Shipa Delivery, an Agility Company is eyeing $300m in revenue this financial year from rising freight bookings as it plans expansion in the Middle East on the back of the region’s growing e-commerce sector.
The company, which was started as part of regional logistics conglomerate Agility in May allows for the GCC’s small and medium sized businesses to use freight services at an affordable rate, according to its chief executive Borhene Ben Mena.
With around 1,000 SME clients in the UAE, Kuwait, Saudi Arabia and Jordan, Shipa is eyeing expansion into Egypt and other lucrative markets in Africa.
“[We’re servicing] clients who will not be served by Agility because they’re small,” said Mr Ben Mena.
“Agility caters to large clients who have high purchasing power, and want full service, a dedicated account manager with a blocking capacity up front,” he added.
Kuwait-based Agility, which used to be the key supplier for the US army in Iraq plans to invest at least $2 billion into its business by 2020. Shipa, which is part of its portfolio is betting on the growth of regional e-commerce and has allocated a capital expenditure of $6m this year.
“[Next year], we’re looking to increase that to twice that amount,” he added.
Nearly 80 per cent of the firm’s investments are in technology, of which the company is specifically eyeing the potential to leverage artificial intelligence and block chain.
“We have all these block chain initiatives but we’re not there yet but the technology exists. AI is already mature,” he said.
With capital from Agility, the company is being groomed to disrupt the regional logistics sector allowing for cash-strapped SMEs to have more domestic options to ship with.
Much of the traffic facilitated by Shipa comes from China, which is a key source for garments, textiles and other products imported by regional e-commerce firms.
"The two main geographies are US and China. The UK used to be big but we see that slowing,” said Mr Ben Mena.
Shipa, which carries out around 100,000 bookings of shipping containers per month, is looking to increase the total number to 1 million per year on the growth of regional industry.
Freight handled by the company is more inbound rather than export with Saudi Arabia and the UAE accounting for much of intra-regional trade.
“It costs about $300 per booking, so $300m revenue could be achieved by that in a year maybe,” said Mr Ben Mena, noting that internal targets for the firm are much more aggressive.
The biggest challenge for the player is navigating customs compliance on behalf of SMEs, a tricky area as e-commerce retailers in the region occasionally trade in counterfeit products.
“Everybody is throwing that [compliance] hot potato to his partner in the supply chain,” said Mr Ben Mena.
“In the UAE there is this issue of greenmarket products being mixed with genuine products. As a logistics operator we just make sure that if it’s a sealed product, we deliver it as it is and if it’s an open product then it’s our responsibility to look at what’s inside because we’re packaging it and selling it to clients,” he added.