LOGISTICS: How noon.com is doing it differently

LOGISTICS: How noon.com is doing it differently
Published: 18 September 2018 - 6:04 a.m.
By: Logistics Middle East Staff

The Middle East’s newest e-commerce platform, noon.com, has entered a market that is ripe for growth and yet beset by intense competition.

Unlike in Europe and North America, where a handful of players, such as Amazon and eBay dominate, noon.com operates in a market that is just over a tenth the size of the USA in terms of value, but with a lot of companies competing for market share.

To compete, the platform has hit the market with an aggressive growth plan and an even more aggressive focus on its back-end logistics and supply chain systems.

“We want to turn the e-commerce market in the Middle East upside down. Noon will be a game-changing e-commerce platform,” Emaar Properties chairman Mohamed Alabbar promised back in November, 2016 when the company was first announced.

A look at noon.com’s approach to its logistics and supply chain operations over the course of its first year of operations reveals the truth behind that statement. The company has differentiated itself by focusing on the establishment of partnerships with major local and international players, such as Alshaya, eXtra and eBay. The eBay partnership is particularly interesting because it gives customers in the region the opportunity to buy products from the US and other parts of the globe, with fulfilment handled by noon.

A major challenge that all e-commerce companies in the region face is the disparate nature of the six markets that make up the GCC. With the UAE and Saudi Arabia accounting for the vast majority of online sales, noon.com has taken the decision to focus initially on these two countries. According to the logistics team that Logistics Middle East met with at noon.com’s fulfilment centre in Dubai South in August, 2018, this is because noon.com wants to narrow its focus, to achieve e-com fulfilment excellence in these two key markets before expanding into new markets.

“An e-commerce company is built on becoming a trusted shopping destination that delivers great experience. When you have customers coming to you again and again, that’s how you achieve consistent growth. So this is at the core of our business. We want to provide a reliable, predictable and efficient experience,” says Kaushik Mukherjee, director of customer experience and marketplace operations, noon.com.

A challenge noon.com faced in providing such a service in Saudi Arabia was the unpredictable nature of the address system, requiring an innovative approach to its last mile fulfilment. “We have introduced a new geo-tagging address system in Saudi Arabia, because there is no universal system,” explains Mukherjee. “This is a challenge that every logistics company faces, but what we did was we developed a system in-house that would enable us to capture the correct geo-pin for each and every customer so that we could deliver to the exact right place. That has made our operations in Saudi Arabia much easier.”

It is because of a myriad of challenges such as these that noon.com decided from the outset to handle its logistics and fulfilment in-house. So from the WMS to the warehouse itself and the hundreds of delivery vans noon.com has in the UAE and KSA, all are owned by noon.com and operated by noon.com employees. “We wanted to be able to customise all our systems and integrate them easily in a way that suited our business,” says Raman Kumar, director of operations excellence and fulfilment. “Anything you buy ‘off the shelf’ isn’t going to exactly fit the exact customer requirements, and in our case we wanted something that was going to work in exactly the way we wanted it to.”

This need for home-built fulfilment technology is also a reflection of the complex nature of an e-commerce supply chain, with multiple vendors in various countries supplying fulfilment centres where the merchandise is stocked and picked at item level. Within noon.com’s fulfilment centres there is also a ‘sortation centre’, where orders are organised by the location of the customer, before being send to the relevant distribution centre.

For noon.com, after just one year of operation, there are already three of these fulfilment centres and 12 distribution centres. Then there are also merchants that sell through its platform, also well as noon’s own inventory that it holds. It also has sellers inventory that it holds on their behalf, and inventory that it collects from the seller when a sale is made. It also has different inventory in the fulfilment centres versus the distribution centres.

“All of this needs to be integrated,” explains Mukherjee. “With such a complex operation, there is no system that’s going to give us all of the functionality that we need.” On top of this, there is also the fact that noon.com is growing rapidly, with plans to launch a third fulfilment centre in Saudi Arabia, and a further three distribution centres, by the end of the year, increasing its daily through flow capacity significantly. “So we also wanted scalability,” says Kumar. “We wanted to know that a year down the line we can scale up the system without having to make major changes.”

“And when these changes are required, we can do it in-house with our own tech team rather than a third party,” adds Hareram Jha, director of logistics, noon.com. “One day for an e-com company is like a week to any other logistics company.”

“The crux of it is that it’s all driven by customer experience,”he says. “We have these multiple systems, and everything has to talk to each other simultaneously and constantly. Because it isn’t just a matter of deliveries, there are also returns, and if a customer does cancel an order or return an item, they want it done fast.”

Again, it goes back to the unique nature of an e-commerce logistics operation. E-commerce poses the exceptional challenge of inventory arriving in bulk, but requires much care from there – receiving bulk orders, then inventorying and picking those SKUs as individual products. Therefore, e-commerce retailers like noon have to find a way to standardise and synchronise business processes to have real-time access and insight to inventory movement.

“So when a customer makes an order, it immediately reflects across the system, there aren’t different silos that have to communicate with one another,” says Jha. “Similarly, when it comes to the fulfilment, we have items coming out from our local centres, our international centres, and we use a common system for all of that. Whether a product is in the seller’s inventory or our own, the customer experience in terms of ordering, quality checks and delivery will be the same. It’s seamless.”

When asked if noon.com intends to offer same-day or next-day delivery within the UAE or KSA in the near future, the answer reflects a point made recently by Adam Robinson, who oversees marketing for Cerasis. “It’s no longer about being the fastest in the e-commerce delivery race. Instead, it is about being able to deliver an order at a time frame and price point that customers want,” he said, and this is an ethos that noon.com has adopted.

“For every order placed there is a delivery promise for it, it’s based on the product, the location, the time of day the order is placed,” says Hareram Jha, director of logistics, noon.com. “If you don’t have predictable operations you’ll fail. In order for an e-commerce company to survive it has to provide a predictable customer experience, and this is done through investing in scalable, seamless systems that can be customised to the needs of our customers.”

Part of the way that noon.com is planning to do this, apart from the focus on technology, is by building its inventory in the region. “We encourage our partners to store their inventory with us,” says Jha. “This means that everything will happen faster because instead of going and picking up the product and then bringing it to the fulfilment centre for quality checking and packaging, it can all happen in a more centralised way.”

Another key area for noon.com is that it is wants its systems and customer care and last mile operations to reflect the home-grown nature of the company. “We not just based in this region, we are of this region, and so we want to provide an e-commerce experience that meets the expectations of local customers,” says Mukherjee.

“We are looking to build something that doesn’t actually exist in this market right now.One of the problems we face in Saudi Arabia is that there are still some regions where delivery is difficult or where customers prefer to come and collect their shipment,” he adds. “We want to change that to be as close to the customer as possible and delivery to everyone very fast.”

Kumar says that in both markets noon.com currently has around 85% coverage, and by the end of the year it wants to have closer to 100% coverage in both countries. Part of the way it plans to do that is by approaching last mile logistics in a new way.

“We’re looking to change the way logistics is done in Saudi Arabia to create more employment opportunities for the youth,” explains Jha. “So we’re looking to develop a cloud-sourced platform that will enable young Saudis to deliver for us on their own time and own terms, whether on the weekend, or on a few afternoons a week. This will give us the capacity to handle any kind of growth and will also give us the ability to scale-up for rush periods such as Ramadan and create a source of income for our delivery agents – a bit like Careem and Uber.”

 




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