MENA’s first e-commerce free trade zone aims to solve logistics pain points


Spanning 195,000 sq m, at a development cost of nearly $1bn, Dubai’s “CommerCity” opened in 2020, with goals to allow regional and international manufacturers and e-commerce sellers to store their goods, products, and spare parts in a fully equipped, technology-enabled warehouses, to be shipped later to local markets. CommerCity also states it’s the first e-commerce free trade zone in the Middle East and North Africa (MENA) region, created with the purpose to allow for greater access to international goods and markets.

Located close to the Dubai International Airport, CommerCity is designed to enable fast e-commerce fulfilment across the MENA region. The project is due to be complete by 2023, with currently 51.0% of its intended capacity filled by merchants and businesses.

The facility is split into three parts: a “social cluster”, offices, and a “logistics cluster”. The social cluster offers various shops and cafes for visitors, with all sectors created to support green energy consumption. The social cluster also allows for a dedicated pick-up-point for click-and-collect orders, plus a drop-of-point for customers looking to return goods and gives an area to advertise goods to potential customers. Additionally, having the office cluster allows for businesses to move operations entirely to CommerCity, with three different offerings according to needs.

The logistics cluster consists of varying warehouse space and two types of fulfilment centres: dedicated centres to be used by e-commerce businesses, and multi-client warehouses with pay-as-you-go pricing offered by partners, such as DHL and Hellmann. Warehouses have offerings of flexible space, starting at 360 sq m and a maximum of 22,000 sq m, with goals to add more units in the future.

The facilities offer end-to-end warehousing solutions, plus order management systems that aim to increases efficiency in the fulfilment process by streamlining customs clearance and automating the collection of goods to be ready for last-mile delivery, directly from the bonded warehouse to the customer by DHL. The shipping service includes management of consumer and shipment queries, including tracking and tracing of deliveries. CommerCity also has a 24-hour, 7-days a week operational time, allowing for response to customer queries at any time of the day or year, and fulfilment processing.

These features offered by CommerCity could be vital in growing local e-commerce businesses, as historically there have been logistical and legal problems for local merchants looking to set up an e-commerce business within The United Arab Emirates (UAE). This is because of UAE laws, customs, and constraints placed on e-commerce.

Logistical challenges include delivery costs, shipping and importing products from abroad, which affect the end price for the customers, but with CommerCity being a free trade port dedicated to e-commerce, import costs are expected to be nullified, and last-mile partnerships with large LSPs, such as DHL, also included in the value proposition of the free-trade zone, can help reduce the cost of shipping to consumers too.

Legislative challenges come from accessing a license from the Department of Economic Development (DED), which is needed to establish a web-based company (Sengupta), as well as UAE legislation demanding that all local companies to have a physical office to be legally considered Sengupta.  Help with these legislative challenges is offered in the CommerCity package, with CommerCity providing office space and appropriate licensing, which could help local merchants overcome UAE e-commerce legislative challenges.

With both local and national e-commerce growth expected and benefitting from its strategic location in the UAE, the creation of CommerCity could be seen to capitalise on this expected growth within the MENA e-commerce market, expected to grow at a 2021-26 CAGR of 14.4%, and UAE specifically expected to grow at a 2021-26 CAGR of 10.5%.

Find out more about Ti’s latest report, Global e-commerce Logistics 2022, which addresses the key trends, challenges and developments facing the market in 2022 and beyond, whilst providing comprehensive market growth data and forecasts.

Source: Transport Intelligence, 24th March 2022

Author: Michael Sinclair