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The New Crown Jewel

Publication: Dünya TR Monitor
Issue: Exclusive Interview
Spokesperson: Aras Kargo Chairman of the Board of Directors Peter Umundum

How many employees does Aras Kargo have? How many branches are there and how large is the distribution area in Turkey? Can you explain the annual tonnages in Turkey and worldwide?

As Aras Kargo, we operate one of the shipping companies with the largest distribution network in Turkey with 15,000 employees, 13 regional directorates, 28 transfer centres, almost 1,000 branches and nearly 4,500 vehicles. We stop by more than 1 million doors every day and around 200 million doors every year. Our international services account for 2% of our total turnover. Our goal is to increase this share.

Who are the international companies you cooperate with to deliver foreign shipments and distribute foreign shipments in Turkey?

We cooperate with almost all global companies for international shipments. Along with the existing express channel, in 2021 we aim to deliver mainly to the EU region through our own line with AP cooperation. On the inbound side, which is the part where we come from abroad and offer distribution services in Turkey, we collaborate with the world's leading e-commerce platforms.

What was the company's most recent shareholder structure? How was the division and distribution of labour?

As we reported to the public in August, an agreement on the share increase was reached between Austrian Post and Aras Kargo, satisfying all involved parties. As a result of the agreement, Austrian Post increased its shareholding in Aras Kargo to 80 percent, while Mr Barış Baran Aras maintained his shareholding position at 20 percent.

As a result of the change in shareholding, our Board of Directors was also reconstituted. As a consequence, I took over the position of Chairperson of the Board of Directors, Mr Baran Aras became deputy chairperson of the Board of Directors, Mr Carsten Wallman became CEO and member of the Board of Directors, and Ms Barbara Hagen became CFO. Georg Pölzl, Alexander Koch, Ahmet Cemal Dördüncü and Ziya Engin Tunçay are also members of the Board of Directors. Our General Manager, Mr Utku Ayyarkın, continues his leadership duties together with the management team.

Are there organic and inorganic growth plans in Turkey and abroad? Can you explain that briefly?

The new management structure we have rolled out as Aras Kargo will enable us to maintain our track record of pioneering and innovating in the industry in our stable growth trend, which is focused on our current business. In the next 5 years, we plan to significantly differentiate and grow with a new investment of TL 1 billion by continuing our technological infrastructure and digital transformation that we have already developed since 2016.

How many last-mile delivery companies operating nationwide in Turkey?

Given the growth potential of the sector, shipping companies are growing bigger by the day and new companies are joining the sector. However, it is fair to say that there are 5 major brands that have been in the sector for some time.

What is Aras Kargo's market share in its sector as measured by independent research?

Based on average daily delivery capacity, Aras Kargo's market share is estimated to be around 26-27%.

What is the company's 2019 turnover and 2020 target turnover? What are the 2021 expectations?

Aras Kargo saw its turnover increase by 50 percent over the last three years with double-digit growth rates. We ended 2019 with a turnover of over TL 1 billion and in line with our targets with all our investments and efforts. In the first 11 months of 2020, we have achieved growth of over 65 percent. We expect to wrap up this year with a turnover of almost TL 2.4 billion and a growth rate similar to that of the first 11 months. For 2021, we expect our double-digit growth trend to continue and we will end the year with a turnover of almost TL 3 billion.

TR 8: Have there been changes in the number of your employees during the COVID-19 process?

Since the beginning of the pandemic in our country, the increase in demand has created new employment opportunities for our sector. As a company, we have made it our goal to maintain our customer satisfaction at the highest level while living up to the increasing demand. With this in mind, not only have we expanded our service teams, but we have also developed alternative business models for efficient and sustainable growth. For example, we have introduced periodic staffing solutions with the "Esnaf Kurye (Independent Courier)" system we launched.

How did COVID-19 impact the company's sales growth? How do you expect the second wave of new closures to impact? Can you assess this for both your company and the sector?

As you know, the pandemic broke out in our country in March, and with the onset of the pandemic, consumer habits underwent rapid and significant change. Consumers began to buy all kinds of needs that they had bought in the shops back in the normal days, mainly through e-commerce with the pandemic. The most important factor that affected our business was the change in the shipment structure. During this period, when workplaces were shut down and people worked from home, the number of bulk deliveries was reduced to a minimum, while the number of places we went to for deliveries to individual households increased many times over. During the pandemic period, our transaction volume doubled compared to the previous year. Parallel to the increase in e-commerce users, the number of addresses visited increased by 90 percent. The number of addresses we stop by daily has exceeded 1 million.

