Delivery Platform not only for Food, GroceriesBy Jan Hogewoning | Sun, 12/29/2019 - 11:00
Q: What has made Mexico such a major part of Rappi’s success?
A: There are about 700 million people in Latin America, with Mexico and Brazil being the biggest potential markets. In part because Mexico is so close to the US, it is open to digital transformation. The country has a very rich food culture with many local chefs who cook great food with love. This is something we love at Rappi. The government is also open to investment and does not over-regulate.
Q: What is your strategy for expansion to new areas of the country?
A: We are making our platform available in six new cities every month. By early 2020, we should be in 30 cities nationwide. Our focus is primarily on cities with over 300,000 inhabitants. Because we are a last-mile delivery service, we need to have a good density of users, merchants and couriers at the micro-zone level. Our delivery radius is generally between 1.8 to 3.5km, with most of our couriers using a bicycle or motorbike for a super-fast delivery, all though we also have a large fleet of cars/vans to accommodate larger purchases.
In selecting new destinations, we look at a city’s GDP per capita, traffic patterns and population per square kilometer. We then designate an area polygon, and as we scale orders, we expand its coverage. Our three main cities are Mexico City, Guadalajara and Monterrey. Merida and Queretaro have also been a big success as well as various cities in the north such as Hermosillo and Tijuana. Our business model is pay for performance, so we only charge our merchants if they generate sales. Rappi users pay the delivery fee, which goes to the courier. This is usually between 20-40 pesos, but fluctuates depending on conditions, such as bad weather.
Q: Recently Uber Eats purchased Cornershop. What are you doing to diversify your portfolio?
A: We always welcome competition. Basically, there are two models in the market. One is single vertical, which offers only one service. The other is a super-app containing multiple verticals offering various services. Rappi has been doing that from the beginning, that is our DNA. We are reinforcing our value proposition by offering other services besides restaurant food and grocery delivery. For example, Rappi Pay is a payment service for personal transfers. This can also be used to pay bills, such as taxes, gas and electricity. We also offer Rappi Favor, which allows you to run errands. Someone can go to a location, wait in line, and pick something up for you. They can do your laundry, or get an extra copy of keys. Another thing we do that is different from our competitors is Rappi Antojos that allows users to order food from any restaurant even if they are not affiliated with Rappi. We have also become a platform for other platforms through partnerships with several new successful companies that sell their products through our platform, such as Green (electric scooters), Cyclo (bicycles) and Gaia (furniture).
Q: What actions are you taking in the area of pharmaceuticals?
A: This area is simply amazing and we have had great traction in this segment. If you think about it, people who are ill are in most need of a delivery to their home. One of the pain points in this vertical is not having a complete prescription. Our couriers can go to several points and complete the order for you. Another challenge for pharmacies is how to operate a fleet. There are always spikes in demand, and if there are multiple deliveries at a time, pharmacies can struggle to complete the job. Our couriers are provided on demand and without a limit, whether a pharmacy needs 100 or zero. In terms of improvements, we think there should be a way to provide an interface with a picture of the prescription. Face recognition, for example, could verify that the patient is receiving the correct medication. This would require regulatory changes.
Q: What advice do you provide to restaurants and other merchants?
A: A key aspect of our value proposition is providing insights to our merchants. We collect and aggregate information, and every Tuesday we provide a report to our restaurants. This includes things such as client complaints, whether they are accepting enough orders, if they could have better opening hours, and how menu items perform. We can identify whether a problem is systemwide for a chain, or only in one unit. We translate this information into suggestions for product promotions too. We also do heatmaps of areas and see where there is a demand for a certain product. In that case, we can advise restaurants where to open next. We really believe in democratizing information, not just for large restaurant chains but also for the single unit local heroes that can use the information to improve their operations.
Q: What do you think should be included in regulatory reforms?
A: I believe that if an operation takes place with a merchant that is located in Mexico, then the platform should also be registered in this country. Unfortunately, many companies register in countries that are considered fiscal paradises. In every country where we operate, we pay taxes locally, and charge VAT, which we pay to the government. Of course, taxes should not become a barrier to attracting investment. Capital has to flow freely between countries, without friction or disruption. However, the system should be designed so that everybody is on an equal playing field and contributing to the local economies where the operation takes place.
Q: How are you addressing criticism about the flexible work phenomenon?
A: A key part of our mission is to transform the life of our couriers. Over 80 percent of our couriers work less than three days a week. This means that they are doing other things on the remaining days. They are studying or getting another income. At Rappi, they are making four to five times the minimum wage per hour in a flexible way. This allows them to escape the poverty trap. In Mexico, there are many entry level workers who work eight-hour shifts, six days a week. They have long commutes and if they miss a day, they get laid off. This situation obstructs their economic mobility and studying capacity, and is something we want to change. We also provide a comprehensive insurance policy for couriers while they are on the job and exposing themselves to the risks of the road. I do believe the gig economy is the future. Eventually, it will migrate to other areas too, such as individual management tasks or accounting.
Q: In what other ways are you developing corporate social responsibility?
A: We have several ongoing initiatives. One is a partnership with Ironhack, a school for developers. We provide significant resources for scholarships and guarantee students a job at our company. We have over 700 developers across Latin America. Our couriers receive sponsorship from Rappi to participate in cycling competitions, organized by Gran Fondo. These competitions are aspirational activities. Many of our employees, including those who shop for groceries at supermarkets for users, are climbing the ladder and getting more responsibility in the company. Through authorized third-parties we also plan to provide financial services to our users, couriers and merchants. Over 60 percent of the Mexican population in Mexico does not have access to a bank account. Our transfer services provide a way to spend money safely. In the short term we plan to provide loans to couriers, so that they can buy a bike, a house or insurance for their family. In terms of sustainability, we have been providing information to restaurants on how they can make their packaging eco-friendlier. In the near future, we will provide Rappi users with the ability to order from restaurants that are eco-friendly.
Q: What are your goals for 2020-2021?
A: In the last three years, we have multiplied in size by five every year. We want to continue multiplying at high and sustainable rate in the next few years. We will continue to provide the right offering in our micro-zone polygons, expanding and intensifying the value proposition. This will include adding more services and providing the right insights to our merchants so that they can make better decisions. In the bigger picture, our goal is to cover all of Latin America.
Rappi, Latin America's first super app is a multiservice delivery platform with presence across Latin America. By early 2020 the platform will have a presence in 30 cities across Mexico.