Dubai: The “last mile” is up for grabs in Sharjah... and even in the other northern emirates.
Mushrooming F&B businesses and the demand created by all things related to e-commerce are feeding demand for delivery services — either to a home or office address. And unlike in Dubai or even Abu Dhabi, the process is only getting started.
Tawseel, a business that’s a year and three months old, wants to grab as much of the delivery action as possible. In many ways, it has managed to get a head start, according to Sarmad Al Zadjaly, CEO and co-founder.
“When people talk about prospects for the delivery business, they immediately think of Dubai and say ‘it’s saturated’,” Al Zadjaly said. “But it’s certainly not the case in Sharjah when we started out last year.
“In one area of Sharjah alone, the Muweilah commercial area, in the last 16-17 months, the number of restaurants — excluding the small outlets — have grown to 70 or 80 from 15 in January 2017. Where there’s a new opening, it immediately creates demand for delivery services. The rule of thumb in the F&B business is that up to 45 per cent of revenues could be generated from delivery.”
In Dubai, the F&B-focused delivery business has had two of its best years, helped by the likes of UberEats and TalabatGo, which take in orders from a consumer and then go about delivering, in return for a commission from F&B operators for services rendered.
Industry sources say the percentage of the split remains stable despite the entry of new delivery businesses.
But unlike these entities, Tawseel prefers to go with direct alliances with F&B operators rather than take in orders directly. That is, the order will need to be placed with the restaurant and then Tawseel gets called in to handle the delivery.
“For the moment, we prefer to keep it this way,” said Al Zadjaly. “And we have an agreement with TalabatGo to handle some of its deliveries in Sharjah. With restaurants, our pitch is straightforward — they don’t need to commit resources and time on their own delivery operations. Especially for new F&B operators, this can be a drain on funds.”
The message seems to have resonated well with Tawseel’s intended clientele. It’s fleet strength has risen to 80 bikes, and this is expected to touch 300 by year-end. There are also a few minivans.
This is where e-commerce could lend a hand in the next phase of growth.
Tawseel was launched with the express purpose of handling F&B orders, but now it is expanding its presence into e-commerce shipments too.
A deal with souq.com to manage some of its deliveries in Sharjah and Ajman helped set the direction. Over the next two years, Tawseel expects e-commerce shipments to generate up to 30 per cent of its top-line numbers.
“Frankly, until souq.com turned up, we were not interested in handling e-commerce deliveries,” said Al Zadjaly. “We wanted to focus all our attention on the F&B sector prospects, because that’s where Sharjah and Ajman [were] seeing such change.”
Tawseel, which managed a profit after 10 months of operations — recently sold 50 per cent of its stake to Faris General Trading (FGT), which is building up a portfolio of investments in tech-facing start-ups. Al Zadjaly and Mohammad Al Musharrakh, Tawseel’s founders, hold the remaining shares.
“The initial plan was to sell 40 per cent to multiple investors but FGT came in wanting 50 per cent and also a road map for further expansion in the northern emirates.
“The northern direction will be a good one for expansion — we know the back roads of Sharjah and Ajman, and we are comfortable working there. Sure, there has been new competition but [this is] something we can take in our stride.”
But it’s not just all north-bound. Early this month, Tawseel opened a base in Dubai to further manage the souq.com association.
Plus, there could be “opportunities in relatively untapped areas in Dubai, those not targeted by the major players,” Al Zadjaly added.
While online shopping continues to put in double-digit transaction growth in Dubai, shipment and delivery costs are facing quite a squeeze.
Free shipping is being offered during just about every major promotion by online portals, meaning there will be a squeeze on the actual delivery operators as well.
“Free shipping is not a sustainable model and its continuance is ultimately a function of margin erosion,” said Ali Haji, head of digital operations at GCP Group.
“Shipping costs overall have reduced somewhat and [are] expected to drop further due to competition in the logistics space. Same-day delivery models always have a niche and it is likely they will find traction in some of the northern emirates as well.”
The race for the last mile is on.
Delivery matters for online shoppers
Here’s a statistic online shopping portals and delivery businesses should take to heart: Sixty-six per cent of shoppers buy goods from one retailer in preference to another because of more appealing delivery services offered. Thus “a superior delivery experience that offers live tracking, personalisation, and customisation of deliveries becomes imperative,” according to FarEye, a global digital logistics platform.
It has now launched ‘Delight’, an online platform that helps businesses increase their “delivery happiness score”.
“While more and more companies understand that providing a great customer experience is necessary for business growth, many have a long way to go, bringing all the parts together to make it a reality,” said Kushal Nahata, CEO of FarEye.
“The bottom-line is that companies struggle to get a cohesive, holistic, outside-in view of their customers’ experience.”