It was in 2016 that we began our digital transformation, a process in which we have invested almost TL 300 million in transfer centres, IT infrastructure and operational arrangements over the past two years. We first technologically upgraded our transfer centre in İkitelli, one of our largest transfer centres both in terms of operations and square metres, as part of our investment in the technologisation of our transfer centres, which we started a few years ago. Last year, we technologically renewed our transfer centres in Istanbul Orhanlı and Izmir, and recently we completed those in Ankara. Also, last year, for the purpose of better handling the increasing volume of small parcel shipments between 1-5 desi, we commissioned investments in machines that separate small parcels on both sides of Istanbul. This year we have extended these investments to 4 other major cities.

Thanks to these investments and the dedicated efforts of our staff, I can say that we have successfully managed the first part of the pandemic. Although there were delays in the delivery of consignments in some places due to the increased volume at the beginning of the process, our field staff, our heroes during this delicate time, continued to put their lives on the line and ensure the continuity of the supply chain in our country. We would like to take this opportunity to thank them once again for their efforts.

We expect e-commerce shipments to increase in the second restriction period we are in. With the investments we have made and the experience we have gained, we are prepared for the new restriction period with a higher capacity and a wider branch network. We will continue to work hard to be the shipping operator preferred by our customers during this period, within the framework of our increased capacity, quality and customer satisfaction.

How has the share of e-commerce sales in total sales changed over the last 5 years? Any e-commerce-related plans?

As e-commerce volumes have increased over the years, the number of shipping parcels has decreased very significantly and the number of shipping points visited each day has increased very significantly. Once the shipping sector properly optimises the average and increases the number of parcels per day with the investments it has made in the transfer centres, it will be able to respond seriously to the growing market. As Aras Kargo, we have almost tripled our transaction volume with the investments we have made. Knowing that e-commerce will definitely be the major player and the biggest customer of the sector in this changing and transforming structure in the coming years, we are planning our investments accordingly. The number of small parcels under 5 kilos has increased 2.5 times compared to 5 years ago. The momentum in this direction will continue with the changing consumer habits. We will continue our investments correspondingly.

Is there a sector other than e-commerce that has recorded a significant increase?

It would be more accurate to answer this question like this. As a matter of fact, many sectors have gained momentum with the increase in e-commerce in the field of e-commerce. Taking a look at the data we have, we notice that retail and hardware, especially clothing and cosmetics (hygiene and health products), have increased in e-commerce.

How many of the vehicles at your disposal have been converted to electric power so far and how many do you plan to increase this number?

As Austrian Post, we value sustainability and the environment worldwide.

We outline the importance we attach to renewable energies when organising our projects. We operate the largest fleet of electric vehicles in Austria.

At Aras Kargo, we are highly sensitive to environmentally friendly practices and activities in order to leave a more livable world for future generations. Aligned with this vision, we started adding electric vehicles to the fleet in 2011 to reduce Aras Kargo's carbon footprint. Today, Aras Kargo has the largest 100 percent electric commercial vehicle fleet in Turkey. With the electric commercial vehicle fleet, we save an average of 10 percent in fuel costs per month. We have set out a plan to further expand our electric vehicles. To this end, we expect to further expand stations where electric vehicle batteries can be refuelled. We will continue our efforts with the aim of integrating environmental activities into mainstream operations and pursuing environmentally friendly investments.

Do you have plans in the pipeline to transform into a larger logistics company that doesn't just transport goods?

We are currently fully focused on our current business, hence we do not have such a plan on our agenda in the short run.

Can you elaborate on your 5-year plans? What kind of investments do you foresee? Will there be any acquisitions or mergers? Are there any new business areas you want to branch out into?

Like many other companies, we review our 5-year strategic plan every year. We are of course going through this process this year as well.

We are putting more emphasis than ever on making technological investments, strengthening infrastructure and making business processes more efficient to live up to the increasing e-commerce volume and changing consumer demands. In the coming period, we plan to invest a total of 1 billion TL in Aras Kargo's distribution infrastructure, which covers all areas such as transfer centres and branches. After our major cities, we will focus on technological investments in our transfer centres in Anatolia from next year.

We launched the "Route Optimisation" project to manage the increasing address and data traffic. Thanks to the Route Optimisation Project, we have created the most suitable infrastructure for the proper management of daily transaction volumes, as well as additional employment reinforcement during periods when the number of shipments increases. Once the project is completed in 2021, the system will always determine the most optimal route depending on road conditions, allowing us to deliver our customers' shipments even faster. As a leading company in the industry, we will continue to offer fast and specialised solutions to the needs of our customers and business partners, while continuing to invest unabated.

We have recently completed our share change and new board structure and there are currently no new acquisition or merger plans on our agenda.

