Ecommerce gets UAE’s logistics to do the heavy lifting
Its fast-track growth is recreating the dynamics of how businesses handle stocking
Dubai: The sheer scale of growth in UAE’s ecommerce is carrying everything in its wake ... including the logistics and warehousing sectors. Businesses are either putting up new investments to expand their in-house storage and handling capacities or subcontracting to third-parties who can do the needful. The need of the moment — and of the future — is to have the stock in hand for speedy delivery to the consumer.
“Ecommerce is catching up with where it should be based on the key metrics that are driving it worldwide — broadband penetration and smartphone penetration,” said Idriss Al Rifai, founder and CEO and of Fetchr, which has introduced an app that will use a smartphone’s GPS coordinates to facilitate the pickup and delivery of goods. “This growth strides across multiple verticals, so much so it places demands on logistics companies to comply with new standards for the delivery of packages.
“Delivery companies are aware this segment was under-catered and are now trying to find solutions to the specific concerns of ecommerce: lead time, the cash collection cycle and return rate. Last mile delivery is one of the reasons why ecommerce has not reached its full potential in the Middle East.
“I would not phrase it as placing restraints ... It is about capturing real-time information and being able to make that information accessible to all stakeholders.” (Fetchr has raised $11 million in Series A funding, led by New Enterprise Associates. This is said to be the largest US-based venture fund investment in the Middle East for a Series A round.)
Rather than leave logistics and warehousing details to third-parties, businesses are taking it upon themselves where they feel the costs can be justified.
The Heera Group recently commissioned a production and warehousing facility at Sharjah Airport International Free Zone for its twin ecommerce ventures, one of which (Heeradeals.com, selling women’s apparel and consumer durables) has gone live. The second (heerafoodbazaar.com, for its ‘Heera’ branded food products) should go live after the summer.
“Online sales of food and grocery has not taken hold in the local marketplace ... there’s still the impression among shoppers that buying online could add to their bills,” said Dr. Nowhera Shaikh, CEO of Heera Group. “That’s what we will try to dispel when heerafoodbazaar.com goes live in the UAE, and where deliveries to the doorstep will be free of charge.
“We will absorb the logistics costs, but in the medium-term our ecommerce strategy is to build up the Heera brand and creating the volumes rather than turn an immediate profit.
“That’s the reason we decided to commit to having our own production and warehousing facility (covering two floors and 20,000 square metres), in Sharjah. We have taken it on a 100-year lease. We need to carry Dh4 million to Dh5 million in stocks, and it was thought it’s best we do it rather that subcontract.
“This way we can control the end-to-end operations, with ecommerce revenues riding on the back of our brick-and-mortar operations as a distributor.”
Indeed, warehouses have been one of the most coveted assets for investors in the last 12-18 months. Locations such as Dubai Investments Park and Dubai Industrial City, Kizad in Abu Dhabi and Sharjah’s Saif Zone have been beneficiaries of this interest.
And it’s not just ecommerce that is driving all of the interest. The traditional retail and consumer goods categories continue to pitch in. Mohebi Logistics has just confirmed that its eight-year old arrangement with the Swiss food giant Nestle has been extended for a further seven years. As per the agreement, Mohebi Logistics will store, pick and pack raw materials and finished goods from the Nestlé factory at Technopark, Dubai, and their new 175,000 square metre facility under construction at Dubai World Central.
Its products will be stored and handled at the former’s new site at the same location.
Even as the warehousing sector tries to adjust to emerging needs, more change could be on its way. “First, there will be the growth generated by the trade throughputs, then comes the quality issues that the industry will need to address for the cold chain and pharma industries,” said Frederic Zielinski, General Manager at Swisslog M. E., the specialist supply chain solutions company.
“Then comes ecommerce’s need for on-time deliveries ... this region is still at the beginning of this revolution. The logistics and warehousing will have some running to do to catch up.”
