One Rappi to Rule Them All — Latam’s Super App
I’ve experienced the magical world of Rappi in Mexico, Colombia and Peru. Rappi, often described as a mere food and grocery delivery app, is much more than that.
While using Rappi, I can have medicine and essentials delivered in under 10 minutes. The app offers alcohol, Nike sneakers, dog food, and even furniture from dozens of different stores. Forgot your laptop charger at your friend’s house? Need some printing collected from a print store? RappiFavor is your answer. Want to play online games linked to real-world prizes? Rappi Games. Need to buy plane tickets? Rappi Travel. All in one app.
Colombian friends share how they are being drawn away from traditional banks to Rappi’s credit card, offering attractive cashback benefits. In the creation of a pseudo-currency, friends pay each other in Rappi credit, instead of via bank transfer given the associated time delay and costs. Last month, Rappi also received authorisation to operate its own digital bank, paving the way for a new range of financial products.
Rappi is truly a super app, joining the ranks of Gojek in Indonesia and Wechat in China. The company became Colombia’s first unicorn in 2018, and has raised over $2 billion — including $1 billion from Softbank’s Vision Fund.
Rappi’s Covid (and Venezuelan) booster
Lockdowns in Colombia certainly aided apps like Rappi. In 2021, home deliveries represented 35% of total restaurant sales in Colombia, up from 21% in 2019. Rappi, as the market leader in home deliveries, certainly benefitted from lockdown orders and remote working.
But Covid was a universally shared experience in recent years across the globe. So why do similar super apps not exist in the US and Europe, despite all the technological advancements and venture capital?
The significantly lower cost of labour is a key factor. Rappi is a labour-intensive business. For example — if your Rappi arrives at the supermarket and realises that your item is out of stock, they simply suggest an alternative that they see in store. You can accept or reject the suggested replacement (and associated price). After paying at the store on your behalf, your Rappi sends a picture of the receipt to you in the app, and updates the order total on the app, with your credit card charge adapting to the new amount. No expensive AI involved.
This system works well, but needs cheap labour. Colombia’s minimum wage was raised to $1,000,000 Colombian Pesos in 2022, but this still only corresponds to approximately USD250 per month. Low-cost labour in Colombia has also been supplemented by another source — the mass migration of Venezuelans to Colombia.
Of the estimated 6.11 million Venezuelans that have left their country, many to escape the hyperinflation and food shortages plaguing the country, 1.84 million migrated to Colombia, with which it shares a land border. The majority have arrived since 2015. This vastly outnumbers the 1,24 million refugees in Germany — the country with the most refugees in Europe. It also places Colombia as the country hosting the second most displaced persons worldwide, after Turkey with 3.7 million people.
Last year, the government announced that they would register all undocumented Venezuelans (at the time estimated to be up to a million). This entitled Venezuelans access to essential government services, as well as the right to legally work in the country — a massive boost to labour-intensive startups like Rappi.
Rappi gave thousands of Venezuelans access to income — some earning in one day the equivalent of Venezuela’s monthly minimum wage (USD15 — although a tricky comparison given the hyperinflation in the country, and higher cost of living in Colombia). Delivery apps help immigrants earn by avoiding many of the barriers to more traditional employment. However, Rappi, like many other gig companies, face criticism for not providing minimum wage guarantees, health care coverage, etc.
The Rappi-mafia
The PayPal mafia is a term used to describe a group of early PayPal employees, many of whom went on to establish successful tech companies. In a similar fashion, Rappi has stimulated significant activity in Latin America’s tech ecosystem.
As mentioned, it was Colombia’s first unicorn (TuHabi recently became Colombia’s second — the company allows homeowners to sell their homes in 10 days online). Over 100 tech startups have since been founded by former Rappi employees, raising over $2 billion.
Rappi’s future in uncertain funding markets
Latin America (LATAM) still lags behind North America, Europe and Asia in terms of venture funding. In 2021, only $19.6 billion was invested in the region’s startups, compared to $330 billion in North America, $165 billion in Asia, and $116 billion in Europe. However, LATAM was the fastest-growing region, with a 300% increase from 2020. 2021 was a record-breaking year in venture funding globally. However, as 2022 has proved, markets have cooled down significantly. As many investors re-evaluate some of their past investments and plan for the future, markets like LATAM and Africa offer attractive valuation multiples.
2022 has been especially unkind to delivery apps. Gorillas, Glovo, Getir and Zapp have all had mass layoffs. A key difference is that these companies operate in European markets with a much higher cost of labour. This has to be sustained by venture funding, of which there has been a significant reduction this year.
The impact of the global funding downturn on Rappi, and the tech ecosystem in LATAM, remains to be seen. However, for millions of people across the 9 countries and 220 cities where Rappi operates, the app has become a daily part of life. Even as someone who has only spent a few months in LATAM, it is tough to imagine life without it.
