#Stayathome and Cornershop – The Future of E-commerce
This article is also available in Spanish, click here to access it.
On 29 May 2020, the Chilean antitrust regulator (FNE) announced that it had approved Uber’s purchase of the Santiago-based online grocery provider Cornershop. For Uber, this is a logical next step (see our briefing on delivery apps in Latin America) as it looks to expand beyond ride-sharing and foodservice and into the delivery of groceries and other goods.
While Cornershop may not be a household name in the US or the rest of the world, it has rapidly disrupted the modern grocery channel in Chile. Long before the first case of Coronavirus (COVID-19) was confirmed in Latin America, Cornershop staff were a common sight in hypermarket aisles in Santiago.
The shoppers receive orders on their smartphones and users receive a prompt via the app at the moment of checkout to confirm replacements or to add an additional request before receiving it all at their front door shortly afterwards. Delivery (when a city is not under quarantine) is typically under two hours, or at the time scheduled in the app. Some 65% of Chileans are middle class according to the World Bank’s income criteria, and the USD80 annual fee for the service is worth the convenience and the time saved.
Looking for a buyer
Antitrust officials in Mexico had already blocked a similar bid in 2019 (one worth USD225 million) from Walmart due to concern that they would be unable to guarantee a level playing field for rival retailers. A decision on the Uber deal from Mexican regulators should be expected during 2020. From that point on, the platform’s growth plans could potentially be accelerated, the priority markets being the US and Brazil. The company currently operates in Chile, Mexico, Peru, Brazil (nine cities including São Paulo and Rio de Janeiro), Canada (Toronto) and, most recently, the US (Miami and Dallas).
Cornershop arrived in Brazil via São Paulo in January 2020 and includes large chains such as Carrefour and Group Big. Cornershop’s Head of Operations in Brazil, Andressa Carrasqueira, informed that the company plans to rapidly expand by launching in a new Brazilian city every week.
Uber CEO Dara Khosrowshahi said that the Cornershop acquisition is a key move for Uber Eats growth in Latin America. “The big opportunity that we already thought Eats was just got bigger”. “Once the acquisition is complete, we’ll integrate Cornershop with Eats”. Meanwhile, the pandemic has been good for business. Uber Eats recorded 89% year-over-year gross transactions growth in April (excluding India).
Chile’s antitrust regulator was concerned that Uber purchasing Cornershop would limit competition among the country’s online delivery services. However, the regulator in its May announcement said that a rush by supermarket chains into e-commerce and online platforms had eased those concerns.
For example, Cencosud, which manages one of Chile’s more premium grocery chains, Jumbo, announced that it would also compete with the last-mile delivery app by improving its own app and delivery service. Jumbo purchases within the Cornershop app currently carry an additional 18% service fee, enough for a user to be motivated to download the Jumbo app.
The Cornershop model is an extremely attractive option for consumers preferring to #stayathome during the pandemic. Consumers across the globe have flocked to the e-commerce channel as a means to reduce their exposure and stay healthy. In the case of Santiago, Cornershop was not able to keep up with the demand at the onset of the pandemic or in the days prior to a quarantine order going into effect.
Groceries delivered within two hours were suddenly an impossible order, let alone the next day or within the same week. The approximately 4,000 Cornershop shoppers in Santiago were overwhelmed by the sudden increase in demand, and although residents can still legally leave their homes for these errands, #stayathome meant that those with the means to, would.
An informal gig economy is better than nothing
The couriers for delivery apps and the shoppers for last-mile delivery in countries such as Chile, Argentina and Brazil are often migrants and refugees, individuals who typically have trouble finding work in the formal sector. Prior to COVID-19, governments across the globe were increasingly under pressure to regulate the ride-sharing and delivery app economy, to provide worker protections, and to ensure that these companies pay their fair share in taxes. It is increasingly clear, however, that innovation and regulation do not mix.
Regulating Uber Eats or Cornershop would consist of standardising driver requirements, which would significantly reduce the size of the fleet, and no doubt increase the waiting time for orders. An unregulated gig economy means more (albeit precarious) work, for more people. While the pandemic rages in Latin America, unemployment will surge, meaning a potentially larger workforce for the gig economy, especially foodservice delivery apps and last-mile players.
Although the delivery apps and last-mile players are a unique opportunity for these workers, they are consolidating a trend of increasing labour precariousness that affects both workers’ rights and public coffers.