On April 10, in the midst of a nationwide lockdown, Bogotá’s Movistar Arena transformed into a fulfillment center for the grocery startup Merqueo. The 14,000-seat indoor stadium usually hosts tennis matches and “Disney on Ice.” Instead, forklift operators and delivery drivers replaced line judges and skaters, scrambling to set up a warehouse.
One month earlier, as rumors swirled that the country was preparing for a lockdown, the company’s cofounder, Miguel McAllister, received a call. It was Ignacio Gaitán, one of the main deputies of President Iván Duque, in charge of the country’s entrepreneurship-and-innovation initiative. Gaitan needed help establishing a food-distribution system for people in quarantine.
Nothing came of this conversation, but two weeks later, the men struck a deal that would prove crucial to McAllister’s company during a moment of unprecedented growth. In exchange for partial rent, Merqueo could convert the government-owned arena into a temporary warehouse. It was a win-win arrangement, and it came just in time. Over the next month, Merqueo’s users tripled.
Founded in 2015, Merqueo functions as a hybrid of Instacart and Amazon — consumers can choose from a supermarket’s worth of grocery offerings, which Merqueo then delivers as soon as the same day with its own fleet. Merqueo owns the goods it sells, managing the entire fulfillment process from its now 11 warehouses, four of which have opened since lockdown was announced.
The company is a recent addition to Colombia’s booming e-commerce sector. Several years ago, platforms like Merqueo faced a roadblock: the lack of logistics infrastructure in Colombia to support operations, such as warehouses, trucking, last-mile delivery, or internet connectivity. With the success of one large last-mile logistics company, Rappi, and a labor market profoundly altered by the recent influx of Venezuelan refugees, that began to change. Investment in delivery services poured in, and Colombia now has the most sophisticated logistics ecosystem in the region, with a robust array of super-app startups. This has paved the way for entrepreneurs like McAllister.
Rappi put Colombia on the international tech map, according to Maximilian Beck, an entrepreneur and professor of business at the Bogotá university CESA. “Colombia, before Rappi, was irrelevant globally,” he told Rest of World. Now, Rappi is Colombia’s first unicorn and No. 11 on the list of companies to come out of the prestigious startup incubator Y Combinator by valuation, ahead of fellow alumni such as Reddit and Twitch.
Rappi avoided the infrastructure problem by effectively crowdsourcing its products. It invited stores, restaurants, and grocery stores into its marketplace, serving as the intermediary between goods and consumers and avoiding the need for fulfillment centers and warehouses. Buoyed by massive rounds of funding, which are now upward of $1.7 billion, and the Venezuelan refugee crisis, Rappi was able to expand rapidly. Of the 5 million refugees who have fled Venezuela, over 1.5 million have settled in Colombia, where many found precarious work with Rappi. While this fueled the company’s growth, it came at a human cost. Over the past year, protests have been held in Colombia and across Latin America to condemn the company’s shoddy labor practices and low wages.
Nevertheless, Rappi’s success not only generated interest among investors outside of the country — particularly from the United States — it also spurred local consumer expectations for e-commerce, meaning that more Colombians now turn to e-delivery for basic goods. Thanks to its model of distributing small-ticket items with rapid fulfillment, according to Beck, Colombians started to expect delivery not that week or the next day but within the hour. “E-commerce here means literally real time,” Beck said. “Rappi has game-changed the way we think and experience e-commerce in Colombia.” To compete with Rappi, a new wave of startups began to raise funding to service more traditional e-commerce platforms with warehouses, trucking, and delivery, which built out Colombia’s logistics ecosystem.
McAllister has been developing new delivery apps for some time. He founded a service called Domicilios with José Guillermo Calderon, who went on to create the Colombian cloud-kitchen startup MUY in 2007, when food delivery as a technology was still a nascent idea in Latin America. (In 2017, the German food-delivery giant Delivery Hero acquired the company.) The next year, McAllister launched Merqueo. Unlike Rappi, Merqueo controls its own infrastructure, buying directly from wholesalers, just as a supermarket would. The gamble is that this will be the next step in e-commerce.
“People care about how much they’re paying for everything. An iPhone, an Xbox, or their tomatoes,” as McAllister told Rest of World. Like Amazon, Merqueo is focused on disintermediation: removing as many links as possible in the supply chain between producers and consumers. Unlike Rappi, Merqueo has hired around 600 of its delivery drivers as employees, and a spokesperson for the company said it pays its warehouse operators 13% more than Colombia’s monthly minimum wage of around $300. By managing the whole process, he says, Merqueo can keep prices comparable to a supermarket’s — with delivery included.
Merqueo was founded in 2015, and on the strength of McAllister’s experience, he has since raised $24 million in funding, including a $14 million series A round in 2019. Still, Merqueo is incredibly expensive to operate, and McAllister says it didn’t have its first cash-flow-positive month until the pandemic began, when demand exploded.
Since the Covid-19 spike stabilized, its customer base has grown by about 200%. Merqueo operates in the metropolitan areas of Bogotá, Medellín, and Cali (as well as Mexico City), but it doesn’t serve Colombians living in smaller cities or rural areas, who constitute around 75% of the country’s population. Additionally, Merqueo is now facing more competition. A Mexican service with the same business model, Jüsto, recently raised $12 million to expand to Colombia. Beck believes that Amazon is planning on expanding its presence in the country in the imminent future. (According to an Amazon spokesperson, the company is “constantly working on adding and improving services for our customers in Colombia” but has “nothing to announce currently.”)
The main question now is whether the market is big enough to accommodate the continued explosion of e-commerce. According to the Colombian branch of the global research firm Kantar, Colombia had the highest e-commerce growth of any Latin American country during 2020, in terms of consumer penetration — more than double that of Argentina. McAllister believes this is because of the sheer number of companies working on logistics in Colombia.
Even so, Beck warned to take the data with a grain of salt. Like deliveries, the numbers are not always dependable. “It’s a guerilla e-commerce moment here,” said Beck. “Part of the charm of this ecosystem is that everything is possible, but nothing is reliable.”