Anything in 10 Minutes: $5 Billion Delivery App Sweeps Latin America

(Bloomberg) — From an unmarked warehouse north of Bogotá, one of the most important startups in Latin America is entering the race.

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There, Rappi Inc. receives more than 200 orders every hour from 5pm to 9pm, for anything from white wine to toilet paper. It’s the equivalent of UberEats in the US or Delivery Hero’s in Europe, except Rappi’s “Turbo” promises delivery in less than 10 minutes.

That leaves the so-called pickers – mostly young workers in white polo shirts, hair nets and rubber boots – 90 seconds to quickly select items from the smartly arranged and under the conditions of a 10,000-square-foot warehouse.

“Toothpaste?” the employee asks from the end of the store.

“I got it. Arepas?” one asks, given a package of Colombian breakfast corn patties. The most ordered items – soda, beer and ripe avocados – are placed by the door for easy access. .

The pickers then hand the items over to a line of 110 delivery drivers, who receive their next destination eight minutes later. Restaurants are also willing to participate in the Turbo program – something Rappi says is rare.

“We’re not the only ones in Latin America doing this,” CEO and co-founder Simón Borrero said from the company’s headquarters in Bogotá. “We’re the only ones in the world.”

That flexibility has helped Rappi become a $5.25 billion business with a presence everywhere from Mexico to Argentina. CEOs are now riding the wave of public offerings seen among US technology companies such as Walmart-backed Ibotta Inc. and social media platform Reddit Inc., and could prepare for an IPO next year — most “probably” in New York, Borrero said.

The offer would come at a difficult time for the fast-moving business segment, with players such as Gopuff in the US and Getir in Europe cutting jobs following the crisis caused by the pandemic. But Rappi is betting that Latin America is the easiest place to do it.

“Gorillas, Gopuff, Getir didn’t make it work because the economy wasn’t there,” said Paulo Rebolledo, Rappi’s senior vice president of retail and Turbo. “But Latin America is a good market for us, if you think only about Turbo, the costs here are better, from our stores, stores, technology – especially real estate.”

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In developing markets, low labor costs are another advantage. But if India is to offer lessons, burning money still poses a challenge. The speed required to start there provides a similar and difficult window as Rappi requires significant initial investment to build a small network of shops called dark. Strategies to attract users have proven to be volatile, as people jump from app to app in pursuit of better deals. The increasing popularity of such companies means increasing pressure on transport operators as well.

“There is still an expectation from some investors and within the country that these catering companies should be growth companies, so they will not refuse to go to new areas to deliver sales, which means profit becomes a distant goal,” said Milan-based Tatiana Lisitsina, who follows Delivery Hero and Just Eat Takeaway for Bloomberg Intelligence. “For Rappi, the important question is whether it can be strong in its market and not share the same market with three or more players.”

Location, Location

When Borrero, Sebastián Mejía and Felipe Villamarín launched Rappi in 2015, it was a grocery and prepared food app in Colombia. The then-eight-person team got people to download the app by giving away donuts and found unexpected demand by including an empty box in the app for items that weren’t available. listed.

Customers began to order what they really wanted, including dishes from restaurants that did not deliver, as well as cash from ATMs that were billed to them through the app.

It received a $1 billion capital injection from Japan’s SoftBank Group Corp. in 2019, along with other investments from Sequoia Capital and T. Rowe Price. SoftBank previously said Rappi would be ready for launch by the end of 2023.

Rappi has worked on losing market share, acquiring Brazilian competitors, Box Delivery and Avocado, the Mexican payment platform Payit, and now offers everything from packages of travel to credit cards. It was forced to cut staff during the pandemic, and reached break-even for the first time in late 2023. It plans to expand into Central America, and its Turbo offering is already in countries seven, including Mexico, Brazil and Chile.

The need is clear: In the warehouse in Bogotá, where 3,000 items are supplied by Turbo, the banana does not stay on the shelf for more than four hours. The company hopes to offer at least 4,000 products by the end of the year, and 8,000 by 2025.

Latin America was the fastest-growing region for e-commerce last year, representing an estimated $272 billion in 2023, according to Medellín-based AMI analyst Valentina Meneses. Restaurants and takeaways have fueled the growth of local micro markets, with 70% of all sales being made over the phone.

Rappi’s ability to expand into different verticals “has reached new levels of convenience, cost and security that are deepening with Turbo,” which will be key to long-term success, Meneses said.

