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THE BIG INTERVIEW: Amazon Middle East boss plans to double-down on Saudi supply chains

E-commerce giant is bolstering its supply chains in Saudi Arabia amid a surge in demand sparked by the pandemic

Few people know the Middle East e-commerce sector better than Ronaldo Mouchawar, who is considered a giant on the region’s business circuit. The Syrian entrepreneur co-founded Souq.com more than 15 years back and now heads up Amazon in the MENA region following its acquisition of Mouchawar’s Gulf-based e-commerce outfit in 2017.

So when the pandemic hit in early 2020, Mouchawar, as the tip of the e-commerce spearhead in the Gulf, felt a degree of social responsibility to help people cope while staying at home. When Arab countries began locking down in mid-March, people went online to buy groceries and anything and everything to stay entertained. It fell upon the likes of Mouchawar and supply chain experts to allow people and businesses to retreat indoors and wait out the storm.

“We had to quickly get organised around serving customers that we have and the community that we’re in, be it businesses, be it sellers,” Mouchawar tells Logistics Middle East. He describes how demand for categories such as groceries, studying products, toys and sports equipment rocketed during the first few weeks of the pandemic. The boom was as much an opportunity for Amazon and its seller partners to drive change as it was a challenge to adapt.

“Our number one priority quickly turned to safety, making sure we’re able to safely deliver. We saw contactless delivery as being something that we needed to evolve quickly in the region. We wanted to make sure that we develop e-payment methods. So as the shift happened to e-payment, as these categories become the daily ‘need type’ of categories, we definitely saw a shift and kind of a new norm.”

Amazon’s size means it is in a fortunate position to be able to drive change and invent on behalf of its customers. Mouchawar at the height of the pandemic in summer 2020 launched Amazon.sa to start the process of helping the Saudi e-commerce market to develop. 

He comments: “All of us know that Saudi has a large retail market, highly connected user-base and very young demographic of customer. There was more of us understanding what we need to do locally and the logistic infrastructure that we need to put in place. We added warehouses and many delivery networks to make sure for many of our customers we’re able to deliver in a day or two.”

The keystone for Amazon’s expansion in the GCC region is the localisation of its services for local populations. The need for Arabisation is less in the expat-rich UAE compared to Saudi Arabia, for example, but it would not have been possible to copy and paste Amazon’s US or European model into any GCC nation. Websites need Arabic content and delivery addresses must be localised. Naturally, the move to localise services has drawn local challenges specific to individual markets, including supply chain obstacles.  

To ensure the company can react to country-specific challenges, Mouchawar says Amazon.sa has its own supply chain network in Saudi Arabia which relies on a number of “close partners” and third party providers. 

“Really the service is two tiers,” he explains. “We’re able to deliver within a day to most of the big cities in Saudi. In Riyadh and Jeddah, we actually do same day delivery. And then for the rest of the kingdom, it’s three-to-five-day delivery. But Prime also has an international angle to it. So we are able to ship all Prime-eligible orders over SAR 200 from the UAE to Saudi for free in as quickly as two business days, and from the US into Saudi for free in as quickly as seven business days. So it is a holistic offering, making sure that what customers want quickly, for example groceries, are available within a day or two for the majority of Saudi Prime customers. We also know the Saudi customers always like to shop from global sites and a global selection, so it was important to make sure that products and categories from Amazon.com as well as Amazon.ae in the UAE were also available for these customers.”

With so many customers in the Gulf – not just in Saudi – wanting to access international products and markets via Amazon, it is important for the organisation to build multiple hubs and entry points across the Middle East. The organisation already has a fairly large footprint. It is also improving delivery speeds across the kingdom by adding capacity in its network. In 2020, Amazon hired 3,400 new permanent and seasonal employees to supplement its workforce. Mouchawar confirms that the group is planning to expand in Saudi and link the kingdom with the rest of the GCC region.   

“For me, I see young entrepreneurs, many small businesses that are fairly digitally savvy. So there’s no real barrier for businesses using Amazon infrastructure, like through the Fulfilment by Amazon (FBA) programme, to be able to scale their customer base and their businesses. I can see Saudi businesses easily linking to the global Amazon fulfilment network. FBA and Prime are available in many, many countries. We now have over 150 million Prime members globally so they can definitely tap into that customer base as well.”

Increasingly some of Europe’s and the US’s largest majors are setting up distribution hubs in Saudi to act as gateways into GCC markets. Amazon’s Prime model relies on having products as close to customers as possible. Mouchawar wants Prime to be a same- or next-day delivery service in the Gulf so it makes sense to build multiple bases in Saudi where Amazon can conveniently access GCC neighbours as well as end-users in the kingdom’s various cities.

