In the united States, Amazon Prime same-day and overnight deliveries have become the de facto standard in e-commerce. People want instant comfort and gratification, as evidenced by the fact that an astonishing ~ 45% of US consumers are Amazon Prime members.
Most of the big retailers are struggling to catch up with Amazon by partnering with last-mile delivery startups. Walmart has become a major investor in Cruise for autonomous vehicle deliveries, and Target acquired Shipt and Deliv Last-mile delivery startups to increase their delivery speed. Costco partnered with Instacart for same day delivery, and even Domino’s Pizza joined by partnering with Nuro for last mile delivery using autonomous vehicles.
E-commerce in LatAm has taken off at an industry compound annual growth rate of 16% over the past five years.
The holdout: Latin America
Venture capitalists have been investing heavily in last-mile delivery for the past five years on a global scale, 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 only saw about $ 1 billion during 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 region that has 110 million more consumers than in the US.
Based in Brazil Loggi It represents around 60% of last-mile venture capital investment in Latin America, but it only operates in Brazil. That leaves major Spanish countries like Mexico, Colombia, Chile and Argentina without a leading independent last-mile logistics company.
In these countries, about 60% of the last-mile delivery market is dominated by small informal businesses or independent drivers using their own trucks. This results in inefficiencies due to a lack of technologies such as route optimization, as well as a lack of operational scale. These issues are becoming more and more pronounced as e-commerce in LatAm has taken off at an industry compound annual growth rate of 16% over the past five years.
Retailers are losing the opportunity to offer customers what they want. Today’s customers expect free, reliable same-day or next-day delivery, on time, every time, and without damage or theft. All of these are a challenge in LatAm. Theft, in particular, is a major problem, because unprofessional drivers often steal products to deliver them and then sell them for a profit. Cost is also an issue, because free same-day and next-day delivery just isn’t available in many locations.
Operational and technological hurdles abound
Why is Latin America lagging behind when it comes to the last mile? First, traditional e-commerce delivery in LatAm involves several 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 finally , are delivered to the customer. .
By comparison, modern delivery operations are much simpler. Products are collected from the retailer, delivered to a dock, and then delivered directly to the customer. There is no need for storage and an additional cross-dock before warehousing.
And those are just the operational challenges. The lack of technology also plays a role. Most of the coordination and routing of deliveries in LatAm is still done through a spreadsheet or pencil and paper.
Dispatchers have to manually pick up a phone to call drivers and dispatch them. In the US, computerized optimization algorithms dramatically reduce cost and delivery time by automatically finding the most efficient route (for example, packing as many deliveries as possible into a truck along the route) and Automatically send the driver who can complete the route more efficiently based on current location, ability and experience with the route. These algorithms are almost unknown in the Latin American retail logistics sector.
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