Ordering a pizza used to mean searching for a phone number, calling in your order, and paying the delivery guy in cash. But those days, it would seem, are gone. In 2018, online delivery services—such as UberEats and iFood—grew 80 percent according to the Brazilian Association for Bars and Restaurants (ABRASEL). It is predicted that online delivery will completely replace phone delivery within the next five years.

</span></p> <p><span style="font-weight: 400;">It’s not just pizza. Any food—from Big Macs to high-end gelato—is now available at the touch of a button. The only human interaction left is picking up your order from the delivery guy. And even that might become obsolete, as companies begin to experiment with </span><a href="https://airway.uol.com.br/sao-paulo-tem-primeiro-delivery-de-comida-realizado-por-drone-na-america-latina/"><span style="font-weight: 400;">food delivery via drones</span></a><span style="font-weight: 400;">. Meanwhile, startups such as Rappi and Loggi are expanding into areas beyond food. Pharmaceuticals, pet supplies, and Nespresso capsules are just a few of the items that can be delivered within minutes of ordering.</span></p> <h2>A tough market</h2> <p><span style="font-weight: 400;">Brazil’s newest unicorn, Loggi, offers courier and delivery services, making it the second of nine unicorns to operate in the delivery industry, after iFood. In a cut-throat BRL 11 billion market, survival is tough. Spanish delivery app Glovo ceased operations in Brazil after just one year, stating that </span><a href="https://epocanegocios.globo.com/Empresa/noticia/2019/03/glovo-decide-deixar-o-brasil.html"><span style="font-weight: 400;">entering the Brazilian market</span></a><span style="font-weight: 400;"> required more investment than they had imagined.</span></p> <p><span style="font-weight: 400;">If anything, things will only get more competitive as larger companies begin to invest in and develop their own apps. Retail company GPA, which owns supermarket chain Pão de Açúcar, acquired startup James Delivery last year. Forty percent of GPA’s online orders go through the app, allowing for increased sales. </span></p> <p><span style="font-weight: 400;">A survey by the Brazilian Service to Support Micro and Small Enterprises (SEBRAE) shows that consumers favor restaurants and stores that offer delivery services. The study also showed a bump in delivery-only business, with 12 percent of stores having no brick-and-mortar strategy.</span></p> <div class="flourish-embed" data-src="visualisation/487147"></div> <p><script src="https://public.flourish.studio/resources/embed.js"></script></p> <h2>Uberization</h2> <p><span style="font-weight: 400;">People who deliver goods by motorcycle, called “motoboys,” are not a new concept. In fact, they have been all over São Paulo’s streets since the 1980s. These delivery providers, usually young men, zip between lanes of heavy traffic. It frustrates drivers to no end, but ultimately allows for the quick transportation of documents, medicine, and more. According to </span><i><span style="font-weight: 400;">UOL</span></i><span style="font-weight: 400;">, </span><a href="https://tab.uol.com.br/motoboys/"><span style="font-weight: 400;">motoboys make nearly 600,000 deliveries each day</span></a><span style="font-weight: 400;">, and nearly 80 percent of them are not registered as formal workers.</span></p> <p><span style="font-weight: 400;">Delivery apps take advantage of the ecosystem that already operates in cities by offering convenient platforms for motoboys, businesses, and consumers to connect. This convenience </span><a href="https://brazilian.report/money/2019/05/16/ride-hailing-apps-car-rental/"><span style="font-weight: 400;">creates jobs</span></a><span style="font-weight: 400;"> in Brazil’s slowly recovering economy. </span></p> <p><span style="font-weight: 400;">It isn’t all a pretty picture, however, as these spots are part of the gig economy, and offer no protection or benefits for workers. Loggi and iFood have both faced civil actions from the São Paulo Labor Ministry for dodging employer responsibilities. The argument goes that motoboys and food delivery apps both skirt the law; the motoboys by failing to register their working hours, and the apps by transferring all the risks to the service provider.</span></p> <h2>Franchises and the pizza war</h2> <p><span style="font-weight: 400;">The growth of the delivery sector opens up possibilities for franchise owners, who no longer have to invest in expensive storefronts. Delivery-only stores allow for lower investment in location, and third-party apps eliminate the direct cost of paying delivery drivers. </span></p> <p><span style="font-weight: 400;">Franchising is a growing sector in Brazil, reaching BRL 173 billion in 2018, up seven percent from the year before. It spurs entrepreneurship by giving small business owners access to resources and a structure from an already successful chain. Franchising is a key strategy for growth in the competitive pizza market, and American-owned Pizza Hut aims to open 200 stores in the country in the near future. </span></p> <p><span style="font-weight: 400;">A law from 2011 prohibits restaurants from paying delivery drivers by the number of orders they fulfill, requiring pizzerias to pay hourly or monthly wages instead. Tech companies, however, don’t follow this regulation as of yet, and motoboys working with apps feel financial pressure to deliver faster and more. This may explain the 32 percent increase in motorcycle accidents last year. </span></p> <p><span style="font-weight: 400;">Companies such as <a href="https://brazilian.report/money/2018/07/03/uber-brazil-business-model/">Uber</a> are holding their ground, claiming that they are not service providers, but platform developers that facilitate interactions between businesses, motoboys, and consumers. Moreover, they say, apps like theirs allow for supplemental income that drives economic growth.

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MoneyJul 10, 2019

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BY Juliana Costa

Juliana is a growth strategist and contributor to The Brazilian Report