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Saudi Arabia Third-Party Logistics (3PL) Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

Saudi Arabia Third-Party Logistics (3PL) Market - Growth, Trends, COVID-19 Impact, and Forecasts (2021 - 2026)

  • September 2021
  • 314 pages
  • ID: 6155706
  • Format: PDF
  • Mordor Intelligence LLP


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The 3PL market in Saudi Arabia is well-developed and is expected to show a CAGR of over 5% during the forecast period 2021 - 2026.

Because of the Covid-19 pandemic, which affected the volume of demand for goods in several sectors in the Kingdom of Saudi Arabia, the import sector of retail products experienced an unprecedented decline due to widespread closure of retail stores and the imposition of travel restrictions, many challenges have arisen for the Third-party logistics sector in the Kingdom of Saudi Arabia.

In the Agility Emerging Markets Logistics Index for 2021, Saudi Arabia was placed sixth among Gulf countries. The third axis of Saudi Arabia’s Vision 2030 is to capitalize on the country’s advantageous location by developing it into a global logistics center.

In Saudi Arabia, the third-party logistics sector is gaining a lot of traction as a way to manage the growing cross-border movement of commodities. The 3PL logistics market in the kingdom is being driven by factors such as cost reduction, availability of specialised service providers, the presence of industrial zones, and increasing industrialisation.

The country’s strong e-commerce sector is likely to generate significant demand for 3PL services such as warehousing, distribution logistics, and e-commerce fulfilment as a result of Covid-19. Consumer preferences are changing, and there is a growing desire for faster delivery times and more effective supply chain management, therefore 3PL companies in the country are incorporating technology and automation into their supply chain services.

A new logistics zone has opened in the Red Sea city of Jeddah as part of a bigger industrial push to diversify the economy away from oil. Shipping, freight distribution, and product transportation will all benefit from the Al Khomra zone, which spans 2.3 million square metres in Jeddah. The complex in Jeddah wants to transform Saudi Arabia into a global logistics powerhouse, assisting in the growth of the third-party logistics business.

Key Market Trends

Growth in E-Commerce boosting the demand for 3PL services:

The expansion in the e-commerce business drove the growth of the 3PL market in Saudi Arabia. COVID-19 lockdown measures had a significant impact on e-commerce in 2020. Despite the fact that sales were already strong throughout the review period, limits and curfews prompted most businesses to shift from in-store to e-commerce in order to offset losses (due to the absence of in-store shopping).

The government wants to boost the proportion of online payments to 70% by 2030, up from 28% in 2020, as part of the Financial Sector Development Program, which is part of Vision 2030, the Kingdom’s long-term development plan.

The Saudi Arabian e-commerce market contributed to the global growth rate of 26% in 2020, with a 28 percent gain. With the expansion of the supply chain and the emergence of new technologies, new businesses have evolved, and existing businesses have grown even more. Namshi.com is the largest player in the Saudi Arabian e-commerce market.

In 2020, the store made USD 134 million in sales. Jarir.com comes in second with USD 91 million in revenue, followed by extra.com with USD 64 million. Al-dawaa.com is one of the fastest-growing stores in the Saudi Arabian market. In 2020, the store made around USD15.1 million in sales. Its sales increased by 232 percent over the previous year.

COVID-19 saw a twofold increase in the number of users around the country. According to the Central Bank of Saudi Arabia, the number of transactions on Saudi Arabia’s national debit card, Mada, grew 347 percent between 2019 and 2020, while the value of transactions increased 279 percent. In the first quarter of 2021, the General Authority for Small and Medium Enterprises (Monsha’at) revealed that investments in e-commerce totaled more than SAR 250 million (USD 66.6 million).

Strong downstream chemical industry driving 3PL logistics sector

The Chemicals industry is an essential part of the Kingdom’s economic diversification. In line with Vision 2030. Saudi Arabia is among the top ten exporters of chemicals in the world. The chemical industry in Saudi is the region’s powerhouse, with the largest volume output and chemical sales revenue. This makes the country one of the key global markets for chemical logistics, with significant demand for domestic and international chemical transportation and storage services.

Chemical trade in the Gulf Cooperation Council (GCC) is expected to recover by up to 10% in 2021, reversing a 20% decline in 2020. According to the World Trade Organization (WTO), global commercial trade is predicted to rebound in 2021, growing by 7.2 percent, reversing a 9.2 percent decline last year, but still falling short of the pre-crisis norm.

Companies have been more strategic in these areas because of the complexity of market dynamics in production, transportation, accessibility, and cost. As logistics is one of the most important areas for businesses to cut costs and working with 3PL companies provides a cost-effective way of shipping chemicals for a significant number of small and medium businesses in Saudi Arabia’s downstream industry.

Chemical logistics businesses are extending their operations in order to stay competitive in the industry. International Chemical Logistics (ICL), formerly known as Suttons Arabia, the Saudi-based Arabian Chemical Terminals (ACT) distribution company, stated plans to commence operations in Plaschem Park in 2019.

Aramco demonstrated reliable upstream performance with an average total hydrocarbon production of 11.5 million barrels per day of oil equivalent in the first quarter of 2021, including 8.6 million barrels per day of crude oil. Aramco’s total hydrocarbon production averaged at 11.5 million boe/d in Q1 2021. The company’s downstream business consumed 43.8% of Aramco’s crude oil production in Q1, up from 35.5% in the same period a year earlier.

Competitive Landscape

The market is fairly fragmented, with a large number of domestic and international businesses competing. DHL, Agility Logistics, Mosanada Logistics Services, Almajdouie Logistics, Hala Supply Chain Services, Himmah Logistics, and LSC Logistics are a few of the key players. The industry’s top companies are concentrating on strategic market initiatives to increase their product capabilities and extend their market presence. The most popular type of warehousing is the dry warehouse, which has seen significant growth in recent years. Given the region’s potential and the growing importance of trading links, logistics, and service companies, who already have a very strong presence in Saudi Arabia, are further expanding their operations.

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