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Why Latin America is Poised to Become the Next Last-Mile Delivery Battleground

In the last 18 months, the infamously poor state of last-mile logistics in Latin America has carried a heavier price than ever. As anxious, confined populations turned to online transactions for nearly all they needed — spurring regional ecommerce market growth of 37% — the formidable terrain, notorious traffic and weak infrastructure have meant woefully long delivery times for more than just the non-essentials. Last-mile delivery obstacles are also seriously hindering vaccine distribution across the region, likely meaning that immunization efforts won’t be concluded before 2023. 

Yet for last-mile logistics there may be a silver lining. In the wake of Latin America’s ecommerce revolution, the widespread hope is that the pandemic won’t just underscore the region’s comparatively poor state of logistics technology and delivery speed, but rather catalyze an overhaul. 

The stakes, as noted, are as high as they ever have been, and the potential gains for forward-looking investors could be equally great. Experts are envisioning regional e-tailer growth rates of 35% in 2021, even as Latin America still lags far behind Europe and North America in terms of delivery speed. Meanwhile, last-mile delivery has proved a tried-and-true sector for finding venture capital (VC) unicorns — from Loggi to Nuro to Bringg. Ultimately, the widening gap between surging demand and scarce supply of same-day and next-day delivery services makes Latin America especially ripe for lucrative investment opportunities in last-mile delivery platforms. 

Latin America: A Last-Mile Laggard

Massive VC investments in Latin America aren’t new — in the first half of 2021 alone, LatAm startups raised $9.3 billion. However, last-mile delivery companies have seen comparatively less funding, collecting only around $1 billion of the $11 billion invested globally over the past decade. 

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The tide is slowly beginning to turn though as investors realize the untapped potential of last-mile delivery services. As widespread adoption of ecommerce becomes more prominent, big players are making investments in the sector and other investors are taking note. For example, in 2018 Mercado Libre announced they would begin offering same-day delivery and, more recently, the regional ecommerce, fintech and delivery giant began building out its own logistics infrastructure by acquiring Kangu, a last-mile logistics startup that went from launch to exit in two years

At the same time, the investment by Mercado Libre into Kangu helped shine a light on one of the biggest problems in LatAm logistics — dense urban traffic congestion. Now some of the most innovative startups in the region are tinkering with the possibility of resolving that dilemma by capitalizing on the one thing LatAm does not lack: affordable real estate and thousands of neighborhood “tiendas” (shops). 

Investors today are taking an interest in these startups, anxious to see if the answer for last-mile delivery services in the region comes in the form of so-called “dark stores.” Dark stores are spaces established in commercial buildings that are organized and optimized for the rapid fulfillment of online orders. They’re located in strategic urban points — like commercial buildings vacated by the pandemic — allowing for lower logistics costs such as picking per unit (the cost of drivers having to wait in line in crowded grocery stores to pick up orders) and last-mile delivery.

With the widespread adoption of such spaces as micro-logistics centers, Latin America could help close the infrastructure gap that has held the region back for years. This could unleash a tidal wave of new ecommerce services and investment opportunities as networks grow to meet demand.

An Appetite for Change

The enthusiasm felt by investors can also be attributed to what venture capitalists rightfully imagine must be a prodigious demand from customers for better last-mile delivery. Even though ecommerce in the region grew by 37% in 2020, Latin America is still painfully ill-equipped for fast deliveries. A pre-pandemic McKinsey report stated that about one quarter of ecommerce users would pay a premium for same-day delivery.

Any service that is able to meet demand in the region is bound to be met with the rewards of entering the fastest-growing ecommerce market in the world. Investors anticipate that buyers’ frustrated appetite for rapid deliveries spells opportunity. The recent $5.25 billion valuation of two-wheeled delivery app Rappi offers a convincing data point in that regard.

Last-mile delivery services in LatAm are still primarily dominated by small companies and independent drivers, which can create inefficiencies. Additionally, the lack of companies operating at a scale large enough to meet consumer demand, paired with nonexistent optimization processes — many companies still track deliveries using pen and paper and dispatch deliveries with manual calls rather than using an automated service — means that in most places, same- or next-day delivery is unavailable. 

And yet innovation in the region, in the form of an algorithmic overhaul of decades-old processes, could help satisfy what investors see as a growing appetite. Latin American companies can correct the obvious tech discrepancy by integrating smart systems that utilize AI algorithms to cut time and costs by finding the most efficient routes for delivery drivers. A study by UPS demonstrated just how much proper logistics data analysis could save in time, costs and safety risks.

Room for Challengers and Investors

Clearly there is a demand for change, one that both hungry startups and motivated investors are primed to address. For investors, last-mile retail delivery technology already has produced several unicorns, and this isn’t counting food-delivery unicorns like Rappi and DoorDash, or ridesharing companies like Uber and Lyft.

Smart entrepreneurs, investors and retailers can all benefit from entering the market and making the right strategic decisions, and startups in the region will need to appeal to investors with the right mix of technology, competitive pricing and a sufficient fleet to scale. 

Companies now entering the space are able to attract drivers, expand their network and rapidly scale their business due to high demand. In an interview with TechCrunch, Alexis Patjane, CEO of Mexican delivery startup 99 Minutos, which recently raised $40 million in Series B funding, explained this potential: “[We charge] the customer a flat fee for delivery and then [offer] the driver a flat rate as well, but today, the volume is so large on each route that it’s become very lucrative.” Patjane added that 99 Minutos is currently planning to expand to inter-city logistics by utilizing trucks and small aircraft.

It’s evident when analyzing trends in ecommerce growth worldwide that Latin America is poised to see enormous growth over the course of the next five years. Companies that provide smart logistics services that can cut down on delivery time and costs will experience concurrent growth. With VC funding, these promising start-ups may deliver to Latin America a new era of last-mile logistics sooner than expected.


Iván Ariza is an entrepreneur and expert in ecommerce marketplaces, mobility, last-mile logistics and food delivery management. He is the Founder and CEO of Mexican start-up Cargamos, a last-mile logistics technology platform.

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