What's Wrong With Rappi, Latin America's Star Of Uberization
Questions are beginning to mount about the fast-growing, tech-based company's business and hiring practices.
BOGOTÁ — The billion-dollar startup Rappi is a prime example of the so-called "orange economy" — or creative economy, as it's also known —that Colombian President Iván Duque first championed as an author and continues to prioritize as head of state.
Little wonder that the delivery-service firm campaigned in his favor in the last elections, and that the candidate even appeared in a picture with the orange cap worn by Rappi delivery people. The company reflects the power of millennials, he said.
Rappi, a digital startup founded in 2015, is now present in seven Latin American countries. Tech firms like Rappi tend to outpace established regulations for taxes, social security contributions, work relations and other costs borne by traditional-economy firms. That's how Uber, the private taxi firm, avoids payment of car registration and insurance fees for its "partners' or secretive drivers, while Airbnb gets around hotel taxes when selling short-term flat rentals online.
One might say startups have more of an impact substituting traditional firms than in deepening existing markets. Yes, they reduce costs through economies of scale realized online. But they've also provoked opposition from those who lose out. In various cities worldwide, taxi drivers have launched campaigns demanding that Uber drivers meet the same requirements as taxis, and some cities have gone so far as to ban online cab hailing. Likewise, some cities are restricting flat rentals by global websites, as these reduce the availability of standard rentals while inflating real-estate prices.
They must take into account that this is a new economy.
Recently, Colombia's Trade and Industry Superintendency, which oversees markets and consumer rights, ruled that Rappi was running its online business "irresponsibly." It found that the company does not issue receipts, offers "rappicredits' rather than reimburse money on returned purchases, does not post accurate prices — often concealing additional costs, charges for canceled orders, fails to honor promotional offers, delivers late, mixes up orders, sometimes charges twice for a product, and charges bank cards without authorization.
The firm's "policy director" said he respected the authority, but has warned that "they must take into account that this is a new economy" and should consider how the "negative effects' of regulation could "discourage businesses." Rappi, in other words, should not be subject to the law.
The Labor Ministry, in the meantime, is now having to investigate an even more serious matter: work conditions in these new, "sharing" industries, which bypass all hiring and responsibility norms. Rappi pays nothing toward the healthcare and pensions of its "partners," as its employees are called. Nor does it pay insurance premiums for work accidents, which are frequent among the many cyclists it hires, or offer paid holidays. There is no severance pay either, and no promotion prospects in the firm.
What Rappi does offer its "partners' is: "Passion, Pride and Determination" and the chance to "Get active when you want." Needless to say, these kids will need a lot of that, as they work for just a few hours a day in precarious conditions with no prospects for the future.