JEDDAH: Saudi Arabia’s courier and parcel delivery market, now estimated to be worth $970 million, was expected to grow by an average 6.5 percent per year until 2026, according to new figures.
A report issued by Dublin-based ResearchAndMarkets.com has revealed that the Kingdom was a key Middle Eastern player in the booming sector.
“E-commerce is one of the major factors driving the market growth. With higher connectivity rates, a young working population, and advanced infrastructure, the country is one of the major markets in online retailing in the Middle East,” the study said.
A growing trend highlighted in the report was the popularity of pickup, drop-off (PUDO) points. At present, only about 15 to 20 percent of orders are collected at a physical location operated by courier companies or their delivery partners.
The increased investment by large operators in the e-commerce sector was likely to result in the development of more warehouse facilities and the growth of PUDO points, the research showed.
Global giant Amazon in March announced plans to add 11 buildings to its network in Saudi Arabia, boost its storage capacity in the Kingdom by 89 percent, and increase its geographical delivery network by 58 percent.
According to data produced by research firm Statista, e-commerce revenue in Saudi Arabia is set to reach $7.051 billion this year and grow at an annual rate of 5.38 percent to reach $8.697 billion by 2025.
At the same time, Dubai’s Majid Al-Futtaim recently told Arab News that the surge in demand for e-commerce had seen it expand its fulfillment and delivery network. A new 9,000-square-meter center in Riyadh operates 24 hours a day, seven days a week, handling up to 5,000 orders each day. More than 500 workers process the orders, which are delivered by a fleet of 150 refrigerated trucks, and the company plans to open more centers next year.
The courier and delivery report added: “Given the continuous growth in e-commerce and the fact that building one’s own network is very expensive, more partnerships are expected to happen in the market on the back of pressure on cost reduction.”
Technology will play a big part in changing the industry over the next few years, as a big challenge in Saudi Arabia was the country’s lack of postal codes. The report highlighted that delivery companies in the Kingdom regularly requested landmarks rather than addresses, with drivers often asking for locations to be identified via WhatsApp.
The rate of returns on e-commerce goods in Saudi Arabia was relatively low due to most transactions using cash on demand. However, the report predicted that as digital payments continued to rise, returns would become more common.