Rappi: LATAM’s newest Unicorn
Value capture by an everything on demand platform.
Introduction.
Rappi is a platform that allows users to order virtually any product and have it delivered to their door in select Latin American countries. Additionally, Rappi utilizes its courier network to complete small task for customers such as wait in line for product or service. I would categorize Rappi as UberEats, Instacart, and TaskRabbit combined. Rappi, colloquial for fast, operates in Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Uruguay. Rappi has achieved series D funding and raised $392 in Venture Capital sinces its founding in 2015. Rappi is reported to have reached Unicorn status, a valuation of over on billion US dollars, as of August 2018.
Interesting platform offerings:
Everything on demand.
Prime delivery.
Delivery fleet.
Everything on demand.
Unlike other platforms such as UberEats or DoorDash where individual merchants have to opt in to a given platform, Rappi allows users to order virtually anything from their platform by simply messaging instructions to a courier. I find this feature to be innovative because it allows the platform to focus on its core competency of delivery as a service instead of having to strike deals with merchants. Additionally, this model allows merchants to avoid commissions charged by other delivery platforms.
Prime delivery.
By ripping a page from the Amazon playbook, Rappi introduced a monthly subscription service for free delivery. I find the free delivery model to take the friction out of online orders for some consumers. Rappi’s prime delivery subscription allows customers to pay for their prime membership on an annual or monthly basis. Customers who sign up for prime and protected from nighttime and inclement weather surcharges. I find Rappi’s prime payment model to be innovative as it makes its delivery service more accessible to
Delivery fleet.
In the same way that DoorDash and other platforms leverage on contract gig employees, so does Rappi. However, Rappi only contracts with bicycle and motorcycle delivery drivers. A two wheel delivery fleet allows Rappi to keep delivery fees low and provides faster delivery speeds in congested cities in Latin America (LATAM).
Other Delivery Apps.
Walmart’s recent acquisition of Cornershop, a grocery and pharmacy deliver platform, can be seen as a positive signal of the delivery ecosystem in LATAM. Additionally, Walmart has rolled out a conversational commerce app, Jetblack, in New York City that allows customers to order virtually anything via text message. Jetblack’s service is priced at $50 per month. I assess that Jetblack’s price point shows that Rappi has room for increasing their Prime pricing. Much in the same way that Amazon increase its prime service from $99 to $119 in May of 2018, Rappi may be able to extract more revenue from its membership subscription service.
Value Creation.
Rappi has created a third party logistics platform for virtually any business. This value creation is a win-win for Rappi and its partners are partners see increased sales and Rappi captures delivery fees. Additionally, Rappi has created a new marketing channel for brands to run promotions on the Rappi app. Rappi’s marketing potential is allows for firms to run promotions on its online marketplace while at the same time allows its delivery fleet to offer customers sample products.
References:
[1] Rappi. (n.d.). Retrieved February 23, 2019, from https://www.crunchbase.com/organization/rappi
[2] Rappi raises $200M as Latin American tech investment reaches new highs | TechCrunch. (n.d.). Retrieved February 23, 2019, from https://techcrunch.com/2018/08/31/rappi-raises-200m-as-latin-american-tech-investment-reaches-new-highs/
[3] Rappi 24/7. (n.d.). Retrieved February 23, 2019, from https://www.rappi.com.mx/prime
[4] Walmart to acquire Mexico & Chile-focused grocery delivery service Cornershop for $225M | TechCrunch. (n.d.). Retrieved February 23, 2019, from https://techcrunch.com/2018/09/13/walmart-to-acquire-mexico-chile-focused-grocery-delivery-service-cornershop-for-225m/
[5] Text to order: Walmart rolls out Jetblack, a members-only service. (n.d.-a). Retrieved February 23, 2019, from https://www.cnbc.com/2018/05/31/text-to-order-walmart-rolls-out-jetblack-a-members-only-service.html
[6] Amazon Prime fee is increasing from $99 to $119 – Recode. (n.d.). Retrieved February 23, 2019, from https://www.recode.net/2018/4/26/17287476/amazon-prime-new-price-increase-119-99-dollars
[7] Colombian Startup Rappi Wants to Deliver “Everything” | Fortune. (n.d.-a). Retrieved February 23, 2019, from http://fortune.com/2016/11/08/rappi-delivery-latin-american/
Jose,
Thank you for sharing your insights on Rappi.
This is interesting model that focuses on the logistics piece of a wide range of business activities rather than focusing on specific verticals (e.g. ecommerce) and providing a full suite of services.
I am curious as to the stickiness of the merchants on the platform. Is there risk that the service becomes commoditized and makes room for new entrants? In addition, logistics has traditionally been a labor-intensive and low margin business. Will this be Rappi’s fate as well? If Rappi were to counter this trend, perhaps it could consider expanding further into the transactions by providing services such as payments and digital marketing. Companies such as Grab and GoJek in Southeast Asia have taken similar routes, although the potential is yet to be seen.
From the consumers’ perspective, this is a very compelling offering. Who would say no to having someone always on call to run errands? However, this is conditioned upon having ample supply of cheap labor. Will it be sustainable in the long run?