and accessible to all. What happens when one tries to control these invisible hands?
Qcom Intervention
In the Qcom business model, businesses sell commodities from already perfectly competitive markets by separating buyers from sellers. Now, this intervention is trying to control the invisible hand. Why do buyers and sellers allow two things to happen in the first place? For buyers, it’s the comfort of purchasing and having items delivered at home with an additional expense of delivery cost (at least that’s the claim). For sellers, it’s the reduced operational expense. Instead of engaging with multiple buyers, they now only have to engage with one buyer—the Qcom firm. This intervention by Qcom firms hampers the free flow of information between buyers and sellers, and that “almost” perfectly competitive market starts showing traits of a monopoly but favoring Qcom firms. Even if Qcom firms decide to be transparent by sharing information between buyers and sellers regarding supply, demand, and prices, there will always be speculation about its truth.
Who Suffers?
Prices do not remain constant across the market for the same commodity; society suffers. A few buyers end up buying at a higher price, and a few sellers may end up selling at a lower price than the equilibrium prices. Is this intervention intentional? The motive of the intervention can be questioned. It is hard to tell if Qcom did this intentionally or not, but the fact that this moves them towards a monopolistic nature indicates a sense of intentional intervention.
However, it is also a fact that the Qcom business model started with redistributing the value to buyers, sellers, and themselves. Due to intervention in an almost perfectly competitive market, instead of just redistributing the value created, they ended up increasing the total economic value and then distributing that additional economic value among sellers and themselves, which happens at the expense of the customer who now is not in control and not aware of market prices in any way. The same applies to the sellers who end up selling at lower prices than market prices. The ultimate winner here is the Qcom firm. And this is a disturbing part because the loss of economic value seems to be higher than the value generated for these buyers and sellers. The conceptualized value sticks for three scenarios are shown in the image for more clarity:
1. AS-IS value distribution, if there are no Qcom firms in the market.
2. TO-BE value distribution with Qcom firm intervention
3. Actual value distribution with Qcom intervention
(Delivery charges are ignored)
If you have read through to this point, do you think you are only paying for the delivery charges for the convenience of buying veggies from home? If you are a Qcom firm, do you think you really generate enough value to nullify the loss in economic value for the end customer due to market intervention?
Author:- Vinayak Shete, Manager Solution Design, Addverb Technologies
