Last-mile delivery in Latin America is ready to take off – TechCrunch

by Joseph K. Clark

Most major retailers scramble to catch up to Amazon by partnering with last-mile delivery startups. Walmart has become a significant investor in Cruise for autonomous-vehicle deliveries, and Target acquired Shipt and Deliv’s last-mile delivery startups to increase its delivery speed. Costco partnered with Instacart for same-day deliveries, and even Domino’s Pizza has jumped in by partnering with Nuro for last-mile delivery using autonomous vehicles.

Over the past five years, E-commerce in LatAm has taken off at a compound annual industry growth rate of 16%.

The holdout: Latin America

Venture capitalists have invested heavily in last-mile delivery over the past five years globally, but Latin America (LatAm) has lagged. Over the past decade, over $11 billion has been invested globally in last-mile logistics. Still, Latin America only saw about $1 billion over the same period (Source: PitchBook and WIND Ventures research).

Within this, only about $300 million was in Spanish-speaking Latin America — a surprisingly small amount for a country with 110 million more consumers than in the U.S.

Brazil-based Loggi accounts for about 60% of last-mile VC investment in Latin America, but only in Brazil. That leaves major Spanish countries like Mexico, Colombia, Chile, and Argentina without a leading independent last-mile logistics company.

About 60% of the last-mile delivery market in these countries is dominated by small, informal companies or independent drivers using their trucks. This results in inefficiencies due to a lack of technologies such as route optimization and a lack of operating scale. These issues are becoming more pronounced as e-commerce in LatAm has taken off at a compound annual industry growth rate of 16% over the past five years.

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Retailers are missing an opportunity to give customers what they want. Customers today expect free, reliable same- or next-day delivery — on time, all the time, and without damage or theft. All of these are challenging in LatAm. Theft, in particular, is a significant problem because unprofessional drivers often steal products out for delivery and then sell them for a profit. Cost is also a problem because free same- and next-day deliveries are unavailable in many places.

Operational and technological roadblocks abound.

Why does Latin America lag when it comes to the last mile? First, traditional LatAm e-commerce delivery involves multiple time-consuming steps: Products are picked up from the retailer, delivered to a cross-dock, distributed to a warehouse, delivered to a second cross-dock, and delivered to the customer.

By comparison, current delivery operations are much more straightforward. Products are picked up from the retailer, delivered to a cross-dock, and delivered directly to the customer. There’s no need for warehousing and an extra pre-warehouse cross-dock.

And those are just the operational challenges. Lack of technology also plays a significant role. Most delivery coordination and routing in LatAm are still done via spreadsheets or pen and paper.

Dispatchers must manually pick up a phone to call drivers and dispatch them. In the U.S., computerized optimization algorithms dramatically cut both delivery cost and time by automatically finding the most efficient route (e.g., packing the most deliveries possible on a truck along the way) and automatically dispatching the driver that can most efficiently complete the course based on current location, capacity, and experience with the route. These algorithms are almost unheard of in the Latin American retail logistics sector.

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