FEATURE: DHL prepares for e-com boom in Saudi Arabia
With Amazon and Souq.com having confirmed a major merger plan, and Emaar Group on the cusp of launching Noon.com (the ‘Alibaba of the Middle East’), the stakes have never been higher when it comes to online retail in the region.
At the time of going to print, the news had only just broke of Amazon’s acquisition of Souq.com, and while the details of the merger are yet to be released, what’s clear is that e-commerce will come to dominate express logistics in the coming years, particularly in Saudi Arabia, the largest consumer market in the region.
For express logistics providers, those who have planned ahead will stand to benefit the most, and DHL Express is positioning itself to be the last mile fulfilment giant in the region. It’s the logical next step in DHL’s growth strategy in the region.
Recently named the number one ‘Great Place to Work’ for a 4th consecutive year, DHL Express is one of only three integrated express logistics companies with landing rights at Dubai International Airport, DHL Express has a market share of around 50% of the express logistics market in the Middle East.
“B2B has always been our backbone, but the market is changing, B2B will always remain at the core of what we do, but e-commerce is a great opportunity for a company like ours,” says Geoff Walsh, UAE country manager, DHL Express. “The whole B2C ecommerce revolution is really taking off, and so is technology and the reliance of the digital platform needed to do e-commerce logistics properly.”
See the video below for a tour of DHL's Meydan facility.
“The ecommerce scene in the region is undergoing massive changes and we expect a lot of growth in the next 2-3 years,” he adds. “With the likes of Noon. com and Amazon coming into the region, this will accelerate the growth of the platform and set a path for other retailers and manufacturers to quickly establish a presence. This in turn will drive the growth of global logistics and global trade which means that there will be a lot of opportunities for us to grow and support many new business set ups.”
For Walsh, technology and facilities in the ground in key markets will be the big differentiator. “We have our gateway at Dubai airport, which we are currently expanding to around seven and a half thousand square meters so it will have a brand new automated process that will allow us to process five thousand shipments in one hour,” he says.
“Because we use that as a trans hub as well, so the shipments connect from our network onward for the rest of the world on commercial aircraft as well as our own. In Abu Dhabi, we own a facility at Abu Dhabi airport as well so we have flights into Abu Dhabi. We also have a flight to Sharjah so we use all the airports in the UAE. In addition, we have a presence in every emirate, apart from that we have about 350 couriers on the road now.”
The expansion of the Terminal 2 hub at Dubai International Airport has come on the back of DHL’s investment in gateways and ground operations facilities across the Middle East and North Africa, including all three of Saudi Arabia’s airports, giving it unrivalled access to the region’s largest consumer market.
“We’ve built facilities at Riyadh airport, Dammam airport and most recently Jeddah,” says Walsh. “What that means is that we now have the fastest clearance into Saudi Arabia at all three airports of any other logistics company, our transit time to Jeddah is one day quicker, thanks to our new direct flight from Bahrain into Jeddah. everyone else has to clear through Riyadh or Dammam or the land border.”
This investment in Saudi Arabia is part of DHL’s effort to “stay ahead of the curve”.
“Our expansion of our facility at Terminal 2, and in Saudi Arabia and our looking at Abu Dhabi and Al Maktoum are part of that effort to stay at the front,” says Walsh, adding that the current market is undoubtedly challenging. “But, I think challenges are opportunities. These markets are big markets and we address the challenges as they come and we just try to stay ahead of it by being closer to our customers and closer to the market and understanding the trends.”
And the biggest trend of all at present is the growth in e-commerce. DHL is therefore better positioned than most to take advantage of the demand for airfreight and last mile delivery that will come with Amazon’s entry into the Middle East or Noon.com’s acquisition of Souq. com through Emaar Malls.
The UAE investment at Dubai Airport will give DHL the ability to process 5,000 packages per hour through its Dubai hub, which provides immense connectivity to its global network, but according to Walsh, UAE investment is just getting started.
“Our Terminal 2 facility expands our lifespan at the airport by another ten years, but we’re also looking at establishing a hub at Al Maktoum and in Abu Dhabi,” he says. For DHL it’s all about being as close as possible to the market and according to market analysts McKinsey & Company, whoever is closest to the market will win in last mile fulfilment.
This is because, in the US at least, online retailers see return rates of 20% to 40%, with the majority of returns happening within 48 hours of a purchase being made. For this reason, e-commerce companies are pushing for same-day delivery.
Souq.com is doing it in Dubai through its own in-house last mile fulfilment arm, while Amazon.com in the United States has even launched its own air freight division called Amazon Prime to ensure control of its logistics and guarantee same-day and next-day delivery.
When Amazon enters the Middle East market (and the merger is expected to take place in late 2017), express logistics companies with the greatest reach, and with facilities on the ground in major consumer markets like Saudi Arabia, will be the best-positioned for long-term logistics partnerships.