Online action

The demand for express shipments in the region is skyrocketing in line with the wider economic growth. Couriers are looking to win this business with an array of online services, but local organisations are reluctant to use them just yet.

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By  Laura Barnes Published  March 2, 2005

|~||~||~|Express delivery companies in the region are enjoying a buoyant market driven by the rapid growth of the Gulf’s economy. Local businesses are express-shipping more and larger packages, and courier companies are ramping up the range of services they offer as they compete for the business. However, with couriers generally offering similar geographical coverage within the same timeframe, the main focus for this competition is increasingly in the field of online and other IT-related services. These systems offer a host of advantages to shippers in terms of ease of use, cost and visibility, but only a few companies in the local market have fully embraced the technology so far. With more businesses opening up offices in the Middle East and global companies working more closely with local partners, an increasing number of parcels and documents are naturally being shipped within, into and out of the region. Evidence for this is clear, with a number of companies reporting strong growth figures. UPS, for instance, reported 35% growth in the local express sector last year compared to 2003, while DHL recorded an 80% increase in weight handled year on year and an actual shipment increase of 30%. “The UAE economy is on fire at the moment, which is fuelling a lot of growth within our industry,” comments Mark Pell, managing director, TNT Gulf & Saudi Arabia. “Our business alone saw an increase of 40% last year compared to the previous year. This type of growth rate is unheard of in a medium-sized country. The economy is obviously a key reason for this, but the UAE geographically and historically is also in an ideal location for shipment, not only as a gateway to the rest of the Arabian Peninsula, but also for the rest of the world,” he adds. Considering the strong growth of the express document market locally, and its still robust shape in the rest of the world, it is hard to believe that not so long ago some observers were predicting its demise in the face of new technologies. Firstly it was the fax machine, then e-mail and the internet, and finally digital signatures, but the express document sector has remained strong despite all of these. “We had been told for years that the document industry was going to end because of all the technology that is now available,” says Geoff Walsh, country operations manager, DHL UAE. “But each year it grows by 11% in the Gulf, which is very healthy.” The document business is growing particularly strongly in this region partly because it is coming from a low base and also because of a lack of trust in new technologies that have been more readily taken up elsewhere. More generally though, people still want real signatures on contracts, for instance, and a fax or e-mail will never have quite the same panache as a glossy brochure. However, while the express document business is growing strongly in the local market, the real growth, both regionally and around the world, is in the parcel sector, as an increasingly large proportion of the items now being express-shipped are heavier items. DHL, for instance, says that the average weight of items being sent by express in the local market is now 12 kg compared to just 1 kg six years ago. “The [express] industry used to be seen as a document and small parcel business, but now it is whatever the customer wants to move: whether that be 100 kg or 1 tonne,” says Walsh. The reason for this growth in the size of express packages is twofold. On the one hand, consumers — although less so in this region — are making more use of internet shopping services, with their purchases then being delivered by express services. More importantly though, companies both here and worldwide are adopting just in time inventory systems, which rely on supplies being sent in a fast and predictable manner. “We have seen a shift just recently,” says Hamdi Osman, FedEx’s regional vice president. “Customers are no longer asking how much does it cost to get it from point A to point B, the question is how fast you can get it there.” With most express delivery companies able to give similar answers to this question, the battle for business is taking place more in the virtual world than the real one. In particular, online services, such as track & trace, or software packages that ease the management of deliveries, are now becoming as important to courier companies as trucks and aeroplanes. “Track & trace is becoming an integral part of the delivery service,” says Aramex’s general manager for the UAE, Hussein Hachem. Track & trace services allow customers to follow their shipment from when it is collected until the final delivery. This can be done in a variety of ways, including via websites, through SMS text messaging or by telephoning a call centre. The advantages of such systems differ for different types of customers. Consumers and SMBs are more likely to closely follow the movement of goods, as they seek reassurance that the package is heading in the right direction. For corporate customers making numerous dispatches each day, the reporting of exceptions is more important, as they will only be interested in knowing about what is going wrong not right. ||**|||~||~||~|For companies receiving goods, the main advantage of track & trace is that it can forewarn them about the arrival of a delivery, which then means that they can prepare to receive it. “[Using track & trace,] there is high visibility throughout the process from moving the package from desk to warehouse to final destination,” explains Tansey. “There is also the advantage of the information flow [being separate from] the physical flow, which means customers can be pre-alerted before the goods arrive,” he adds. However, while track & trace is gaining ground within the local market, the region is far from embracing more advanced internet-based services, such as ordering pick-ups online. FedEx’s website, for instance, racks up 2 million hits a day in the US, and more than 70% of its orders there are placed online. However, within this region, less than 10% of orders are made via the internet. “This is true for everybody’s business here, not just FedEx,” says Osman. “The industry itself is still in its early stages [locally]… and people here still like to be able to look and touch, and to have that personal relationship,” he adds. Even people who do place orders online often then call the call centre as well, just to confirm the pick-up, which all but negates the advantages online systems offer to both the courier company and the user. “This particular region is just not that excited about relying on placing an order online and then waiting for it to happen,” says Jamil Janjua, chief executive, international business, TCS Express. “They always want a personal confirmation from a telephone call, which then gives them greater belief in the system.” The region’s reluctance to use the internet for doing business, of course, extends beyond just the express courier sector, and so it will be difficult to drive through the necessary culture changes. However, a number of the major players in the express market have plans for promoting the use of online and IT services within the region. FedEx, for instance, is gearing up for such a campaign within the next few months, while Aramex has invested heavily in promoting ‘shop & ship,’ a service designed to allow local consumers to buy goods from overseas-based websites that do not ship to the region. “We have a lot of customers [for this service] and it is showing significant growth,” says Hachem. “We are bridging a gap between the region and the internet.” Yet increasingly, the main target for online and other IT-based services is the SMB sector. Such businesses have a large enough number of shipments to be of interest to express companies, but within this region in particular, they have not yet invested heavily in IT systems. As such they represent an emerging market for express companies to tap into. TNT, for instance, states that only 27% of its customers are using IT services at present, but it hopes to grow this figure to 40-50% by the end of the year. “The 50% not using the technology will be those that use express services everyday and to check every shipment would take a vast amount of time… It is really the small-to-medium-sized businesses that we are targeting,” says Pell. The software solutions on offer to companies tie in with the services available via the internet, but they offer a greater range of features. These can include having a barcode printer for use by the company itself or an online database of regular recipients, which the company can access and use to place orders. “This is great for us and the user, as when we pick up the shipment, the information is already in the system so the work does not have to be duplicated,” comments Walsh. Access to shipping information via the web also means that companies can more closely monitor how much they are spending through online billing systems. FedEx, for instance, introduced online billing in Kuwait, Bahrain and the UAE last month, and it is already reporting better than expected levels of interest. “This is something that makes life easier,” says Osman. “In our business, it is giving today and delivering tomorrow or the day after, but the bill did not use to arrive until 30 days afterwards. Now, with an online system you can tell on a daily basis where you stand and how much you are spending. It then makes it easier to manage the money.” However, while companies can do most things related to shipping, including seeing the bill online, the last step in the process, payment, still remains unavailable. This is a difficult task though, as for the service to work globally — which is what the largest companies, which would be most likely to use the system would require — it would need agreement and integration with every country’s national banking system. “Today’s customer is a global customer, which means that a company with an account number can ship from Brazil, the USA or Kuwait, and as a result of that you have to have a global system… [Introducing online payment] will require a change in the methodologies being used worldwide, but we are looking at it now,” comments Osman. ||**||

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