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No, these are not “the best of times” for last-mile delivery apps

Don't worry, we speak : Español (Spanish), too!


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Contxto – This is a battle royale like none other. Last-mile delivery apps are used to duking it out over consumer markets. It’s a fencing duel they’re well versed in. 

But with the ongoing pandemic and incoming economic crisis, this is now a duel they are fighting with one arm behind their backs, blindfolded, on a rollercoaster. 

Food delivery apps, like Simpleat, Frubana, Foody, Waruwa, Rappi, Cornershop—and these are just the regional players—, are in a truly unprecedented situation.

They are burning through their cash to meet enormous additional demand, without being able to raise their prices, in need to cover additional expenses, and with no clear means of raising money on the venture capital (VC) market any time soon. 

Viral solidarity

Startups often tout social causes as part of their modus operandi. They’re founded not only to sell the goods, but also—allegedly—to change the world.

Now, with the world in crisis, many are having to put their money where their mouth is. Or rather, where other people’s mouths are.

Take Tomás Iakub, co-Founder and CEO of Argentinian Simpleat. Last week he announced that through their “Food for heroes” (“Comida para héroes”) campaign they would be handing out meals to hard-working—and time-scarce—health workers.

And it’s not just transnational scaleups. Startup Foody is donating food as well, we were informed by a self-described “small investor”, who believed it was also right for the media to show “appreciation for the smaller guys” in the ecosystem.

So there you have it. Virtually all other last-mile delivery companies have stepped up the plate and coughed up the solidary goods to ease the passage of this crisis. 

But keep in mind, if they play their cards right, there is much to be won if these companies make the most of a good crisis.

Exponential growth

While, a few months ago, companies were convincing large, late-adopting swathes of the population of the convenience, trustworthiness, and usefulness of their apps. How the times have changed.

Mexican-Chilean Cornershop has actually revived three-year-old adverts featuring older people easily doing their shopping without leaving their homes. (Obviously from a different context in what now feels like a different age.)

But most of the marketing legwork seems to be done by the virus. Downloads of delivery apps in Latin America have jumped by more than 250,000 in the past month, according to the data firm Sensor Tower.

Companies are concurrently scaling up on a massive scale.

Nelson Rodríguez, Founder of Colombia’s Waruwa, revamped its logistical efforts in order to single-handedly distribute its fresh, locally grown, produce. Fifteen tons of it daily. 

Not only that. They completely overhauled their business model from B2B (business to business) to B2C  (business to consumer). Their priority wasn’t just feeding the folks trapped at home, but to not deprive the network of small farmers that depend on the startup. 

The results have been immediate. Last week, over the course of three hours, Waruwa covered its signup quota for the year

Clearly, this growth has allowed startups to reinvent themselves.

In a similar vein to Wawuwa, produce delivery company Frubana is looking to supply working-class neighborhoods with fresh produce tapping into community tools already in use such as Whatsapp.

Indeed, Frubana is going as far as to create a “startup within a startup”, Fresco, which will be carrying its new distribution duties out.  “Fresco is the future of Frubana,” said the company’s Product Manager, Miguel Silva.

Unfortunately, the future is still far off, and, believe it or now, many will not be making it that far…

Burning the ship to keep the engine running

With great growth come great overheads, and some companies are simply not equipped to deal with them.

Add to that a sudden surge in additional costs—facemasks, sanitizer for your delivery people—, for instance. Or a sudden end to income, like after Rappi’s choice to stop collecting on loans it extended to restaurants that built special kitchens—not charity, but rather pragmatism; they can’t allow these businesses to go under.

Indeed, for many it is already too late, Chilean PedidosYa found that nowadays demand outstrips supply. About half of the 10,000 restaurants on its app have shut down.

With all this in mind it turns out that despite a “bumper user crop”, Rappi CEO actually forecast particularly bad times. He predicts the company will tally wider losses for March and April than expected, even after having doubled the number of couriers it works with to 300,000.

Scarcity all down the foodchain

Every stage of the supply chain is affected.

The unemployment glut, which is only set to get worse worldwide, is not only swelling the ranks of those begging to become last-mile couriers, but it may also choke up demand as the regional economy contracts and remittances fall.

And they will fall. Look at the US unemployment rate. Just wait for 2020…

Source: US Department of Labor

By most counts a single last-mile delivery person’s order rate has been halved just this week across platforms. 

Rough times are clearly here for everyone, but spare a special fallout for those who had it hard before this crisis—the couriers, the cooks, the small business owners.

This weekend the Colombian border saw the crossing of 500 Venezuelan citizens in a single day. Only thing was, they were returning to the country they had recently emigrated from. 

One of them was quoted as saying that they’d rather be unemployed and at home with their mother, than in a foreign land. 

Related articles: Tech and startups from Colombia!

-AG

Alejandro González Ormerod
Historian, writer, and editor from Mexico City. He was a book publisher, academic, and cheesemonger before joining Contxto. Still deciding on which Latin American country to visit next; food and fun are the main criteria.

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