dataPlor’s CEO and Founder Geoffrey Michener wrote a piece for IDG Connect discussing why the biggest food delivery apps are moving into Latin America, and the challenges they face to compete in its highly saturated market.
The global food delivery mobile app market is expected to hit $16.6 billion
by 2023. India’s Swiggy, Germany’s Delivery Hero, the UK’s Deliveroo, and San Francisco’s Postmates and DoorDash are among the delivery companies expected to attain VC-backed valuations of $1 billion or more in the past two years, according to Pitchbook
The technology industry in Latin America is booming. Millions
of consumers are coming online via mobile devices, and entrepreneurs are seizing the opportunities that increased connectivity offers. In the first half of 2019 alone, VC investment in Latin American startups totaled $2.6 billion
, a significant uptick from the less than $2 billion raised in all of 2018. Technology is disrupting everything in Latin America, from banking and education to travel and food delivery.
The food delivery market in Latin America is now one of the most competitive in the world. In the early 2010s, Germany’s DeliveryHero
expanded aggressively across the region through a series of acquisitions. The food delivery giant arrived in Latin America almost overnight through its acquisition of Uruguayan PedidosYa
, which at the time was the leading online food delivery service. In the same year, DeliveryHero also acquired Colombian startup ClickDelivery
, helping to solidify its Latin American presence.
Latin America’s local delivery heroes
There are more than a dozen other local food delivery apps
in Latin America, all vying for a slice of market share. But Softbank’s billion-dollar bet on Rappi and Uber’s interest in Cornershop are signs that the international community is excited about the region as well. Global delivery giants are increasingly turning to Latin America for growth; however, operating in Latin America is not without its challenges, and requires a different playbook to succeed.
The global players placing bets on Latin America
In 2015, the on-demand courier service, Glovo
, launched in Spain. With a fresh injection of venture capital investment and a joint venture
with mobility company Cabify
, Glovo entered Latin America by launching in Chile in 2017. Cabify supported Glovo’s Latin American launch by providing access to its existing network of messengers, which helped the app to become a regional leader from the start. Glovo now serves more than four million
monthly orders worldwide, with a large percentage of those orders coming from Latin America. Glovo recently reported that Peru will be among its top three markets
by the end of 2019. And while Glovo has been wildly successful in Peru, it has struggled to find its footing in other Latin American countries.
In 2019, Glovo abandoned
its operations in Chile and Brazil following fierce competition with direct competitors Rappi, Cornershop, iFood, and UberEats. UberEats began it international expansion in 2016, which included Mexico. Over a two-year period, the company launched its food delivery service in more than 60 cities
across 11 countries. Although UberEats now has a presence in 40 Mexican cities, the country is completely saturated with food delivery options. UberEats is fighting against Rappi, SinDelantal
(owned by JUST EAT and iFood), Postmates, among others in a market that is estimated to reach $750 million
in sales in Mexico alone by 2021.
Postmates launched in Mexico City
around the same time as UberEats, with more than one thousand local merchant partners and couriers. And while the company does not operate in any other international markets aside from Mexico City, local players are keeping an eye on its growth strategy, which also focuses primarily on food delivery. Meanwhile, Amazon, Walmart, and other grocery retailers are also experimenting heavily with on-demand delivery services in the region.
Challenges still facing food delivery in Latin America
Fierce competition remains the top challenge for both local and global food delivery apps in Latin America, but not the only one. Consumer preferences and digital behavior differ greatly across the region, making local teams and partnerships crucial for success.
According to UberEats data, nearly 20%
of UberEats orders are paid in cash across Latin America, and in Colombia, this number rises to around 40%. Cash is still king in Latin America, so delivery companies must adapt to local payment preferences as well, which means still offering cash payments as an option.
Another growing approach that food delivery companies are using to augment their operations and meet consumer demands are ‘ghost’ or ‘dark’ kitchens
. These basic commercial cooking spaces provide restaurants all the resources they need to cook up more food and deliver it at lower costs. DoorDash has already opened
a dark kitchen for multiple restaurants to share in California, and Glovo launched seven dark kitchens
across Spain, Argentina, Peru, Italy, and Ukraine.
Solving the challenges above will be key to compete in Latin America’s saturated food delivery market. Fortunately, many delivery services have already found unique ways to deal with these hurdles; however, continuous innovation in this space is crucial as more of Latin America’s population comes online and will demand better and faster services.