Posted on: | Posted by: Rahul

How Rappi works: Business Model and Revenue Model

The trend of online food delivery systems has changed the face of the food industry completely. With the rapid increase in demand for online food delivery services, people are investing in the food delivery business. A customer prefers a doorstep food service rather than going outside to dine. The most fascinating fact about online food delivery service is that a user can go through various menus of different restaurants by simply scrolling through the food application. Also the competition in the online food delivery market is directly proportional to the services provided to the customers, and since the competition is rising, it results in more benefits to the customers.

One such food delivery business working to benefit the customers in cities and villages alike is Rappi. It was started in 2015. Since then Rappi’s business model and efficient delivery network have helped the people of South America at large, to save time and get a host of services at their doorstep. An analysis of the incubation and working of Rappi is presented here starting with the size of the market that it operates in.

MARKET SIZE

In South America, revenue in the Online Food Delivery segment amounts to US$4,374m in 2020.

The revenue is anticipated to manifest an annual growth rate (CAGR 2020-2024) of 9.0%, developing in a market volume of US$6,166m by 2024.

The largest segment in the online food delivery market is Restaurant-to-Consumer Delivery along with a market volume of US$2,759m in 2020.

ABOUT RAPPI APPLICATION

Rappi app is a dream come true for Latin Americans. Rappi’s unique business model and amazing services like delivering food, medication, alcohol, groceries, stationery etc. have changed the way people used to buy their daily necessities. This Colombian app is in headlines since the day it was introduced into the food market. It’s an all-time food delivery app solution for the people.

Some interesting facts about how Rappi works are given below:

· Rappi was founded by Felipe Villamarin, Sebastián Mejía, and Simón Borrero, three Colombian entrepreneurs, in 2015.

· The initial expenditure in Rappi was $2,000,000 (equivalent to $2,160,958.92 as of 2019).

· SoftBank came into partnership with Rappi in April 2019 with a $1 billion dollar investment.

· Along with an on-demand online delivery service, Rappi also provides courier services in Latin America.

· One of the amazing features about Rappi’s Business model and the delivery services which operate in Argentina, Brazil, Chile, Mexico, Peru, Uruguay, and Colombia is that customers can order doorstep cash delivery where it is unsafe to go out and use ATMs at certain hours. Customers pay the amount at the Rappi app and a delivery person will come and deliver the cash to their door. It has covered almost “every nook and cranny”.

Rappi is currently valued at 3.5 billion USD and raised a funding of 1 billion USD in its latest Series E funding.

rappi business model Type a message

RAPPI BUSINESS MODEL: HOW DOES IT WORK?

Rappi’s business model is as efficient as it is unique, Rappi works as a moving store or an online food delivery market that brings everything to the customer’s doorstep. The sole purpose of Rappi is to provide value to its customers. It has also helped unemployed people to earn a living and progress towards more development.

Value to the customers: How Rappi works is really interesting to know, Rappi is designed in a way that the app works for providing the customers with maximum comfort. Rappi was the first-ever on-demand delivery service in Latin America that works for the convenience of the customers. Daily delivery for basic necessities has become much easier than before. People get their food within one hour of the order while groceries are delivered within half an hour. Rappi has spread its roots in more than 40 cities in 7 countries across Latin America. One of the unique features that have been added to the app for customers is Rappi pay. This feature works as a bank for users, where they can transfer money to each other and make any payments.

Value to the businessmen One of the reasons for the success of Rappi’s business model is its partnerships,Rappi has collaborated with multiple restaurants, grocery stores, and CPGs which makes it easier for these businesses to reach the maximum number of people in the town. Rappi application publishes advertisements for the companies in exchange for some commission. Sometimes, Rappi helps them to distribute free samples of products to spread mass awareness about the product in the market. Coca-Cola has sent around 100,000 bottles of gift samples in one month, one of numerous examples proving the efficacy of Rappi’s Business model. Rappi’s Business model is constantly being refined by continuously experimenting with newer services, for instance it partnered with Sony for delivering their Playstations to the customers in Colombia.

Value to Couriers Rappi has 50,000 couriers that deliver more than 30 orders each per month. Rappi always keeps the comfort of its employees on priority. The Rappitenderos (the courier men) can work for as many hours and at any time in the day. Even less educated ones working full-time can earn a good amount of money and contribute to the upliftment of society.

RAPPI REVENUE MODEL: How does Rappi earn?

Commission: Rappi is a type of online store that delivers products to customers. For that, it partners with a number of stores, restaurants, companies in order to provide varieties of products to the customers. Once the order is placed, Rappi charges a small commission on each order from the restaurants, store owners.

Customers: Satisfied customers due to the fast delivery or availability of the product on the Rappi app, often give tips to the delivery men for their hard work. This is how Rappitenderos earn from the deliveries.

Advertising and Marketing: A user receives notifications on the app for suggested items from various stores that he can order from. For such advertisements, Rappi charges money from the respective businesses to display their product to the customer.

OTHER PLAYERS IN THE MARKET

IFOOD: IFOOD is a Brazilian food delivery firm that has been experiencing growth for a long time. By the end of 2019, the company completed 21.5 million orders in Brazil. IFood is currently delivering food to 822 Brazilian cities, including 160 restaurants. Over 100,000 restaurants are now partnered with IFood. It is one of the toughest competitors of Rappi.

GLOVO: Glovo is a Barcelona based start-up that has changed the way consumers used to access local goods, delivering the product in less than 60 minutes. They are currently present in Spain, Italy, Portugal, France, Argentina, Chile, Bolivia, Peru

Glovo app connects customers with local couriers, who receive goods from any restaurant or shop in a city and also deliver packages for a variable fee. The mobile app allows users to order food from various restaurants at their doorstep.

The app features include geolocation, which helps customers to track their deliveries and locate the nearest glover (courier)

CONCLUSION

The global food delivery market has taken a completely different direction since the online delivery system has been introduced to the customers. It has helped develop a healthy relationship between customers (by delivering their needs and wants at their doorstep) and organizations (by connecting them with the customers and helping the companies to see their products) and is continuing to do so. The future of the online food delivery apps is very promising especially in growing markets like South America and alike.

If you are also thinking of stepping into this market and planning to launch an on-demand food delivery app like Rappi, then get in touch with AppsRhino. We would guide you in designing the most unique and user-friendly app for your business and help you achieve your dream.