The importance of the e-commerce industry has been multiplied by 10 as a result of the Covid-19 pandemic according to Iyad Kamal, chief operating officer at Aramex.
The executive, who has been at Aramex for almost 30 years, describes Covid-19 as a pivotal moment for the e-commerce and logistics sector, one that will have a lasting impact. We spoke to Kamal about the trends that have emerged so far.
Consumer Shopping Habits
With restrictions on movement still in place across the Middle East and North Africa (Mena), sales of items deemed non-essential have taken a hit.
“People are looking at what’s happening globally and regionally and are postponing non-essential purchases in favour of key, essential products that can be used during these uncertain times.”
These essentials include groceries and pharmaceutical goods which have seen an unprecedented surge in demand. Demand for fitness equipment, office and kitchen supplies also saw an uptick in the beginning of the lockdown as people anticipated the shift to working from home. According to data from Redseer, e-groceries saw a 500 per cent growth in the UAE and Saudi Arabia, while fashion and beauty declined by 10 per cent. Overall, the e-commerce market in these two countries grew from $7.5 billion pre-lockdown to $11 billion after lockdown.
The method with which consumers are paying for these goods is also changing as many are now shying away from cash-on-delivery (COD), a long-established payment mechanism offered by e-commerce players in the region, which constituted 60 per cent of all transactions.
Now, in Saudi Arabia, 50 per cent of COD orders have switched to other payment means. This includes payment upon order or upon delivery using credit and debit cards or online payment upon checkout.
“In my opinion it will become a habit of people just not wanting to use cash and instead they pay using card on delivery. Retailers are likely to push for more online payments instead of payment on delivery which will reduce the rate of returns. This is good for the e-commerce industry.”
Growth of Domestic Markets
Due to the disruption in cross-border shipping, strict border controls and limitation in airline options, the demand for locally-sourced products has increased.
"Specific increase in demand for essential goods has driven the domestic market up, yet as retail stores close down, they have shifted to online overnight to fulfil demand.”
Kamal believes that this rise in local demand will result in a “global reorganisation” of the supply chain.
“Global companies will re-evaluate their supply chain and will aim to have multiple fulfilment centers around the world. In the event that something happens in the future, they will have backup centres from which they can fulfil locally and regionally. This will certainly reduce delivery times. In the past you would purchase products online that were delivered cross-border, now with marketplaces and retailers, you will find the same product domestically and it will be delivered overnight.”
The Challenge of Last Mile Delivery
As more people shop online, the load on delivery and last mile logistics has also increased.
“There’s a big inflow of business, but the challenge is in finding ways to increase delivery capacity almost instantly in order to accommodate for that growth.”
In Dubai, the Road and Transport Authority (RTA) enlisted taxi drivers to fulfil the delivery of online orders and are currently working with Aramex as “delivery extensions”.
In some markets including Saudi Arabia and Jordan, Aramex has introduced a crowdsourcing model, Aramex Fleet, to attain delivery resources to satisfy peaks in demand without long term commitment and resources.
There is also a greater need for contactless delivery as consumers try to limit their exposure to others. Aramex recently introduced its “Leave at Door” service, where the courier leaves the package by the front door and takes a picture as proof of delivery instead of requiring a signature.
“There will be a lot of innovation in the last mile, we will see more click-and-collect and locker deliveries. These alternatives for delivery will accommodate for the changes in consumer demands towards minimal contact between the courier and the customer. Customers can buy online and deliver to a locker then they can pay using their credit card… a fully contactless experience.”
But perhaps the most contactless form of delivery will be via drones.
“We will see drones develop for expedited delivery, from products ranging from medicine to sensitive equipment that would need to be delivered in a timely manner. Also, drones are likely to be more effective in hard to reach or rural areas. But within urban areas, I still don’t envision delivery of packages to soar by drones in the near future.”
Throughout his career at Aramex, Kamal has witnessed several crises, but he says Covid-19 is the “worst of them".
“I have never seen disruption of supply chains like this before. We’ve been through different types of conflicts and logistical challenges, but because of its global scale, the impact that the Covid-19 pandemic has had, and continues to have, is much more substantial.”