Online retailers are not the only winners in the e-commerce boom

Customers are demanding convenience and speed, enticing logistics firms into the virtual world
Click to order: the impact of online shopping on various sectors related to retail is only just emerging in the Gulf.
By Nour Suliman
Sun 02 Apr 2017 10:06 AM

The phenomenon of e-commerce has grown beyond anyone’s comprehension in terms of volumes, scale, markets and countries. By 2020 more than 900 million people around the world are expected to be online shoppers and global e-commerce sales are said to double.

The same trend is sweeping over the Middle East on the backbone of a flourishing retail industry. Although MENA makes up a small fraction of the estimated $1.5 trillion global e-commerce market, at just over 1 percent, recent reports suggest the GCC e-commerce market is set to quadruple to reach $20bn by 2020, prompted by a surging consumer base, high disposable incomes and changing buying habits, among other factors.

For logistics companies, these forecasts represent enormous opportunities. There are over 4 million online buyers in this region, and this figure is set to rapidly increase with an expanding population that is surpassing world average growth rates. There is also a predominantly young population, especially in the Gulf countries which are more tech-savvy and prone to explore the world of online purchases.

Other factors that will continue to boost e-commerce in the region are improved internet penetration, rising ownership of mobile devices and accessibility of payment cards as well as government efforts to improve the e-commerce ecosystem and facilitate online transactions.

The growing popularity of e-commerce has led to a parallel evolution in the logistics processes to accommodate this new business model. Logistics players are adopting smarter, more advanced processes and procedures to support rising e-commerce demand, especially in light of the sector’s tremendous growth prospects, which DHL has witnessed first-hand, citing an average 25 percent year-on-year increase in its regional e-commerce activity in the last five years.

Logistics companies need to tackle e-commerce as a separate vertical all together. It is much more than just delivering a product to the client; it’s about customer satisfaction at every step of the process and living up to a promise. Consumers have much higher expectations today. They live in a real-time environment where they want things faster, with more visibility, more predictability, more choice and a great deal more convenience.

Retailers recognise how critical this is to a customer’s journey and see fulfilment as a differentiator and a driver of loyalty - and they are looking for logistics partners with an innovative mindset and creative solutions that can help them deliver it. In this respect, logistics companies need to offer services that add significant value to the retailer at competitive costs. As a result, retailers will be able to stay ahead of the game and secure customer loyalty while offering their end consumer the flexibility to receive an order when and where it suits them.

Many of the challenges come with last mile delivery, which can amount to 50 percent of the total logistics costs. Logistics providers have to work on ever-creative, cost-effective solutions to get deliveries to customers and provide them with the choice, control and convenience they demand, whilst offering significant value to the retailer.

Innovative last-leg delivery solutions, such as DHL Lockers and DHL Parcelshop collection points, secure delivery boxes for houses, in-car deliveries, click and collect and automated door openers are a win-win; they meet the needs of the consumer for convenience and choice and also reduce the cost of delivery for logistics companies.

Geo coding, GPS positioning and location mapping are some of the new mechanisms being adopted by the regional industry to ensure e-commerce fulfilment and DHL has also deployed a system called on demand delivery, where customers can choose the location and time of delivery.

E-commerce is likely to become the cornerstone of the region’s growth in coming years and logistics is without doubt its lifeline. Logistics companies need to adapt with new and improved solutions to help support this sector’s development especially in light of a more demanding, price-conscious customer segment who seek more control over their delivery process. Personalised track-and-trace systems, competitive pricing structures, efficient last-mile delivery methods, integrated technology and smarter warehousing and inventory management are just some of the ‘must-dos’ for the logistics industry; this is in addition to the continuous enhancements in air and road connectivity to ensure speedy, safe and affordable delivery.

It is no longer about being the fastest in the industry, it’s about delivering within a specified timeframe, safely and at an attractive cost.

We are bound to see more and more alternate delivery methods taking shape in the future, such as autonomous vehicles, which are taking shape in the last-mile space, offering efficiency, accuracy, speed and cost. Drones are already being used commercially in Europe and the US. Robotics have been prevalent in warehouses for some time, improving e-fulfilment in terms of accuracy of pick and cost, and now delivery robots are being trialled. It may take a little bit longer to see some of these adopted in this part of the world but the options are endless and it is a very exciting journey ahead.

The GCC is set to continue to lead the growth of the region’s e-commerce, with the UAE taking centre stage, owning over 50 percent of the GCC’s B2C (business to consumer) e-commerce market share. It is closely being followed by Saudi Arabia, Qatar, Kuwait and Bahrain in the adoption of e-retail.

Looking beyond the GCC to the extended MENA, there are still obvious challenges curbing e-commerce growth. Volatility is the most prevalent, with disruptions in road connectivity affecting timely deliveries, especially in the case of intra-regional transactions. The limited number of e-commerce players is restricting the industry’s competitive potential. Online consumers in this part of the world are also sceptical when it comes to online payments, preferring cash-on-delivery methods, which are not efficient for logistics players.

As the dawn of e-commerce continues to challenge traditional supply chains, the journey ahead promises to be truly exciting for the logistics industry, as it shifts gears to take on a different mindset more skewed to the needs of the virtual world.

Nour Suliman, CEO Middle East and North Africa at DHL Express.

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