How rapid delivery services are evolving in Latin America

Date : 04 June 2020

Oliver Butterworth

Retail Analyst

Rapid delivery services have been present in Latin America for around a decade, although the most successful start-ups launched in 2014 and 2015. Through a range of providers customers can order fast-food, restaurant meals, groceries, medicine, and more and have these delivered by courier in under an hour.

Evolving region creating opportunity for rapid delivery services

Latin America’s cities are huge and in usual circumstances are busy metropolises with high levels of traffic congestion. In recent years, the region’s population have been feeling increasingly time-poor, due to working longer hours and lengthy commutes. This created a space in the market for rapid delivery services to flourish. For many customers, having something brought directly to them in under an hour is highly convenient, even if there is a cover charge.

                    Source: IGD Research

Different services for different needs

Pureplay rapid delivery services can be loosely divided into two types:

  • Aggregators, like iFood and Uber Eats, where the delivery of restaurant food is the core business
  • Delivery providers, e.g. Rappi and Glovo, where couriers deliver a range of products and services

Notes: monthly website visits are based on the average of three months of data from September-December 2020. PedidosYa and Domicilios are both owned by Germany’s Delivery Hero but operate as two subsidiaries in the region.

Source: IGD Research/SimilarWeb

The region’s largest domestic delivery services are iFood, Rappi and Cornershop. In recent years, rapid delivery has become major business in Latin America. Rappi achieved unicorn status in 2018 and in 2019 Japan’s SoftBank Group invested US$1bn into it. Uber is currently in the process of purchasing a majority stake in Chilean start-up Cornershop.

An increasingly competitive industry

All the major rapid delivery services now deliver in less than an hour. As these businesses have extended the range of services on their platform, there has been more crossover and, therefore, increased competition.

The businesses typically launch in capital cities (or countries’ main commercial cities), where there is the highest demand and the last mile is shorter. The major cities also benefit from better roads and faster internet speeds. Inevitably, once these services gain a foothold in the largest city, they begin to branch out to tier two and three cities and beyond.

A key strategy for businesses like Glovo, Rappi and Cornershop is to extend their coverage out of the cities and into the suburban provinces. However, this creates a challenge when wanting to maintain the same delivery times, which they have become widely known for.

Last mile landscape in the big six markets

Source: IGD Research

Alliances and acquisitions

Many of the region’s major retailers have formed alliances with third party deliverers to unlock their own rapid delivery services. In most cases, these operate alongside retailers’ own delivery services. Partnerships allow retailers to continue managing in-store operations and relationships with suppliers, whilst leveraging third parties’ delivery capabilities.

Some retailers have taken this a step further by acquiring third parties, enabling them to own the complete end-to-end process. For example, in Brazil GPA (part of French retailer Casino) acquired third party business James Delivery.

          Source: James Delivery Linked In

How could last mile evolve?

In our report on last mile delivery in Latin America (subscribers can find this here) we explored several ways Latin America could take learnings from other international markets to evolve last mile solutions even further.

One of the examples we provided was through the greater use of dark stores, which will enable businesses to pick and fulfil deliveries quicker. For example, Yandex, Russia’s largest technology company, launched an app-based grocery delivery service called Yandex Lavka, which can deliver groceries to customers in Moscow and  St. Petersburg in 10 - 15 minutes. It achieves this by using over micro dark stores (approx. 150 sq. m), located all over the city. Its couriers collect products from the dark stores and deliver them to customers in a one-mile radius. 

Source: Yandex.Lavka


PedidosYa opens its first dark grocery store in Uruguay

In May 2020 PedidosYa (Orders Now) (part of the German Delivery Hero business) opened its first dark store for grocery deliveries in Uruguay’s capital, Montevideo. Through its Market service, it aims to fulfil grocery deliveries in 20 minutes. To support this PedidosYa is opening two more dark stores in Montevideo this month.

Using its own warehouses and staff has several advantages. Pickers will quickly master the layout and be able to locate products efficiently, without customers or store staff obstructing them. Also, they do not need to spend time queuing and paying for product. Lastly, PedidosYa has full control over the layout, inventory management and product range.

How could dark stores develop further?

PedidosYa aims to have five dark stores in operation by the end of 2020. Faster delivery times in its home market will give it a competitive edge over local rivals, like Rappi. It also aims to expand the model into other countries where it operates. Given its presence in competitive markets including Colombia and Chile, the step could encourage other providers to open dark stores of their own.

Another option is for retailers to open dark stores. For example, in Brazil Carrefour has partnered with Rappi and is driving efficiency through use of its own dark store. Carrefour manages its own picking, with Rappi only handling the delivery. Its Express service delivers groceries in 35 minutes.

This report provides insight on the evolution of last mile, rapid delivery services in Latin America. This includes both global businesses that have entered the region (e.g. Uber Eats and Glovo) and the extremely successful local players (such as Cornershop, iFood and Rappi).

See how shoppers are using online rapid delivery and how manufacturers from across the world, can meet the opportunity.

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