Open Sesame: Alibaba finds a treasure trove in the UAE hub
The Chinese e-commerce conglomerate Alibaba, which made $22.99 billion last year, has now set its sights on the Middle East market, choosing the UAE as its hub. It is carving paths in the Middle East to facilitate and streamline its shipments to the region.
China Daily reports that Alibaba’s logistics arm, Cainiao, has signed a Memorandum of Understanding (MoU) with Emirates Airlines’ freight branch, SkyCargo. This will allow both companies to streamline and improve the delivery of cross-border shipments.
“The MoU we signed is the first step in what will be a deep and fruitful relationship between Emirates SkyCargo and one of the biggest players in the global e-commerce supply chain,” said Nabil Sultan, divisional senior vice president of Skycargo.
Alibaba currently operates in the Middle East through its AliExpress online retail site.
Are souq and noon feeling the pressure?
Could AliExpress’s incoming rise in the region spell doom for Souq, noon?
With improved delivery times, customers could be shifting their attention to AliExpress. The Chinese retailer offers a sea of options when it comes to choosing a particular product, with the endless array of Chinese products all a click away. Souq and noon, on the other hand, cannot hope to rival their Chinese competitor in terms of product range.
However, it is important to remember that the “Made in China” stigma still exists, as Chinese American fashion designer Phillip Lim notes. “It’s going to take a long time [for this to change].” This stigma could stand to hurt AliExpress in its race with Souq and Noon.
The fact that Souq and noon are local companies could overshadow AliExpress’ upcoming 72-hour delivery times. These companies understand local customer attitudes and expectations, and simultaneously offer cheaper, faster delivery options.
Big on delivery
This new agreement will allow Alibaba to adopt a more hands-on approach with its deliveries to the Middle East via Dubai, which serves as the region’s biggest trade and logistics hub.
Currently, the Standard Shipping option on most products on Aliexpress offers a 22-35 day wait period between payment confirmation and delivery, for about $2-3. Premium shipping, taking about 7-15 days, costs upwards of $20. This new partnership is looking to expedite delivery, hoping to hit a 72-hour global delivery timeframe.
Xiaodong Guan, general manager of Cainiao Global Business, said, “As a key gateway that links Asia and Europe, Dubai is well positioned to help us achieve our goal of 72-hour global delivery. We have a strong commitment to Dubai and the neighboring markets. This fits well with our broader strategy.”
E-commerce market strength
This latest announcement comes hot on the heels of the noon-eBay partnership that was revealed on Tuesday, just two days ago. It seems that online retailers are realizing the potential of the market that exists in the region, and are looking to capitalize on it.
Just last year, US e-commerce giant Amazon purchased UAE’s Souq for $650 million.
It seems the big three are scrambling to nip the market in the bud, each carving a piece of it for themselves before e-commerce fully kicks off in the region.
It is not surprising either, as the Middle Eastern e-commerce sector was reported to have the greatest exponential growth in the world, according to BMI research, with online sales expected to double to $48.8 billion by 2021.
Global management consulting firm AT Kearney expects e-commerce in the UAE to grow at a compound annual growth rate for 25% per year up to 2020, with Frost and Sullivan estimating the market could be worth up to $10bn by next year.
On the other hand, online sales in Saudi Arabia are expected to surge to $13.9 billion by 2021 from a projected $8.7 billion this year, according to Reuters.
In 2017, internet sales represented only 2% of total retail sales in the region, according to a report by the Boston Consulting Group. However, with these 3 companies moving their pieces across the board, and with the slated developments and improvements in the pipeline, we can only expect to see this percentage rise in the coming years, as most financial reports are forecasting.