After posting a set of strong first quarter results, Aramex’s COO Iyad Kamal says 2014 is shaping up to another great year for the logistics giant.
By Dina al-Wakeel
Aramex, the region’s largest courier company, recently reported a 14 percent rise in fourth quarter net profits to $21.4 million, year-on-year, and a 6 percent rise in revenues to $232 million.
Yet, the company’s formidable results are not unprecedented. As a matter of fact, 2013 marked Aramex’s ninth consecutive year of record profits. The company said its strong performance was driven by substantial growth in its key geographies in the Middle East, sub-Saharan Africa, and Asia as well as across its core businesses in express, logistics, and freight.
Looking ahead, Aramex COO Iyad Kamal wants his company to expand its already substantial geographical footprint even further, invest in new technology, and develop last mile solutions to better cater to clients’ ever changing needs. Aramex also plans to extend its e-commerce reach even further through its Shop and Ship service.
You’ve just posted some very strong first quarter results despite operating in a region filled with challenges. What are the biggest issues you have to contend with?
Cross-border trade regulatory issues that exist within the region and customs formalities top the list of issues we face. I wish we were like the EU where everything is freely circulated (or is in free circulation). The ease of regional trade is a factor that needs improvement. We are witnessing incremental improvement, but we’re not there yet. In addition, as we are expanding in new markets in Africa and South East Asia, paying close attention and understanding the local culture is high on our agenda, because we need to align our solutions and integrate our culture with the local requirements and environment.
Do high custom charges in Jordan stand in the way of e-commerce growth?
Although customs processes and procedures are well established, high custom duties in Jordan are an obstacle to growth of ecommerce, no doubt. For the sake of comparison, custom duties in the GCC are flat at 5 percent of the value of goods. Meanwhile, in Jordan duties and taxes can reach up to 40 percent and more. If we want to encourage e-commerce in Jordan, and cross border trade, this is something that we definitely need to look into.
Aramex was one of the first companies in the region to venture into e-commerce with its Shop and Ship service. How has it been developing?
Shop and Ship service has been growing in double digits since it was launch 13 years ago, and continues to have enormous potential. We have now set up Shop and Ship service in eight cities around the globe, from Hong Kong, Shanghai, Istanbul, Dubai, Mumbai, South Africa, to the United States and the UK. Every day, this service enables hundreds of thousands of customers globally to shop online from across the world and ship their packages to a personal forwarding address in these countries. Aramex then ships, clears, and delivers those packages to their doorstep. Other than our Shop and Ship service, we serve the majority of e-commerce players in the region through offering fulfillment, distribution, and logistics—we handle it all.
How big is e-commerce in the region today?
In 2013, e-commerce-related business grew 100 percent, and in 2012 the business was valued at $9 billion in the region. This number is expected to grow to $15 billion in 2015. Other than the importance of making sure we deliver our customers’ packages on time, we are also investing heavily in technologies that make track and trace easier and more accessible for our customers who can interact with us instantaneously. For example, we just re-launched our Shop & Ship website with responsive design features, making it more adaptable for smartphones.
To meet the demands of customers who require swift and personalized deliveries which include purchases from local ecommerce sites, we recently introduced a two hour Bullet Plus service in Dubai. Customers can schedule pickups and make payments through an interactive website dedicated for this service. The plan is to launch this service regionally by 2015.
In addition, we just announced a joint venture with InPost, the world’s largest parcel lockers network. The new partnership will create a network of automated parcel lockers that will be set-up across the region in all major cities and towns. The move will support the development of the rapidly growing e-commerce industry in the Middle East and Africa by providing online businesses, and consumers purchasing online, with an innovative solution for sending and receiving packages. Through these new, automated self-service terminals, ecommerce sites will be able to send goods ordered online direct to parcel lockers, whilst customers will be able to collect their e-shopping at preselected terminals at their convenience.
So how much is e-commerce out of Aramex’s total business and where do you see the trend going in the coming few years?
Aramex e-commerce business is growing by 30 percent year over year and we expect this upward trend to continue in the next three to five years.