He comments: “We continue to double-down [in Saudi]. We’ve added thousands of employees in the country. I feel it’s an important market. It’s known that in the GCC, the Saudi retail segment is quite high. We have a large customer base there from the Souq days. Now we have a large Prime member base that’s growing.

“In the last three years, my main focus has been on localising Amazon, for example cash on delivery is something that we wanted to offer locally. But also making sure the service logistically … has the right network on the ground, the right delivery, even with our third-party partners like Saudi Post to make sure that we are all working together to serve the Saudi customer.

One of the challenges in rolling out the Amazon model across the developing Saudi market has been the kingdom’s addressing system, which is an obstacle faced by e-commerce firms across the Middle East. Addressing is an element that by definition has to be localised if customers are to receive deliveries accurately and on time. To be able to promise a delivery slot, companies like Amazon have to know exactly where their customers are.

“Many people in the Western world use ZIP codes and postal codes as a way to know where the location of the delivery address is. In our part of the world, sometimes you have landmarks, sometimes you have city names that are the same but in different regions. So we had to innovate a lot in terms of how our logistics systems are able to give these promises and be as accurate as possible for Prime members. At the same time we had to build the right logistics infrastructure on the ground so our sellers, our fulfillment services, the businesses who sell on Amazon in Saudi, feel like our delivery is at the global standard and meets the expectation of customers in this region.”

When a giant like Amazon adapts its logistics set-up, so too must its partners. Mouchawar says he is seeing fellow organisations in the region evolve and invest in line with the developing e-commerce scene. He cites Saudi Post and Emirates Transport as two groups in the Gulf that have evolved their infrastructure allowing Amazon to deliver on its promises. He notes: “Three or four years back, delivery promise, logistics and cash payment were big e-commerce barriers. And we’re seeing that shift today. You’re seeing much bigger growth overall for the e-commerce sector fuelled by the ease of logistics, the improved customer experience and improved payment-processing capabilities on smartphones. You also see the sellers on Amazon – which make up more than 55 percent of what we sell today – are doing better and growing faster.”

During the pandemic, Amazon was forced to evolve its logistics infrastructure rapidly to be able to keep up with changing customer demands with people less inclined than ever before to wait more than a few days for delivery. At the same time, a massive boom in e-commerce and medical equipment sales made for a perfect storm which caused supply chains to creak and crack. Mouchawar says the group had to innovate quickly but importantly had to keep things simple for the customers and its logistics partners. This approach was also necessary so smaller companies with more modest logistics infrastructures could serve Amazon sellers and deliver packages using Amazon’s technology on personal devices. Crucially, it ensured customers and Amazon were able to trust companies to deliver packages on time.

Describing the kind of tech deployed, Mouchawar says Amazon extended its fulfillment and warehouse technology to manufacturers in the Gulf region, meaning they were able to ship directly from their warehouses. The organisation also sought to make its last-mile technology easily accessible to small logistics companies and businesses that wanted to set up their own infrastructure in a particular city or zone. In this way, Mouchawar wants businesses to be able to tap into and link up with Amazon’s network.

“These start-ups may not have all the technical capability, but they will definitely have the local know-how. They know their cities well. They know the addressing scheme well. So by putting the two together, making the technology available to them, we’re able to really jumpstart many of these smaller service providers for us. And at the same time for them, they can guarantee business from Amazon on a daily basis. And as we all know, e-commerce is growing, so it’s a way forward for them to really grow.”

In theory, as Amazon and its partners invest together, ultimately the customer experience and satisfaction levels improve. But with the pandemic, consumer demands shot up when it came to e-commerce. Mouchawar had to focus initially on expanding the workforce and number of delivery stations and fulfillment centres on the ground in Saudi. But he also had to think on his feet to meet e-commerce demands.

“We went out and said: ‘Airline transport has closed and demand for mobility has come down’. So it was a case of: ‘How can we use your vehicles that are usually parked around the airport to help us in meeting the demand?’ We even went out to car-sharing companies and said: ‘You’re not transporting people. We need you to transport goods.’ So while we grow our teams organically, we also make sure that wherever possible, wherever there was extra supply of mobility because people were staying at home, we’re able to tap into it using Amazon’s technology. The shift for these companies was much easier than if they would have had to build their own technology.”

Clearly then, Amazon sees the value in working with smaller and more unlikely companies to strengthen its supply chain. Flexibility is crucial in crises and the region’s largest majors are unlikely to continue to rely wholly on a narrow base of logistics hubs and operators.

This method of running supply chains could dictate part of Amazon’s strategy in Saudi Arabia, which presents significant opportunities for logistics operators in and around the kingdom. Already we have seen Amazon and other majors establishing new bases in Saudi Arabia in the last 12 months. The time is now for supply chain hubs across the Gulf to make themselves heard and help support and facilitate the expansion of e-commerce groups looking to capitalise on the pandemic surge.

Source: Logistics Middle East