Valued at $970 million, Saudi Arabia’s courier, express and parcel (CEP) delivery market is expected to grow by an average of 6.5 percent per year until 2026, a new report indicated.
Despite the challenges that remain with last-mile delivery, the growth is driven by the e-commerce boom in the wake of the pandemic, according to a report on the topic issued by ResearchAndMarkets.com.
“E-commerce is one of the major factors driving the market growth. With higher connectivity rates, a young working population, and advanced infrastructure, the country is one of the major markets in online retailing in the Middle East,” the report outlined.
In March, e-commerce giant Amazon announced it is growing its operations network across Saudi Arabia to include six fulfilment centres and 13 delivery stations, creating more than 1,500 new jobs in 2021. This would enable it to reach more customers with a wider geographic coverage and remote locations.
The e-commerce logistics in the kingdom are still developing and more business models are expected to evolve involving outsourcing and focus on specific parts of the value chain, such as first mile, long haul, and last mile, according to the report.
“Given the continuous growth in e-commerce and the fact that building one’s own network is very expensive, more partnerships are expected to happen in the market on the back of pressure on cost reduction,” added the report.
The challenge remains in the last mile delivery due to the lack of postal codes in Saudi Arabia which necessitates delivery companies to ask for landmarks or WhatsApp pin locations when coordinating delivery. Technology is therefore expected to play a big part in changing this and developing the market, as per the report.
The rate of returns on e-commerce goods in Saudi Arabia was relatively low due to most transactions using cash on demand. However, the report forecasted that as digital payments continued to rise, returns would become more common.
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