Ivan Ariza
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5 Pandemic-Fueled Logistics Trends Set to Stay in Latam

By Ivan Ariza | Wed, 06/15/2022 - 13:00

It’s not news that the pandemic has changed the way people consume, shop, and travel – and profoundly impacted the last-mile ecosystem in Latin America. In Mexico, about 80 percent of web users now rely on delivery platforms to get their groceries, fashion, household items, and other products. This trend will only continue to grow.

Granted, consumer expectations for fast delivery and technological efforts to make this happen were already booming before the pandemic. But the sheer number of new companies entering e-commerce in Latin America has paved the way for a new era of last-mile logistics that goes far beyond speedier delivery.

Let's take a look at the five trends altering the last mile in Latin America for good.

1. Fast delivery is the new normal

With its slogan, “free delivery in 1 day,” Mercado Libre is pioneering a novel trend in the logistics industry: lightning-fast delivery. The retail giant has recently invested in several planes to meet its unabated demand for agile shipping.

Due to successful frontrunners like Mercado Libre, venture capitalists are now hungry for startups that set high standards. In fact, I’ve been observing a growing push-and-pull effect from new expectations to improve solutions. Sooner or later, even the smallest stores will have to adapt to fast delivery and offer their customers similar conditions.

However, fast-paced delivery poses an immense challenge to corporate logistics centers and the logistics industry, impacting the entire supply chain. Especially because consumer expectations are not just about speed but also about keeping a low price, businesses are under pressure to operate more efficiently and cost-effectively.

But fast delivery is capital-intensive. First, stores need accurate inventory forecasting. Next, logistics operators need to have distribution centers close to their customers to shorten distances. Finally, only those with sufficient delivery staff and vehicles can deliver goods as quickly as possible. This means that even small businesses must invest in new infrastructure, technology, and personnel – or outsource the last mile.

2. Customer-centric models

When making purchasing decisions, global consumers value "good experience with the brand" and "fast availability/delivery." Further, 40 percent of US shoppers say that delivery and fulfillment are essential service attributes when shopping for groceries. I doubt that these numbers are any different in Latin America.

But how exactly does the last mile affect the customer experience? As mentioned, fast and reliable delivery is a given. On top of that, customers increasingly welcome the ability to track their packages in real-time, specify personal delivery preferences and provide feedback. For instance, Rappi, the popular Colombian delivery startup, allows cart adjustments while shopping and customers can communicate with their shoppers for special requests.

Delivery also requires fast and reliable customer service, making it easy for customers to voice complaints, get refunds and return or exchange products without hassle. Customer-centrism, currently in its infancy in Latin America, will soon determine the success or failure of e-commerce.

3. Click-and-collect: The thirst for alternative delivery models

Further, more and more consumers are opting for a hybrid e-commerce model. Click-and-collect means that customers can select items online and pick them up in-store or at a central location near their home. This type of model helps reduce pressure on stores and saves time for busy customers as they can simply pick up their ready-packed deliveries on their way to work.

Hybrid operations can also reduce the cost of delivery for stores, diminishing the need for fueling plenty of vehicles. Especially now with rising transportation prices on the horizon – not to mention Latin America’s rising dependency on importing expensive gasoline – any solutions are welcome.

4. Technology as a last-mile gateway

As a result of new customer demand trends, logistics companies are mobilizing all efforts to find solutions that help decrease pressure on stores and increase customer satisfaction. Currently, popular technology solutions range from artificial intelligence (AI) to automation.

Integrating AI capabilities into delivery platforms connects every stage of the logistics cycle and enables a more efficient process from retailer to customer. This includes predicting inventory needs and determining the best location for distribution centers in major cities.

Last-mile optimization seeks to save time and money by considering various factors, such as customer preferences, traffic congestion, and distances, to determine the fastest route to multiple destinations in a city. The benefits of using AI are directly related to a company's revenue. Often, a business can increase revenue by 1 percent, reduce inventory by 5 percent to 30 percent, and cut the cost of goods sold by 2 percent through improvements across the supply chain.

On the other end of the tech spectrum, automation and robotics are helping to reduce time in the warehouse and order fulfillment. Amazon's logistics center in Tijuana offers a glimpse of the future. The department store giant uses robots to collect packages from large warehouses, pack them, assemble them, and hand them over to the delivery person.

Today, this kind of robotics still requires massive investment, which is not feasible for smaller companies. But small and medium-sized enterprises, too, can use automation. For instance, it can help keep customers informed about order status and simplify everything from order placement to invoicing to customer service.

5. Logistics platforms are creating ecosystems

Lastly, it’s increasingly clear that the last mile is becoming a collaborative effort. Companies no longer have to manage their logistics alone or outsource it entirely to third parties. Instead, businesses and logistics providers are joining forces to integrate the necessary infrastructure into distribution and merchandise management systems. In fact, delivery platforms in Mexico alone have generated more than $2.1 billion in revenue this year.

By analyzing each store's data, logistics companies can optimize demand, offer locations for distribution centers or click-and-collect and tackle the most challenging part of the last mile. In addition, stores benefit from having a say in their marketing, sales, and logistics preferences, and they can keep their data in-house to optimize all of these channels.

Compared to the global trends in logistics, Latin America is by no means lagging. Of course, companies here face many challenges such as long distances in major cities or high-traffic congestion. But the region also offers unique opportunities, including the digital engagement of the younger generation, the rapid proliferation of mobile devices, and a large workforce. Together with new technological achievements, the future is bright for our vibrant e-commerce ecosystem in Latin America.

Photo by:   Ivan Ariza