How are last mile delivery challenges influencing the future of e-commerce in Saudi Arabia?
The e-commerce industry is gaining significant growth worldwide driven by the increasing smartphone and internet penetration worldwide and the consumer preference for convenient shopping from their homes. In the Kingdom of Saudi Arabia (KSA), e-commerce has taken centre stage in the overall retail landscape due to the rise in internet penetration and use of smartphones and social media. According to a recent report by Renub Research, the number of internet users in Saudi Arabia is over 36 million of its population and over 42.5 million active cellular users.
The growing significance of e-commerce is bringing about a shift in the way consumers make purchases, that is disrupting the traditional business models and leading to the necessity of creating novel customer experiences. There are four key tactics being used by companies in Saudi Arabia to personalise customer experience. These tactics are especially profitable with the millennial and growing GenZ population in the KSA, who are avid e-commerce users. According to the General authority of statistics, population under 44 make up around 75% of the total population in KSA.
This reveals the opportunity for e-commerce in the country as new online retailers are entering the market. With the rise in e-commerce parcel numbers with such factor like personalised customer experience and a young population, last mile delivery has experienced intense activity and is expected to further observe challenges with escalating e-commerce deliveries.
Challenges in Last Mile Delivery
Greater parcel volumes in Saudi Arabia have consequentially resulted in last mile deliveries facing numerous pressures in handling customer expectations and managing large volumes of packages. Multiple drop off points, doorstep deliveries and increasing smaller packages together make route optimization more complex and challenging.
Last mile deliveries also often face delays and inefficiency with a slow technology incorporation in the Saudi market. Local delivery networks in the country often lack digital and technological advancements making shipments difficult to track with lack of visibility. Consumer preference for cash on delivery (COD), empty miles and sudden demand spikes further create budget related strains on last mile deliveries.
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The Future of E-commerce delivery
These challenges are pushing e-commerce industry towards making last mile deliveries more seamless and efficient. The introduction of new products as well as cross-border commerce have pushed innovations with same-day delivery options. Increasing establishment of micro fulfilment centres placed in the highest demand areas are making deliveries faster and easier to their destinations. Furthermore, e-commerce delivery tech-startups like Saee are transforming the landscape by offering a platform that connects freelance drivers with e-commerce companies to deliver parcels. Introduction to flexible delivery options in the Saudi last mile environment is also gaining momentum with the option to choose dates and time of delivery.
Given these trends and developments in the e-commerce industry in Saudi Arabia, it is estimated that the future of e-commerce delivery will be influenced by:
- Autonomous vehicles and drones: Contactless deliveries are predicted to emerge with eminence in the mid-term outlook. International autonomous vehicle producers Teksbotics and Alshrouq Express, in collaboration with the King Abdullah University of Science and Technologies (KAUST) and The National Digital Transformation Unit (NDU) are developing and testing autonomous vehicles for efficiency and cost reductions. Not only will this initiative support sustainability but it will also make last mile deliveries even more seamless.
- Digitalized operations: Applications of Blockchain, Artificial Intelligence, Internet of Things and 5G amongst others will steer logistics operations. Data analytics in predicting hindrances and providing prescriptive solutions will play a major role in the smooth delivery of packages.
- Smart lockers: Smart lockers are also projected to expand across the country in the long term as it lowers carbon emissions and makes returning products easier. It helps to cut down the distance travelled by the last mile coordinators, thereby eradicating time restraints.
- Sustainability: Electric vehicles powered by solar energy and other renewable sources of energy will gain prominence in Saudi Arabia. International companies in the nation will be the early implementers of green last mile which involves the application of Artificial intelligence for route planning and optimization. The Saudi Green initiative launched in 2021, with 60 projects and investments of more than USD 180 billion will further drive a greener economy.
The Kingdom of Saudi Arabia recognises e-commerce as a vital industry to enhance its national economy. The growth of the e-commerce industry is one of the objectives of the National Transformation Program, an initiative that was launched with the aim of developing the necessary infrastructure and create an environment that enables the public, private and non-profit sectors to achieve Vision 2030. The country supports entrepreneurs, who are willing to transition from regular trade to ecommerce, through entities and bodies that support electronic payment, digital marketing and technical solutions service.
Furthermore, the Saudi E-Commerce Council of the Ministry also aims to strengthen the reliability of e-commerce, boost its contributions to the national economy and stimulate and develop e-commerce activities in the country. As a result, the scope for growth in the industry is vast which provides large opportunities for companies in the sector to adopt innovations to provide a seamless shopping, transaction and delivery experience for its consumers.
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