Rappi: Creating value across 3 dimensions
In Colombia the startup Rappi has set its mission to become the everything store of Latin America. Rappi, unlike Amazon, focuses on instant deliveries. Like Amazon they want to have a wide variety of products and services. Currently they will deliver groceries, food, alcohol, pharmacy products and, more recently, apparel and electronics. They also offer a courier services which will run your errands, pay bills and deliver cash.
As a 3-sided market place Rappi has managed to generate value to all the players in the market place by using innovative business models
Value to Consumers
Daily food delivery and grocery shopping has now become easier than ever for the citizens of +40 cities in 7 countries across Latin America. Through Rappi, consumers can order from over +3,000 restaurants, coffee shops and bakeries and receive their food under an hour. In addition to this service consumers can also order groceries in under an hour, get someone to run and errand or rent a scooter through the app.
One of the most valuable services recently included in the app is Rappi pay. Rappi pay is an electronic payments system through which users can transfer money to each other or pay at merchants with their phone. This functionality is extremely seamless and easy to use which makes it better than any banking platform available.
Value to Restaurants, Grocery stores and CPGs
Rappi has built a secondary revenue stream by creating partnerships with CPG companies. Rappi charges CPG companies marketing fees to guide consumers to their products within the app and to display adds. Additionally, to increase the utilization of its couriers in low demand hours Rappi offers CPGs the opportunity to deliver sample products. By levering Rappi’s consumer data CPGs can choose specific customer profiles to send the sample product. Companies like Coca-Cola have sent as many as 100,000 bottles of gift products in one month.
Rappi is constantly adding new categories to the platform to achieve higher ticket transactions. They recently signed a deal with Sony to be the exclusive seller in Colombia of its PlayStation products like video games and other items.
Value to Couriers
Rappi has 50,000 couriers that make more that 30 order each month. Thanks to the flexibility of the platform, Rappitenderos (how they call their couriers) work in Rappi as many hours as they wish and get paid per order. For many people with lower levels of education working in Rappi fulltime gives them the opportunity to generate 2x the minimum wage.
1 Kia Kokalitcheva, “Colombian Startup Rappi Wants to Deliver ‘Everything’” Fortune, November 8, 2016, [http://fortune.com/2016/11/08/rappi-delivery-latin-american/], accessed February 2018.
2 Rappi App
3 Luke Tugby, “Rappi app lets users shop for groceries by swiping smartphone screens – and delivers goods ‘in minutes’,” Reatailweek, February 12, 2016, [https://www.retail-week.com/topics/technology/rappi-app-lets-users-shop-for-groceries-by-swiping-smartphone-screens/7004793.article], accessed February 2018.
4 “Rappi consolida su posición mediante alianzas con grandes marcas,” September 19, 2017, El Espectador, https://www.elespectador.com/tecnologia/rappi-consolida-su-posicion-mediante-alianzas-con-grandes-marcas-articulo-713931, accessed February 2018.
Student comments on Rappi: Creating value across 3 dimensions
Great post! As you mentioned, similarities can be drawn between Rappi and Amazon. While you’ve clearly demonstrated some of the differences, could there be any potential that Rappi follows Amazon’s lead in building Rappi-branded products for delivery (i.e., in a similar fashion to Amazon Basics brand). A decision to sell its own branded products would certainly affect the value being created for its to the CPGs, grocery stores, and restaurants that it is currently serving.
Thanks for your post Daniela!
What is happening in Latin America, with the explosive growth of platforms such as Rappi or Cornershop is super interesting. On the one hand, if you take Rappi business model and you breakdown it by parts, it is hard to find any competitive advantage or core competency or asset that is unique, irreplaceable and non-imitable by others players. What it would take to any player to enter this business and displace Rappi? Probably not much, just money to invest in at least equivalent technology and initial marketing to attract drivers. It is only a matter of time to see more entrants in these markets.
But on the other hand it is also true that, in the long run, this is a market where the “winner takes all” premise will be a big driver, as it plays in any platform business. There are significant economies of scale, and incentives to drivers and consumers to be “locked in” in only one growing platform.
Looking forward, once competitor arrive, I see that the main challenge for Rappi will be to avoid what is happening in the Uber/Lyft dynamic, where the lack of point of differences in the service and technology within both side of the platform, drivers and riders, has made price the only way to differentiate. Once Rappi start facing lower price competition (charging less to consumers or improving salaries to drivers) the question will be how strong is the brands and “locks” that the company was able to build in these years.