One of the 22 fullfilment centers of B2W Digital,
One of the 22 fullfilment centers of B2W Digital, parent-company of large e-commerce portals in Brazil such as Americanas, Submarino and Shoptime, in Itapevi, Sao Paulo state. Photo: B2W Digital/Courtesy.

Rappi, Loggi, and B2W Digital: What changed in e-commerce logistics in Brazil after COVID-19

What was supposed to happen over the course of a couple of years took place in only a few months. Parcels that used to take five days to reach the buyers' home are at their doorstep in less than three hours

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The COVID-19 pandemic changed the way Brazilians consume, and digital channels capitalized on a never-before-seen momentum. E-commerce and logistics platforms had to adapt and invest to meet the demand for faster and faster deliveries. What was supposed to happen over the course of a couple of years took place in only a few months. Parcels that used to take five days to reach the buyers’ home are at their doorstep in less than three hours. And it doesn’t matter if it’s a book, a piece of clothing or a television.

“Brazil evolves through great ruptures. This great step that emerged in the pandemic will have an incredible transformation effect; this wouldn’t happen if we stayed in the comfort zone,” says Ana Paula Tozzi, an expert from AGR, a Brazilian consultancy focused on e-commerce.

“We had to make a businesses that, in the vast majority were not prepared, learn five years in one,” ponders the expert. From the seller to the courier, the various actors in the chain were affected and saw the logistics processes accelerate. Urgency has become the rule event for those who already had online sales channels.

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And whoever does the midfield, that is, who takes care of the logistics, is the one who grew the most in this period. A lot of investment was made not only to reduce deadlines but also to make the process smarter.

“Before the COVID-19 pandemic, we had worse logistical structures than today,” says Ana Paula. “What happened was a positive transformation because it dilutes the dependence on a few channels. Regional operations that few paid attention to now become relevant and protagonists. It really is an important transformation, ”she adds.

Forced adaptation of shopkeepers benefited platforms like Rappi

Without optimized channels for online sales and established distribution strategies, many retailers had to resort to existent solutions. Stores such as Fast Shop (home appliances and electronics), Decathlon (sportswear), L’Occitane (cosmetics), Multicoisas (utilities and tools), and Saraiva (books) rushed to Rappi, the Colombia-based delivery unicorn that now wants to be a super app. Alongside its most traditional clients, such as restaurants, grocery stores, and pharmacies, Rappi has expanded its so-called Rappi Lojas (Rappi Stores), providing sellers with a system to display, sell and deliver many types of products. And all happened very fast.

“We had to grow our operation by 50%, in just three weeks at the beginning of the pandemic, with our team working 100% remotely,” recalls the president of Rappi in Brazil, Sérgio Saraiva.

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Sérgio Saraiva, President at Rappi in Brazil
Sérgio Saraiva, from Rappi Brazil. Photo: Rappi/ Courtesy

We watched e-commerce gain more and more space within the super app and registered a 57% increase in the number of orders in this vertical in Brazil, in 2020, compared to the previous year

SÉRGIO SARAIVA, president of Rappi Brazil.

Stores were able to reduce their losses due to the circulation limitations imposed by the COVID-19 pandemic. Simultaneously, Rappi strengthened its strategy of being a super app, seeing its customers buying a wider range of products through its platform. “Brazilians have a lot of interest in technology, and the change in behavior generated by the pandemic, which allowed new users to enter e-commerce, accelerated this digital transformation,” points out Saraiva.

Loggi had to open new cross-docking centers to meet demand

Even those who already had sales channels on the Internet needed to rapidly deal with their logistical issues to support the growing demand. Startups operating in this market were quickly targeted by stores of all sizes, including large retailers. The vice president of sales for the Brazilian express delivery unicorn Loggi, Ariel Herszenhorn, says that 2020 was unlike anything the company had experienced since its foundation in 2013.

Ariel Herszenhorn, VP of Sales at Loggi. Photo: Loggi/Courtesy.

“In 2020, we saw Loggi’s numbers surpass all levels of 2019. In July, at the pandemic’s peak, we had already registered a growth of 500% in the number of deliveries over the same period of the previous year. With the end of the year, Black Friday and Christmas, we reached 360% Y-o-Y growth,” stresses Herszenhorn.

Loggi was born focused on the so-called last mile, which is the final step, the product’s actual delivery to the buyer. Gradually, however, it expanded its operations to all logistic phases, from the collection of the product to its arrival at the customer’s door. This required infrastructure investments, such as the opening of six cross-docking centers (Belo Horizonte, Brasília, Porto Alegre, Recife, Rio de Janeiro, and Salvador). Cross-dockings are sorting centers where products leave by various means before reaching mini-hubs in cities. From the mini-hubs, the last mile leg of the parcel’s delivery is made by a partner courier (by car or motorcycle).

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Loggi’s cross-docking center in Cajamar, São Paulo. Photo: Loggi/Courtesy.

With this strategy, Loggi can serve 600 Brazilian cities – the company expects to reach 3,000 cities (more than half of the total) in Brazil in 2021. This will require at least BRL 600 million ($111.7 million) in investments until 2022.

Our growth made us anticipate a series of investments that were already expected. The ability to make these improvements and keep up with the e-commerce increasingly demand has placed us in a unique position in a market that, we believe, has a lot of room to grow in the coming years

ARIEL HERSZENHORN, vice president of sales at Loggi.

Retail giant B2W ended 2020 offering delivery within 24 hours to over 1,000 Brazilian cities

Even large stores that already had consolidated logistic arms decided to invest even more to reduce delivery times during the pandemic. In some cases, this journey has dropped from days to hours.

There were those who even invested in an ‘own’ aircraft fleet, such as MercadoLibre, which created MELI Air, with a aircraft operated by Sideral – to increase its next day deliveries range. From the distribution centers in São Paulo and Bahia, the four planes depart for other urban centers to begin the final delivery stage. It is a movement similar to that of Amazon in the United States, which launched Amazon Air (formerly PrimeAir), and today has 68 aircraft dedicated to the delivery of its products.

B2W Digital, one of the largest Brazilian retailers, which owns the brands, Shoptime and Submarino, also invested much more in logistics than it had planned for 2020. The company opened five distribution centers – the previous plan was to open them by 2022 – and reached 22 units in 12 of the 27 Brazilian states. The biggest change, however, was the expansion of the logistics model with the delivery of products directly from the store.

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According to B2W Digital’s investor relations director, Raoni Lapagesse, this allowed the group’s stores to serve more than 1,000 Brazilian cities with deliveries within 24 hours. “Currently, 46% of the company’s orders are delivered in 24 hours in Brazil as a whole and, in November alone, we made 147,000 deliveries in up to three hours,” he says.

This was also made possible by the expansion of Ame Flash, the company’s logistic last mile arm present in 700 Brazilian cities. “Ame Flash was essential to these initiatives, with more than 22,000 independent partner couriers. In 2020, the platform also started to deliver large items, such as TV and appliances, by car and from physical stores,” says Lapagesse.

The expansion of B2W Digital’s distribution channels will continue in 2021. Distribution centers are being automated to reduce product shipping times by up to 75%. By the end of 2022, the expectation is that the company will have 17 fully automated distribution centers.

B2W will invest BRL 5 billion ($931 million) over the next two years with a focus on transforming the customer’s shopping experience in e-commerce. We need to change the e-commerce logistics in Brazil; to stop counting deadlines in days to do so in hours

RAONI LAPAGESSE, investor relations director at B2W Digital.

Translated by Fabiane Ziolla Menezes