Same-day and next-day Amazon Prime deliveries have become the de facto standard in e-commerce in the United States. People demand ease and fast pleasure, as proven by the fact that Amazon Prime subscribers account for nearly half of all U.S. customers. Most major retailers are cooperating with last-mile delivery firms in an attempt to catch up to Amazon. Target purchased Shipt and Deliv last-mile delivery businesses to boost its delivery speed, while Walmart has become a big investment in Cruise for autonomous-vehicle deliveries. Costco has teamed up with Instacart for same-day deliveries, and Domino’s Pizza has collaborated with Nuro for last-mile delivery.
On a worldwide scale, venture capitalists have been significantly investing in last-mile delivery during the last five years, but Latin America (LatAm) has lagged behind. Over the last decade, over $11 billion has invested globally in last-mile logistics, while only roughly $1 billion has invested in Latin America (Source: PitchBook and WIND Ventures research). Only over $300 million was spent in Spanish-speaking Latin America, which is a relatively tiny figure for a region with 110 million more customers than the United States.
Logging, based in Brazil, is responsible for over 60% of last-mile VC investment in Latin America, yet it exclusively operates in Brazil. As a result, key Spanish nations such as Mexico, Colombia, Chile, and Argentina are missing a significant independent last-mile logistics provider. Tiny, informal companies or individual drivers using their own trucks dominate around 60% of the last-mile delivery business in these nations. Due to a lack of technologies such as route optimization and a lack of operating scale, this leads in inefficiencies. As e-commerce in Latin America has grown at a compound annual growth rate of 16 percent over the last five years, these challenges are becoming more prominent.
Retailers are squandering a chance to give customers exactly what they want. Customers nowadays expect free, dependable same-day or next-day delivery that is always on time, without damage or theft. All of these are difficult in Latin America. Unprofessional drivers frequently take things for delivery and then sell them for a profit, making theft a big issue. Cost is also an issue, as many locations do not offer free same-day or next-day delivery.
Why is Latin America so far behind in terms of the last mile? To begin, traditional LatAm e-commerce delivery entails a series of time-consuming steps: products picked up from a merchant, brought to a cross-dock, distributed to a warehouse, delivered to a second cross-dock, and lastly delivered to the customer. Modern delivery procedures, on the other hand, are far more straightforward. Products collected from the retailer are delivered to a cross-dock and then delivered to the customer directly. There is no requirement for additional warehousing or a pre-warehouse cross-dock.
That is merely the operational difficulties. A substantial impact was also played by a lack of technology. In LatAm the majority of delivery coordination and routing is still done via a spreadsheet or pen and paper, to call and dispatch drivers, dispatchers must personally pick up the phone. In the United States, computerized optimization algorithms dramatically reduce delivery cost and time by automatically determining the most efficient route (e.g., packing the most deliveries possible on a truck along the route) and dispatching the driver who can complete the route most efficiently based on current location, capacity, and route experience. In the Latin American retail logistics business, these algorithms are nearly unheard of.