On-Demand Delivery Duopoly Dynamics

Duopoly matters because the jump from third place to second place is the jump from permanently subsidizing orders to finally getting local delivery density high enough to make money. In on-demand delivery, the winner gets more restaurants, more riders, and shorter ETAs, which pulls in more customers and lowers cost per order. That is why smaller players tend to exit, merge, or retreat market by market, and why Rappi being top 2 in each country is core to its path to profitability.

• The mechanism is hyper local. More merchants attract more customers, more customers attract more riders, and more riders improve speed and reliability. As order density rises, platforms can stack more drops per trip, spreading courier cost across more orders. That is the core economic reason marketplaces tend to narrow to two scaled players.
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• There were already signs of this in Latin America. Glovo exited Chile and Brazil in 2019, and Uber Eats exited Argentina and Colombia in 2020. In Rappi’s key countries, the main battle lines were iFood in Brazil, Uber Eats in Mexico, and Pedidos Ya in Argentina, with exclusive merchant contracts and promotions used to lock in local share.
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• Rappi’s response was not just to win food orders, but to make the app useful more often. More than 90% of customers were buying from at least two categories, and cohort purchase frequency rose from about 2 orders per month in year 1 to 6 in year 3 and 11 in year 5. That extra frequency helps fill the courier network and makes second place more defensible.
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The next stage is a smaller set of country leaders using food delivery as the traffic engine, then layering grocery, payments, ads, and fulfillment on top of the same local network. For Rappi, the upside is not just surviving consolidation, but turning local scale into a broader commerce utility that is harder for a single category rival to dislodge.