Quarantine heats up wars between Latin America’s delivery apps

A worker rides a bicycle while making a Rappi app delivery in Mexico City, Mexico. As the coronavirus pandemic strangles economies and throws people out of work, food delivery drivers are competing for orders. — Bloomberg

These should be fat times for Latin America’s armies of delivery drivers. Across the region of 650 million, people are holed up at home, and hungry.

But the troops are growing fast as the coronavirus pandemic strangles economies and kills jobs. It seems that anyone with a bike or a motorcycle is hustling to ferry pizzas and grocery orders, intensifying the delivery wars that have been raging between startups such as Rappi and iFood, international players including Uber Eats and scrappy mom-and-pop outfits.

"The main problem now is the new kids on the block,” said Italo Barbosa, who has worked for Rappi, Uber Eats and Spanish startup Glovo in Sao Paulo. He was sitting on a street corner, surrounded by 20 men, about half of whom had just in the past week started in as couriers after losing their jobs, mainly in construction. "We have more deliveries than ever, but now we have many more delivery boys.”

As Latin America hunkered down, downloads of delivery apps shot up by more than 250,000 in March from February, according to the data firm Sensor Tower. Estimates are that now more than a half-a-million drivers – many of them refugees from Venezuela – compete for orders from the restaurants still operating and from markets and pharmacies, transporting everything from diapers to cough syrup to cash. Companies are tapping revenue to equip them with masks, gloves and antibacterial gel.

"It’s been crazy days,” said Simon Borrero, chief executive officer and co-founder of Bogota-based Rappi.

Delivery sales in Latin America quadrupled between 2014 and 2019, making it the fastest-growing region after Asia Pacific for the business, according to Euromonitor International. Investors poured in billions of dollars. Apps lured customers with exclusivity deals like discounted delivery rates and helped restaurants expand their kitchens.

Streets from Mexico City to Buenos Aires flooded with backpack-wielding couriers. Roughly half of the workforce in Latin America is in the informal economy and doesn’t contribute to social protection programmes. In most countries, unemployment benefits can be spotty even for those who do qualify. And so the delivery crew numbers have exploded in the pandemic.

The client base is also growing, but so are costs. Five-year-old Rappi – which received a US$1bil (RM4.34bil) investment from Japanese conglomerate SoftBank last year, the largest ever for a Latin American startup – has stopped collecting on loans it extended to restaurants that built special kitchens. It’s cutting the fees it charges some establishments and is importing hundreds of thousands of masks and bottles of hand sanitiser.

Rappi will book wider losses for March and April than expected, Borrero said. In less than a month, it has doubled the number of couriers it works with to 300,000. But "for us, these will be hard months”, he said.

The coronavirus expenses keep mounting. One of Brazil’s largest delivery companies, iFood, is speeding up payments to the nearly 147,000 restaurants it works with and creating a fund of 50mil reais (RM41.64mil) to help them survive the pandemic, said chief financial officer Diego Barreto. It’s cutting back on marketing and office expenses to help absorb additional costs.

"I see two big challenges for our business: One is making sure we keep the delivery chain working. The other is helping restaurants survive,” Barreto said.

For PedidosYa in Chile, demand often outstrips supply. About half of the 10,000 restaurants on its app have shut down, managing director Juan Martin Lopez said in a radio interview with Pauta Bloomberg. "It will be weeks or months of this.”

Bearing the brunt are those at the end of the chain.

"Drivers have seen a drop in their work not because of a drop in demand but for an increase of couriers in the streets,” said Samuel Alvarez, 22, wearing a mask as he waited for an order in Mexico City. A Venezuelan who fled his country more than two years ago, he said he’s earning half what he did last month. "The virus has turned Mexico City into a ghost town.”

Another Venezuelan, Jhon Rivera, 33, used to score more than 20 orders a day from Rappi in Bogota. Now he’s doing around 10, if he’s lucky. "It’s all supermarkets,” he said, hunched over an aluminium-foil plate of rice and chicken perched on his rectangular Rappi delivery bag.

He and two dozen others were waiting on a commercial street in a wealthy neighbourhood, thumbing through mobile phones and reclining on their motorcycles. After nearly an hour, Rivera’s phone buzzed. He walked across the street to a grocery store to fill his backpack. He hopped on his bicycle."It’s tough out here these days,” he said, and pedaled away. – Bloomberg

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