• jessy@bsiscm.com
  • CN
Cross-border News


your location: HomeNewsCross-border News

How is the development of e-commerce terminal delivery in the Middle East? Logistics tend to operate with light assets?

source:Cross-border News 2021-12-18 17:14:59 4 Middle East e-commerce delivery method

The last part of product transportation, defined as the last mile delivery, is the least efficient and most costly part of the entire logistics product supply chain, accounting for 50-60% of the total delivery cost.

Usually involves several small parcel sites, how to efficiently last mile? Some companies have entered the cost exploration in the field of drones and robots. Just last month, Careem, Noon and Majid Al Futtaim signed agreements with Kiwibot, Neolix and Yandex to develop autonomous driving solutions to use robots for their food and grocery delivery services.

At the same time, in Saudi Arabia, a startup company called Quix introduced drone-based delivery solutions to its domestic market for the first time. It raised 3 million Saudi Riyals (800,000 U.S. dollars) through crowdfunding platform Scopeer.

Although cities such as Dubai and Riyadh are becoming test beds for the latest last-mile robotic solutions, most of the last-mile logistics is inseparable from manual operations, so most of the current innovations are focused on improving efficiency through technology.

In the past few years, the last mile delivery field has witnessed a surge of new entrants, most of whom have adopted a light asset model, focusing on providing transportation services to small businesses through crowdsourced express delivery and empowering small businesses.

The industry has also attracted regional and international investors. In November, iMile, headquartered in the UAE, raised the largest round of financing in 2021, raising US$40 million from ByteDance in China, while another Lyve, which also does the last mile delivery, raised US$35 million in March. So far this year, startups in the logistics sector in the Middle East and North Africa have raised more than $153 million in funding.

The growth in the number of players is not only due to the pandemic and subsequent e-commerce boom. In fact, the biggest peak of start-up entrants was the establishment of 28 new companies before the outbreak of the new crown virus in 2019, mainly in the express delivery sector. Of the 102 last-mile delivery start-ups drawn by Wamda, 67 operate express delivery models.

"With all these new entrants, everyone in this scene starts to improve their game level. Technologies such as AI for route optimization, real-time traffic navigation, automatic communication, and many other tools are in place to ensure the best Customer experience. Aramex Global Director Rabih Allaf said: “The market is saturated and it is definitely a competitive market with new entrants from all over the world. "

The change brought about by the epidemic is the increase in the number of startups providing distribution, warehousing and delivery services, which is a trend driven by the growth of online shopping.

From the perspective of regional changes, e-commerce was already on the rise before the epidemic. As Internet penetration continues to increase, e-commerce is becoming more and more popular among consumers. Amazon-supported Souq and PIF-supported Noon have successfully entered the top e-commerce list.

According to Bain & Company data, as early as 2017, the e-commerce market in the region was valued at 8.3 billion U.S. dollars, with an annual growth rate of 25%. According to Visa data, by 2022, its value will reach 48.6 billion U.S. dollars.

"In general, the e-commerce market has grown by 20% in the past 10-15 years. When the epidemic broke out, the industry’s growth rate was 80%, and it has now fallen to 50%. In other words, in any case, online sales Will continue to exist." said Samer Gharaibeh, CEO and founder of Egypt's last-mile logistics startup Myrlez.

As e-commerce matures, last-mile logistics and fulfillment solutions continue to mature. The fundamental changes affecting the retail space increase the pressure on retailers and shippers to provide faster and cheaper last-mile delivery and fulfillment services .

"Retailers were previously forced by companies to sell online; this is no longer the case. Now, some retailers are selling specific items through online channels to encourage people to shop online. We see an urgent need for efficient fulfillment and warehousing solutions. People Need to scale up."

But in regions where cash on delivery (COD) still dominates, scaling is difficult. Although the preference for COD declined during the lockdown, it is difficult for consumers to completely change their habits, and many people have returned to cash payments.

As a payment method, COD makes it more difficult for e-commerce companies to manage efficient reverse logistics and increase their delivery success rate. To offset its impact on reverse logistics, e-commerce brands such as Amazon charge additional shipping costs for cash-paid orders.

Hasan Jabarti, CEO and co-founder of Diggiepacks, a Saudi express aggregator platform, said: “If the goods are prepaid, there is a 93% to 95% chance that it will not be returned or rejected, but 80% of Saudi Arabia’s current Transactions are paid in cash. During the blockade, approximately 95-96% of the goods were prepaid. We rarely have cash on delivery. Soon after, cash on delivery accounted for 81-82% of transactions, with the remainder being prepaid."

In Egypt, 70% of the retail industry is an unregulated gray market, and the high penetration of cash has led to a trust gap between merchants and couriers, leading to misconduct. For example, if the merchant pays in advance, their cash or goods may be stolen by the courier, or the courier can pay the merchant the actual amount of the goods before the shipment, and then find that its value is lower than the amount paid.

The prevalence of inaccurate geolocation data further exacerbates this problem, especially in remote or remote areas. When couriers find it difficult to determine a specific address, they usually contact the customer so that they can send location information or provide directions via WhatsApp. This process takes up a lot of time for the courier, resulting in slower delivery times and a poor overall customer experience.

Looking ahead, Jabarti expects that the rise of mobile payments and alternative payment methods such as buy-first-pay-later (BNPL) heralds more fintech adoption and a decline in COD rates.

"This has produced a huge change in the market. There are many companies that can get rid of COD as long as they have another option, which is BNPL. Therefore, these companies move from COD to prepaid by forcing buyers to lower COD,"

For the last mile express company, terminating the COD service will also increase efficiency and reduce the safety risk of couriers. Couriers eventually carry large amounts of cash in certain areas of the region, making them potential targets for attacks. However, since the penetration rate of bank cards and credit cards in the Middle East is the lowest in the world, it will take a long time for the COD in the Middle East to truly disappear.

Message prompt