Rappi, Super App of Latin AmericaBy Jan Hogewoning | Fri, 10/23/2020 - 13:08
Q: How has COVID-19 altered the restaurant landscape in Mexico?
A: The online trend was already there. However, delivery apps were usually between 10 to 20 percent of a restaurant’s sales, depending on the type of food and how it is transported. With COVID-19, online sales suddenly became 100 percent of the restaurants’ revenue for several months. It made them realize the attractiveness of home delivery for the consumer. They could no longer see it as an ancillary business unit that was on automatic pilot. Another thing that happened was that many restaurants, for example fine dining, had not considered delivery but they became more open to it. This meant they had to rethink how to structure and package their meals, to ensure the same experience at home.
Many restaurants are rethinking the real estate model, as well. They may not want to spend a lot on square meters, reducing their footprint and considering a dark kitchen mostly for deliveries. Of course, people will continue to interact at restaurants, with friends, colleagues and loved ones. But the delivery channel is challenging the way we think about space usage.
Q: What are Rappi’s short to midterm expansion plans?
A: For now, we continue to be focused on Latin America. We are present in nine countries and 209 cities. Last year, we started operations in Ecuador and Costa Rica. At the moment, we are comfortable with this but we do not discard opening a new country in 2021. In Mexico, we operate in 31 cities. Last year, we were opening at a pace of three cities per month, especially in the second half of the year. We do not really intend to expand to a lot more cities across Mexico. There is a great deal of space to improve the coverage in the cities where we are. We need to continue densifying, increasing our footprint in those places. Rappi is focused on the delivery radius, which is usually 3 miles (4.8km). Sometimes we extend it a bit more. The objective is to ensure that wherever you have access to Rappi, you are using the best version of the app. Densifying as an expansion strategy is about making sure we have all the verticals operating. This means the right stores, the right cuisine mix, the right types of pharmacy, offering a wide variety of prices and products.
Q: How do you assist in reassessing the use of existing and new real estate?
A: Before COVID-19, we had already developed over 300 dark kitchens. We would put the infrastructure in place and partners would come in and operate the brands. We would pay for utilities and the permits to operate. They would provide their magic and the sales. With COVID-19, everyone became a dark kitchen. It is not necessary to go out and build. Restaurants are renegotiating their leases and thinking about other existent spaces.
Our strategy is always to operate through partners. We are very good at creating a marketplace, connecting users with restaurants and couriers with the platform to give them the chance to earn an additional income. We are not experts in creating restaurant brands or opening a restaurant. For now, that is not what we want to do.
Q: How has Rappi advanced with its joint venture with Banorte?
A: The agreement was signed a couple of months ago. The investment will be up to US$200 million. The joint venture will be operated by an independent team of professionals. At the moment, the agreement is still going through approvals, which we expect to be complete in a few months. Rappi was already operating Rappi Pay, which includes person-to-person transactions and payment with QR codes. This provides allies with opportunities to purchase equipment and expand fast, giving them access to loans, while also providing savings products for couriers, as well as credit cards and insurance for users. The alliance with Banorte is going to increase those capabilities. For now, we are focusing on credit cards, primarily.
For us, it is important to partner with the largest Mexican banks. They know the culture in Mexico and have a large customer base. I see major benefits in that as opposed to starting a fintech from zero. The joint venture will combine the best of two worlds: Banorte’s expertise and Rappi’s freshness and young audiences. Many of our users are early technology adopters. I think going through a traditional bank for services is not necessarily the best experience. People have to wait for their turn, they get a contract with small print that nobody reads, they have to wait for the credit to be issued and pay a number of fees. Overall, people find it hard to understand. Rappi has a lot to offer to improve customer experience.
When a user gets a Rappi Pay card, they become part of the banked population. This will continue with the Rappi Banorte joint venture. For us, the digitalization of cash is a secular trend. We do try to promote it. On the other hand, we allow the option for people to pay in cash. Our Rappi Cash vertical gives people the opportunity to get cash by allowing a courier to go to an ATM and deliver it to them.
