Chinese Couriers Ride the E-Commerce Boom for Middle East Expansion

Chinese e-commerce companies are making significant strides into global markets, engaging Chinese logistics providers to follow suit, with the Middle East becoming a key area of focus due to its robust consumer spending capability [para. 1]. iMile Delivery LLC is a logistics company founded in Dubai in 2017 by Huang Zhen, a former Huawei and Alibaba Cloud executive. Although it is a local company, iMile’s founder and main clientele are Chinese [para. 2]. iMile operates in eight Middle Eastern countries, as well as Mexico and Brazil, and expanded to five new countries by 2023, including Turkey and Italy [para. 3]. Despite having R&D centers in China and Poland, the company does not provide delivery services within China [para. 3]. Additionally, J&T Express Co. Ltd., established in Southeast Asia by Li Jie in 2015, has rapidly grown its presence in the Middle East [para. 4]. The expansion of these logistics companies, iMile and J&T, positions them as leaders in the Middle Eastern market, challenging established firms like Aramex and DHL [para. 5].

Chinese courier companies' growth in the Middle East has been largely driven by the expansion of Chinese cross-border e-commerce, with platforms like Temu, Shein, and AliExpress entering the region [para. 6]. Shein has seen the Middle East become its third-largest market by 2022, accounting for 16% of its total gross merchandise value, with the region offering higher profit margins and larger average order values compared to the U.S. and Europe [para. 7]. To manage logistics, AliExpress and Alibaba’s logistics unit Cainiao International opened warehouses in Israel and Dubai, while Temu and TikTok Shop began operations in 2023 starting with Israel [para. 7].

The Middle Eastern market, due to its young tech-savvy population and expanding internet penetration rate, is particularly attractive for Chinese e-commerce. Between 2018 and 2022, the region's e-commerce market grew at an annual rate of 32%, expected to hit $57 billion by 2026 [para. 9]. This boom has sparked rapid logistics expansion, with companies like J&T advancing their infrastructure to handle daily orders in major cities like Dubai [para. 10]. There are growth opportunities in less developed markets such as Qatar, Kuwait, and Bahrain [para. 11].

Chinese e-commerce companies tend to collaborate with Chinese-backed logistics firms for enhanced coordination and operational cohesion. In the cost-driven landscape of Middle Eastern online shopping, low prices are crucial, pushing logistics firms to reduce costs and optimize efficiency [para. 13]. iMile, for example, offers dedicated 24/7 account managers to cater to specific e-commerce clients, a service unmatched by local companies [para. 14].

However, penetrating the Middle Eastern logistics market poses challenges. Limited local supply chains and reliance on imports limit e-commerce development. Unlike its franchise model in China, J&T operates independently in the region, finding it difficult to establish a back-end service network, which constrains revenue streams [para. 15]. Adapting to regional specifics, such as using air-conditioned vehicles in Dubai due to high temperatures and local preferences for cash-on-delivery in Saudi Arabia, requires significant localization efforts [para. 16][para. 17].

Middle Eastern countries are enhancing their infrastructure, investing heavily in airports and ports, with nations like Saudi Arabia aspiring to be the quintessential logistics hub [para. 19]. Development projects such as King Salman International Airport and Dubai's logistics hub for agricultural trade contribute to these ambitions, with logistics becoming an increasingly significant sector in their economies [para. 22].