Supermarkets have also started selling online and offering same-day delivery. Can shipping companies be part of this trend? Is this going to have an impact on your company and your sector as well?

Same-day delivery is a new trend in the sector. Like all developments in the sector, we are keeping a close eye on this trend and evaluating it in the context of our strategic plans.

Are you planning to enter the air and sea shipping business?

With the TIO certificate we have, we can partially cooperate with our business partners in international land, air and sea transport. From 2021 onwards, we intend to expand our land, air and sea transports, over and above our express service, which is the focus of our overseas product portfolio. In this sense, we are expanding our supplier network at home and abroad.

Do you have further goals in the area of sustainability investments?

Consistent with Aras Kargo's vision to protect nature, we established the Nature-Friendly Araslar platform in 2014. In the framework of this platform, we have been keeping the coasts of Turkey clean for 4 years with the participation of our volunteers in cooperation with TURMEPA (Turkish Marine Environment Protection Association). Up until now, we have collected and recycled almost 4 tonnes of waste, preventing it from ending up in our seas.

Also aligned with our eco-friendly vision, we save 25 percent energy thanks to LED lighting and photocell systems in our handling centres. Our cargo bags are biodegradable and naturally bio-degradable.

What is the most exciting project you are working on these days? What's on the company agenda?

The investments we have made in the technologisation of our transfer centres, which we began with a view to managing time and capacity well, will continue in Anatolia after the big cities. Thanks to the investments we have made, we have become the company with the highest hourly processing capacity in the industry. By tripling our hourly processing capacity, we are the best company in the industry. We technologically upgraded our transfer centres in Istanbul Orhanlı and Izmir last year, and this year we completed Ankara. To be able to better handle the increasing volume of e-commerce shipments, last year we commissioned an investment in a small parcel separating machine on both sides of Istanbul. We have extended this investment to 4 other major cities this year. This will enable us to further increase our capacity and efficiency.

We are committed to expanding the direct sales model, which provides the fastest, highest quality and most customer-focused response to e-commerce needs, by expanding our branch-based network structure with micro and mini hubs equipped with technological devices and solutions in locations where shipping shipments are increasing as transaction volumes increase.

This year, 16 Micro Hubs and 5 Mini Hubs were commissioned, almost all of which are located in Anatolia. From our 17 transfer centres, together with the direct sales organisation, we deliver a total of 1000 courier shipments directly to our customers every day without ever visiting a branch. In the coming period, we will continue these investments by evaluating the increasing trend in different regions.

In addition, we continue to pursue alternative delivery and pick-up points (PUDOs), the first trials of which we have started working with the university over the past few years. We plan to accelerate investments in alternative service points (such as workstations and cargo shipping containers), which have become more important with the increase in e-commerce and especially with the pandemic process.

We are also making investments in our IT infrastructure and in courier handheld terminals to have instant access to data and further increase our efficiency. We have already rolled out the mapping and GIS infrastructure. We have launched the courier route optimisation project to handle the increasing address and data operations. By optimising routes to ensure customer-centric process transformation, we will improve our operational processes while providing better information sharing and demand flexibility to our customers as part of a dynamic workflow. In addition, we have created the most appropriate infrastructure for the proper management of daily transaction volumes as well as for additional employment during periods of high shipment volumes. When completed next year, the system will always determine the most optimal route depending on road conditions, allowing us to deliver our customers' shipments even faster with the most accurate exchange of information.

One of our most important investments made this year was the optimisation of our call centres. We have increased our call answering capacity by 2.5 times through a systematic reorganisation of our call centre. We also enabled the voice response system for questions related to shipping information, such as "Kargom Nerede (Where is My Shipment)", which accounts for a large proportion of calls, so that our customers can access this information quickly and without the need for a customer representative. We will continue our investments in this direction.

Another very important investment theme is distribution. We are working on new distribution models. We want to differentiate and expand our self-service applications to speed up the collection processes and make the increasing market activities more efficient. We are preparing our infrastructure studies on delivery points and smart boxes related to alternative distribution models. We will be ready to implement them after receiving the competent regulatory authority's statement as well as its approval.

What would you say about Turkey's current situation with regard to foreign investment?

Turkey represents an attractive, dynamic, strong and growing market. We are confident in Turkey's potential and wish to continue our investments. The increase in our shareholding in Aras Kargo proves the determination of our strategy to grow in selected markets. The cargo shipping and transport sector, which has great potential for development in the long term, is facing significant challenges in the short term. However, we believe that the potential of the sector in which we operate is very high. As Aras Kargo, we will continue our activities with the aim of further strengthening the brand's dynamic position in the market with our global experience in the shipping sector and investing in customer-oriented solutions for the company.
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