Q: Another vertical you recently launched is Rappi Entertainment. How is this going to disrupt the landscape for streaming platforms?
A: We are super excited about this. The value proposition here is to become a super-app for everything in Latin America. We already had several verticals, including restaurants, supermarkets, pharmacies, payment services and Rappi Favor, where you can ask a delivery person to do a task for you that requires a journey. We wanted another high frequency vertical and that was entertainment.
Rappi Entertainment has several components. The first is gaming. Many users like playing games on their phones while waiting for a Rappi order. You can win Rappi credits to use toward Rappi purchases through some of these platforms. It also allows you to compete against friends. Rappi has signed partnerships with several top gaming companies.
The second component is live streaming of artists or athletes giving talks or performing. This could be an athlete, a famous singer or a director of a popular series. For example, we had the director of La Casa de Papel, a very popular series in the region, give a talk during a live event. Due to COVID-19, many of these people are restricted from traveling. Our users can pay a small fee for an event and in that way, we help artists and other famous people to continue to deliver content. The viewer fee for a single event is low, around US$4. There is the possibility to provide series or films or for users to publish their own material, we are not discarding that. For now, we think a live event with a recognized figure is a great experience. It allows users to really connect with performers and artists can submit their proposals for live events.
The third component is live shopping. Users can purchase something that someone is modeling and within 30 minutes to an hour they could receive it at home. This is taking shopping to the next level. All in all, it will give users more reasons to use Rappi.
Q: What other verticals have been in development?
A: Another vertical we have developed over the last couple of months is Rappi Mall. This is an e-commerce service for everything that is not restaurants, pharmacy or groceries. Usually it comes down to retailers. We have done some amazing partnerships with very large retailers across the region that will be providing different pieces of clothing. We have a partnership with Nike and with Adidas, among other brands. Sometimes they are sponsoring an artist or an athlete, which means we can help them showcase their material through our entertainment vertical. Rappi also has partnerships with businesses that sell furniture. As Rappi Pay continues to roll out new options that allow people to pay in installments, they can make bigger purchases without a high upfront payment.
Another vertical we already launched before the pandemic but that we are rolling out in other countries is the payment of utilities, for example electricity bills or car tags for toll roads. We have partnered with over 30 companies in this area. This is another way in which we are making life easier for our customers.
Q: How has Rappi’s user base grown in 2020?
A: This year we have grown many of our verticals by over 300 percent. There are more people who have found a reason to use Rappi. New verticals are helping us acquire users. Over 90 percent of users now use three verticals or more. Our partners also benefit from a greater number of services as people are exposed to the different options when they enter Rappi.
Q: Which verticals are helping you the most to break into new demographics?
A: Rappi Favor was one of our first verticals. It allows you to ask for favors, essentially, which can be anything from buying something that is not part of the Rappi platform or having your keys delivered to someone. This vertical has really helped us to understand new demographics and target them. On the side of groceries, we have identified a segment we call senior moms. They can not only save time but also money by getting their groceries delivered through Rappi. They do not have to pay for public transportation or a taxi to make the trip to the supermarket. People with low to medium income are very interesting in this area because they can avoid that public transportation expense.
Restaurants are our biggest vertical. We have over 40,000 points of sale in Mexico and partnerships with a lot of allies. Brands like McDonald’s have several points of sale. Our number of partners increases every week, either through our inbound channels or with our commercial team. The share of total activity varies per city. In some, restaurants represent a little bit over half of total Rappi user activity and in others a little under half. The restaurant vertical is followed in size by groceries, pharmacies and Rappi Mall.
Q: What are your growth expectations for the region?
A: We think the penetration of delivery apps in Latin America is still extremely small. Depending on the source of information, the percentage of people making purchases through their smartphone averages around 10 percent. In Asia, the percentage is around 25 percent. Over the last four years, we have grown by a factor of four to five times a year. We are on track for this year and hopefully this trend will continue in 2021.
Rappi, Latin America's first super app, is a multiservice delivery platform that is present in 209 cities across nine countries in the region