Leaders in Logistics 2019 Panel: E-commerce growth in the region
The Middle East, and especially the Gulf region, benefits from high spending potential, as the region boasts a high per capita income. The fact that internet penetration and social media penetration is also some of the best in the world means that the Middle East is ripe for online business.
It continues to grow and as a brand, it’s important today to have a presence in the major marketplaces in the Middle East. Marketplaces such as Souq, Noon, Namshi, eBay, Amazon etc. can be a great way to reach more consumers and increase sales.
This session looked at the disconnect between high per capita income and social media penetration, versus e-com sales themselves and the challenges that businesses face in bridging the divide, specifically, what is the role that logistics plays in that process?
Moderator: Deepak Khushalani, Founder & MD, Premier Logistics
Panelists: Abhishek Ajay Shah, Co-Founder & Managing Director, RSA Logistics
Madhav Kurup, Regional CEO Middle East & South Asia, Hellmann Worldwide Logistics
Ali Thabet, Regional eCommerce Director, DHL Express Middle East and North Africa
Shobhit Elhance, Associate Vice President - Business Development (MENA), LogiNext
Madhav Kurup: Logistics industry has traditionally been geared for B2B, not many have pursued the B2C segment. The challenge for the industry is in bridging the difference. If you look at warehousing, B2B is supply led process, while B2C is demand led. In the former you can forecast and plan ahead, but with the latter you’re more vulnerable to the whims of the market at any given time. 3PLs in this region are not fully geared to those challenges. Less than 5% of the market is B2C at this point in the GCC, so change is necessary and once its embraced fully, there’ll be huge opportunity for further growth.
The last mile and the returns process are major issues that we aren’t geared to meet. I think we may need more satellite fulfilment centres and move away from the central hub concept that has been the norm for the past few decades.
Abhishek Ajay Shah: Demand and supply in the B2B2C model is definitely an issue. The problem with forecasting is that its invariably incorrect and the role of companies like ours is to bridge those gaps in resource management, vehicles, manpower, storage etc to manage the peaks reactively. This doesn’t of course enable companies to provide more efficiency and cost reduction in the supply chain, but this is where we have been trying to develop integration capability with as many partners as possible to utilize technology to be more organized in the downstream because the more information you have the more you can plan. Planning is a delicate problem, this year for example we over-estimated the demands of the market for our partners. So the need to get that reactionary and proactive management to work in tandem is extremely important.
Ali Thabet: The main challenge in global cross-border is last mile, which isn’t just finding the location, it’s the multiple delivery attempts. Our productivity is built on the number of stops and the volume at the stops. In B2C you will make fewer stops with greater volumes at each than B2C which will be smaller volumes. We need to educate customers about the importance of putting the correct delivery address and being available at the time that they select. Then there is the cash on delivery problem, which has declined, but not at the rate we would like. There’s a bigger percentage of returns for COD, but the main reason for that is because we couldn’t find the customer. We need our customers, our retail partners, to have an extra verification step, but they want to stick with what has been done for the last ten years. This is because they want to have more orders to boost their profit and loss account, but it creates a headache in the last mile. Some 50% of deliveries we do can have problems with the address in the last mile.
Speed of delivery is undoubtedly more important to the customer in our experience than the cost of fulfilment.
Shobhit Elhance: There isn’t much difference between Dubai and Hong Kong when it comes to infrastructure and regulations, but its impossible to implement a mainstream 55 minute or even same day delivery guarantee here because of the lack of adoption of technology. Companies are pursuing digitalisation, but optimisation remains lacking. As an example, we have more than 130 e-com companies in the region, but we only know of the top two who are offering same or next day delivery, this shows the importance of faster fulfilment to the market. The major problem in the e-com market is the location, the planning, the visibility of stocks and deliveries, all of which needs to be integrated and optimised to provide logistics partners with full control over the process.