Lights, camera, action

Michael Trüschler, the director of Citruss TV, explains why the company outsources logistics to ensure flawless supply chain management.

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By  Robeel Haq Published  July 30, 2006

|~|citruss_tv.jpg|~|Michael Trüschler, the director of Citruss TV|~|Television shopping channels initially gained prominence during the late 1980s, when the likes of QVC and Home Shopping Network experienced massive success by selling products to viewers throughout the United States. The concept has since travelled across the globe and despite its sluggish journey to the Middle East, the market is finally starting to flourish, with a number of shopping channels now operating in the region. One of the region’s largest players, Citruss TV, started broadcasting in April 2005. The free-to-air channel reaches a potential audience of 70 million people throughout the Middle East, offering a range of high quality cosmetic products from around the world. “This is a similar concept to something found in the United States and Europe,” says Michael Trüschler, the director of Citruss TV. “We are basically promoting high-end cosmetic products on television, which viewers can purchase by simply telephoning a call centre and placing their orders.” Citruss TV is primarily targeted at Arab women with above-average household income. The biggest percentage of these customers reside in Saudi Arabia. “The starting price for our products is roughly US$130. We are talking about the exclusive, top-end of the cosmetics market, which remains very attractive for the target audience,” says Trüschler. The business model used by Citruss TV is rather unique in the Middle East. At the moment, the market consists of three or four different home shopping channels broadcasting in the region. However, Trüschler claims his approach is different from the competition. “The other channels normally broadcast infomercials, which are pre-recorded from Europe of America, with Arabic voiceovers or subtitles,” he says. “In comparison, we produce independent programming recorded in Dubai, especially for the target audience. These are recorded in Arabic, with Arabic presenters and guests, which means the audience can really identify themselves with the show.” Citruss TV completed its first year of broadcasting in April. The response from the audience has been favourable and the company recently signed a contract with MBC to increase coverage. However, despite the encouraging start, Trüschler has experienced the usual logistics hurdles faced by start-ups. “This was a very tough year, characterised by many difficulties, surprises and lots of hard work. Thankfully, the response has been really strong. We are very selective about the products being sold, which is something the audience has appreciated. The selection of products is unique and people really like the exclusivity,” he says. The majority of products sold by Citruss TV are purchased from different European suppliers, mainly from countries such as Germany, Spain, Italy and France. “Around 80% of products are sourced from these countries,” says Trüschler. “We own the exclusive rights to these products in the Gulf. They cannot be purchased anywhere else in the region, which adds to the appeal of the channel.” The cosmetics are collected from the supplier and transported into the Middle East by airfreight. Citruss TV has signed an agreement with Aramex to handle the television channel’s logistics operations. “Most of the airfreight requirements are outsourced to Aramex. However, there are a few exceptions, because some suppliers want to handle shipments inhouse,” says Trüschler. Citruss TV has chosen to transport the cosmetics by airfreight because it has a fast turnaround of products and speedy delivery is essential. “We deal with fast moving goods and it’s a constant cycle. The products are aired on television, purchased by the consumer and promptly delivered,” says Trüschler. “If we used seafreight, the delivery process would take a lot longer, probably around three weeks. Although airfreight is more expensive, speed and flexibility are very important factors in this business.” After arriving in Dubai, the cosmetics are stored in Aramex’s new warehousing facility in Jebel Ali. The AED-26-million logistics centre became operational earlier this year and Citruss TV was amongst the first customers. “We moved into the new facility a few months ago,” explains Trüschler. “Although we only take a relatively small amount of space, the facility is state-of-the-art and huge. It is temperature controlled, with temperature ranging from 18 to 20 degrees centigrade, which helps to keep the products in optimal condition.” Citruss TV initially researched a number of logistics companies in the region before selecting Aramex. It focused on the cost and quality of service being offered by each 3PL provider. “As a television shopping channel, we have very unique requirements and it’s very difficult to manage the logistics, so we needed a reliable company. Aramex was capable of providing the service we needed and provided a good offer,” explains Trüschler. “We decided to outsource the logistics because it is very difficult to handle everything inhouse at the moment. It could possibly be manageable if the target audience was limited to Dubai, but we cover the whole region, so we need a partner with plenty of reach and expertise,” he adds. Citruss TV has daily communication with Aramex through a web-based Customer Relationship Management (CRM) system. The relevant employees from both organisations have secure access to the system through a username and password. The CRM system provides online access to inventory levels, which is updated in realtime. “Aramex will upload stock and shipment details every day, enabling us to track and trace the status of each consignment,” says Trüschler. Orders placed by UAE customers are transported by land using Aramex’s fleet of vehicles. However, the majority of products are sent further afield, mainly to Saudi Arabia, which involves extra airfreight activities. “We offer an express delivery because customers want to receive their orders quickly,” says Trüschler. “If the products are being sent from Dubai to Saudi Arabia, for example, we use airfreight to save time. Once it reaches Saudi Arabia, everything is transported by road. We have three main stations in the Kingdom, which are located in Riyadh, Jeddah and Damman.” Customers are kept updated with the delivery process through SMS alerts, which start once the order is made and continue until delivery is finally completed. Although some customers purchase the cosmetics using credit cards, a larger percentage prefer cash-on-delivery to settle their bills, especially in Saudi Arabia. However, this produces extra responsibilities for the delivery personnel. “Saudi Arabia is a cash-driven market, which means the Aramex staff are handling cash in addition to making deliveries,” says Trüschler. This strategy carries a certain amount of risk, because Citruss TV may cover the cost of express delivery, only to find the customer refusing the shipment. The courier is then forced to return to the depot with the package. “This does happen, although such incidents are quite rare,” says Trüschler. “In terms of cost, this means we are paying money and not getting the revenue. However, the risk is reduced as long as deliveries are completed quickly. If the customer is waiting a long time for the order, the chance of the shipment being refused is higher.” Companies throughout the world face similar logistical difficulties. However, Trüschler is constantly brainstorming ideas to improve Citruss TV’s supply chain management and ensure the process becomes smoother and smoother. “It’s been a learning process over the past year on how to improve the logistics operations and increase efficiencies. The logistics part is actually the most difficult aspect of our business, because it’s so huge. However, we are constantly learning and improving,” he says. Citruss TV already has some forthcoming plans in store to improve its logistics operations, which should be implemented by the end of the year. One of the key areas is additional warehousing facilities, to be located in Saudi Arabia. “We plan to have a distribution centre in Jeddah, which will probably be managed through Aramex, because we have all the procedures already in place with them,” says Trüschler. “This move is clearly because of the cost structure. If we send everything from Dubai, with shipments and airfreight costs, it’s a lot of money. At the same time, quick delivery is essential, so warehousing in Saudi Arabia is a very attractive option. We will need to register all the products and get them tested, but the warehouse space should be available later this year, maybe in October or November.” ||**||

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