As for the trends in the region, although the number of players is currently limited, e-commerce will continue to grow. My hope is to see not only 10 or 20 regional companies selling products online, but thousands. Another trend I see happening is an increasing interest from global e-commerce players to sell their products in the region. For us, this is good news. Our infrastructure has to always be ready to accommodate new business.
When it comes to e-commerce, Saudi Arabia tops the list for online retailing, followed by the UAE and Egypt.
Meanwhile, Cash on Delivery (CoD) remains the dominant payment preference for online shoppers across the region. Actually, 80 percent of e-commerce in the region is delivered on CoD basis. As payment options advance, credit card penetration increases, and more importantly, trust in using credit cards online improves, we will eventually see CoD business declining. However, I don’t see this happening for another two to three years.
Aramex has announced many acquisitions across Africa. Why are you putting so much focus on Africa?
Africa is an exciting destination for us. It is one of the fastest growing economies in the world with an expected GDP growth of 5.4 percent this year. It is also home to 1 billion people, yet not many transport and logistics companies are focused on the region. Sub-Saharan Africa on its own is expected to grow 5.2 percent in 2014. The growth is expected to come from investments in infrastructure, natural resources, and personal consumption from a rising population. West Africa is also expected to grow by a staggering 7.4 percent in 2014 which makes it the fastest growing region of the 54 nations in the continent. The outlook is very promising and presents a huge opportunity for us. We are not only connecting these markets together, but we are leveraging the experience that we built in the MENA region for the last 32 years to Africa, with new products and services that have great potential in the continent.
Other than expanding into new global markets, what are Aramex’s other plans for the future?
We are expanding our warehousing infrastructure within the region. In Dubai Logistics City, for instance, we are building a new extension of 50,000 square meters in addition to our existing 43,000 square meters. In Saudi we are establishing new facilities in both Jeddah and Riyadh. Additionally, we are moving into a state of the art 15,000 square meter facility in Oman next month.
Another area that we’re focusing on is our oil and gas product offering. We have expanded our oil and gas services in warehousing and distribution and are aggressively promoting our solutions to a broad range of customers.
Earlier this year, we launched a new product called Biocare, an innovative cold-chain solution for the healthcare industry providing a specific time-sensitive temperature controlled delivery solution to move clinical specimens and medical samples domestically and globally.
Innovation is a key competitive advantage for Aramex. To further institutionalize innovation within the company, we have recently introduced Aramex RedLab; an internal innovation initiative that enables Aramex employees globally to share, develop, and launch their ideas. In a matter of thirty days we received fifteen ideas through a specially designed online platform. High potential ideas are financially backed up with a fund to eventually become products and services or better ways for us to conduct our business.
You are also aware of the effects your business could have on the environment. What has Aramex done to reduce emissions?
We know the effects of the transportation industry on the environment so we take our commitments to the environment seriously. We actively measure and manage our impact; from raising our employees’ awareness on environmental issues, converting our fleet and packaging material to incorporate more sustainable options, surveying our supply chain to ensure environmental compliance, to actively following up on our environmental commitments.
Moreover, in 2013, we spent $3 million on environment-related investments and expenditure.
Aramex takes pride in being the first company in the region to calculate and report on its carbon footprint. We have been members of the World Economic Forum’s (WEF) working group tasked with creating a framework for the decarbonization of the logistics industry.
Fadi Ghandour stepped down as Aramex’s CEO one year ago, what role does he play today? Are there any changes in the company’s strategy or did you follow in his steps?
Fadi remains involved in strategic initiatives covering our expansion plans, acquisitions, and sustainability. Although he is not involved in the day-to-day management of the company, we capitalize on his vision and years of experience, not only in logistics and transport, but also in other key organizational issues; from our values, to corporate culture and entrepreneurship (internal entrepreneurship). Fadi is currently the Vice Chairman of Aramex and a member of the board.
We are on the path to deliver on a clear and set strategy; Aramex stays committed to building its operations and proactively strengthening its footprint in growth markets, as our aim is to link and facilitate emerging trade opportunities between key strategic markets.
For me as the COO of the company I continuously look at solutions to enhance our operational efficiency and deliver a unique customer experience.