Door-to-door delivery, Middle East style

Financial Times

Door-to-door delivery, Middle East style by Tom Gara

If there’s one thing that works across the Arab world, it’s delivery. From Cairo to Dubai, a fleet of men on scooters, bicycles and foot will deliver pretty much anything to your door, from a Big Mac to a cigarette lighter. And plugging that hunger for to-the-door service into the global e-commerce boom is proving to be a healthy earner for one Middle East company.

Shop & Ship, run by the Jordanian logistics company Aramex, increased revenues by 43 per cent year-on-year to around AED49m ($13.3m) in the first quarter of 2012. The service lets subscribers rent a PO box address in the US or UK, for use with online shopping sites, few of which will ship to the Middle East. When packages arrive at the address – an Aramex-operated warehouse – they are re-routed to the recipient, anywhere in the Arab world and beyond.

Letting Arab consumers participate in the global boom in online shopping has proved lucrative. Shop & Ship now accounts for almost 20 per cent of the AED245m revenues earned by Aramex’s international express delivery business, according to quarterly results published in late April. Business coming from e-commerce as a whole, including other services the company offers, is growing at more than 30 per cent yearly, Aramex management has told analysts.

Aramex – which posted overall Q1 net profits of AED61m (+22 per cent) on revenues of AED746m (+25 per cent) – began its life in 1982 as a local agent for international shipping companies.

But it grew fast, eventually becoming the first Arab company to be listed on the NASDAQ. The regional logistics company has been spreading its reach in recent years, buying smaller operators in Africa, Europe and Asia.

While much of the company operates as a traditional logistics and courier service, a regional equivalent to DHL or FedEx, Shop & Ship is part of a more innovative push to put the business at the centre of e-commerce in the Middle East. With credit card penetration low in the region, and online payment gateways still underdeveloped, Aramex couriers accept cash-on-delivery payment on behalf of local online shopping sites.

“What we’re telling entrepreneurs and e-commerce sites is, focus on your front end and we will do everything else, from order-processing to customer service, to call-taking, effective delivery and collecting the cash,” the company’s founder, Fadi Ghandour, told The National in 2010, when the Middle East’s e-commerce scene was beginning to take off.

The sector, while still small, is seeing serious investment. MarkaVIP, one online shopping site based in Amman that runs on a “flash sale” model similar to the US-based Gilt, has raised at least $18m in venture financing, including $10m in late April. The site has signed 1.5m registered users, with 5,000 more joining each day. Improving the door-to-door delivery experience, the company’s management said, would be the primary focus of the $10m it had just raised.

That may or may not be good news for the Dubai-listed Aramex (it delisted from the NASDAQ in 2002), with MarkaVIP hinting at establishing its own delivery network in some of its markets. But on a bigger level, it shows that in a region where internet penetration is booming, postal systems are unreliable at best and retail growth still has its best years ahead of it, there is more than just sandwiches waiting to be delivered to people’s doors.

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Posted on June 2, 2012, in Business, Morocco News and tagged , , . Bookmark the permalink. Leave a comment.

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