in the United State, same day and next day Amazon Prime delivery has become the de facto standard in e-commerce. People crave convenience and instant gratification, evidenced by the fact that an astonishing ~45% of US consumers are Amazon Prime members.
Most major retailers are scrambling to catch up to Amazon by partnering with last-mile delivery startups. Walmart has become a major investor in Cruise for autonomous-vehicle delivery, and Target has acquired Shipt and Deliver last-mile delivery startups to increase its delivery speeds. Costco partnered with Instacart for same-day delivery, and even Domino’s Pizza has taken the leap by partnering with Nuro for last-mile delivery using autonomous vehicles.
E-commerce in LATAM has taken off at a compound annual industry growth rate of 16% over the past five years.
Holdout: Latin America
Globally, venture capitalists have been investing heavily in last-mile delivery over the past five years, but Latin America (LatAM) has lagged behind. More than $11 billion has been invested globally in last-mile logistics over the past decade, but Latin America has only invested about $1 billion in the same period (sources: Pitchbook and Wind Ventures Research).
Within this, Spanish-speaking Latin America had only about $300 million – a surprisingly small amount for a region that has 110 million more consumers than the US.
Brazil-based Loggi accounts for about 60% of last-mile VC investments in Latin America, but operates only in Brazil. This leaves major Spanish countries such as Mexico, Colombia, Chile and Argentina without a major independent last-mile logistics company.
In these countries, about 60% of the last-mile delivery market is dominated by small, informal companies or independent drivers using their own trucks. This results in inefficiencies due to lack of technologies such as route optimization as well as lack of operational scale. These issues are becoming increasingly more apparent as e-commerce in LatM has taken off at a compound annual industry growth rate of 16% over the past five years.
Retailers are missing out on the opportunity to give customers what they want. Customers today expect free, reliable identical- or next-day delivery – on time, at all times, and without loss or theft. These are all challenging in LatAm. Theft, in particular, is a significant problem, as unprofessional drivers often steal products for delivery and then sell them for a profit. Cost is also a problem, as free same- and next-day delivery is not available in many places.
Operational and technical constraints abound
Why does Latin America lag behind when it comes to the last mile? First, traditional LatAm e-commerce delivery involves several time-consuming steps: products are picked up from the retailer, delivered at one cross-dock, delivered to a warehouse, the other cross-docked. is delivered in, and then finally delivered to the customer. .
By comparison, modern delivery operations are much simpler. Products are picked up from the retailer, delivered to a cross-dock, and then delivered directly to the customer. No need for warehousing and additional pre-warehouse cross-dock.
And those are just operational challenges. The lack of technology also plays an important role. Most distribution coordination and routing in LatAm is still done via a spreadsheet or pen and paper.
Dispatchers have to manually pick up a phone to call and dispatch the drivers. In the US, computerized optimization algorithms dramatically cut both delivery costs and time by automatically finding the most efficient route (for example, packing most deliveries on a truck along the route) and automatically dispatching to the driver who One can complete the route most efficiently based on current location along the route, ability and experience. These algorithms are almost unheard of in the retail logistics sector of Latin America.