Location is one of the keys to making Turbo work.

Rappi must identify storage facilities available where customers live and work. Recycling products several times a day allows the company to choose products with a small footprint – something that is easy to achieve in urban areas. It now has these locations across 30 Latin American cities.

Mastering Logistics

Turbo presents a different challenge for restaurants.

Take the Bacu health food chain in Bogotá, which was the second restaurant after McDonald’s to offer a Turbo menu by the end of 2022. Co-founder Stephanie Gómez said she wants challenging the idea that speed can only be applied to burgers and fries.

“We wanted to offer Turbo from day one, so we tested many dishes that can be prepared in less than five minutes,” said Gómez, who estimates that 40% of the sales of home comes only from delivery.

Gómez, 32, says his 10 restaurants deliver about 10,000 orders a week in the Colombian capital, about 90% of them through Turbo. The key to cooking foods like Greek meatballs or Thai chicken at high speeds requires that the dishes don’t have four steps, he said.

For restaurants like Bacu, “this represents a big operational challenge, and that’s why you prioritize orders coming through Turbo,” said Santiago Franco, global head of Turbo’s restaurant project .

There are many benefits for the food that prepares it. In Barranquilla, 28-year-old David Ricardo said Rappi contacted his burger joint because of its fast delivery times and asked if they wanted to start serving menu items at Turbo . The change allowed him to increase his five restaurants by about 30%, Ricardo said.

Each restaurant in the Turbo vertical receives metrics from Rappi where items are aligned with required delivery windows. The commission that Rappi charges each agency varies based on anything from sales prices, options and other deals, Franco said.

About 70% of Turbo users are part of Rappi Pro, he said, a monthly membership program that charges users around 23,500 pesos ($5.60), which allows discounts on products and delivery.

Under Pressure

Rappi’s reach is unavoidable in Bogotá, where couriers can be seen lugging the company’s bright orange bags from nearly every block. It’s the last part of getting the Turbo to work – and it’s a lot of pressure.

“There is a lot of traffic here, and the rush hour is very difficult,” said 31-year-old driver Angel Pulgar at the Rappi-placed visitor center near Bogotá’s Parque de la 93. “If the restaurant takes two or three minutes to prepare the food, then it’s up to me to prepare the rest.”

Rappi says that to reduce those challenges, Turbo commands are only delivered within a 3-kilometer (1.9-mile) radius, and are sensitive to issues such as stoplights, intersections and traffic, so that they are not urge to hurry.

Rappi has about 70,000 delivery drivers in Colombia, who make an average of 11,000 pesos ($2.65) an hour, said Matías Laks, head of Rappi’s Colombia. Like Pulgar, about 40% of them are immigrants, with a large number coming from neighboring Venezuela, which has seen nearly three million people settle in Colombia after fleeing the economic crisis.

Pulgar, who is from the Zulia state of Venezuela, has been Rappi’s driver for seven years now. He says he can make as much as 500,000 pesos ($119) a week working 10 hours for five or six days on a motorbike.

Shoppers at Bogotá’s Turbo le Chicó store, an upscale area with the most Rappi users in the capital, earn about 1.7 million a month.

That’s slightly more than Colombia’s minimum wage, though as in most of Latin America, roughly half of the labor market is made up of informal workers who can earn even less.

Reaching far

The effects of Rappi’s explosive growth can be felt across all retail and restaurant sectors, and include anything from food packaging to motorcycle sales.

Every month, Juan Carlos Díaz Tarud’s factory on the outskirts of Barranquilla makes about a million paper bags for Rappi Turbo. While his company makes bags for a variety of retailers, from Crocs to Target, he said Rappi’s massive growth has also boosted his business.

“It really pushed us to keep our machines running at full speed,” said Díaz Tarud from Ditar’s large warehouses, where huge rolls of paper are constantly feeding the printing, sewing and sewing machines. fold the bags.

In its desire to grow, Rappi has made a big contribution to the financial sector, starting as a digital wallet in 2019 to get regulatory approval as a financial institution in 2022. It has already issued more than 215,000 credit cards throughout Colombia and has accumulated a savings account of 300,000. customers, which offers 14% interest rate, the highest in the country.

“We started giving out carrots, lettuce and burgers, and now in Colombia people are depositing their earnings into our accounts, which speaks to users’ trust,” co-founder Borrero said. . “The idea is that we want to be where users go to solve all their solar needs.”

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