Analysis: Pet retailers in the Gulf adapt operations to rising costs and supply chain uncertainty

The conflict in the Middle East between Iran and the US is already affecting the pet sector in the region, with a decline in foot traffic to physical stores and disruptions to the logistics chain.

At the same time, e-commerce giants like Amazon and logistic carriers such as FedEx have imposed fuel surcharges on sellers in different markets.

Change in consumer behavior

Dubai-based pet retailer Pet Corner reported disruption in operations starting from March, marked by a temporary shift in customer behavior, logistics routes and sourcing strategy.

“Many consumers moved more quickly to online shopping, while footfall in brick-and- mortar stores softened by around 30%, with demand translating more strongly onto digital platforms,” Owner and Co-Founder Sidarth Mahindra tells GlobalPETS. To adapt to this new situation, the company expanded its 15-minute delivery offering to 20 locations.

According to Mahindra, unexpected categories reported a surge in sales, such as travel carriers approved by the International Air Transport Association (IATA). “Once considered slow-moving inventory, it suddenly became highly sought-after as customers relocating from the UAE needed compliant travel solutions for their pets.”

Other retailers, such as Pet Zone, have experienced a trend toward bulk buying, especially in essential supplies. In a conversation with GlobalPETS, CEO Fawaz Alenzi says that they also saw an uptick in their e-commerce platforms.

Supply chain implications

In terms of the supply chain, Pet Corner saw a double effect in negotiations with partners. “While some suppliers revised credit terms and moved to advance-payment models, others stepped forward with greater flexibility and support, reinforcing the value of long-term collaboration,” adds Sidarth Mahindra.

Additionally, the company has no visibility into when some of its containers currently at sea, carrying pet supplies and food, will arrive at warehouses. “This has created pressure on planning, replenishment and forecasting,” Mahindra states.

Facing the same problem, Pet Zone had to move from a standard procurement model to a “more aggressive, high-buffer inventory strategy,” Alenzi explains.

“Maritime transit times for international shipments have extended by several weeks. We have significantly increased our ‘safety stock’ in our regional warehouses. While some niche items face sporadic delays, we are prioritizing essential nutrition to ensure availability remains steady for our customers,” he says.

Regional opportunities

To deal with disturbances, both retailers have begun exploring alternative supply routes and regional partnerships within the Gulf Cooperation Council (GCC) region, formed by Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.

“We have had businesses in Qatar, Bahrain and Saudi Arabia reach out to us as distributors to help support them with stock via road transport,” Mahindra from Pet Corner says.

Pet Zone’s CEO made the same decision to reduce reliance on long-haul transit, but says reliance on road transportation has increased operational costs.

Financial support measures

To address the crisis, the Dubai government announced an AED 1 billion ($272M/€231M) support package for the economy, starting in April.

This includes the postponement of fee collections by the government and an extended customs clearance grace period, which grants importers and exporters extra time to complete customs formalities without penalties.

“The recent economic support measures, together with the Central Bank’s resilience package to strengthen financial stability and liquidity, sends a strong message of reassurance to the private sector,” Mahindra concludes.

On 17 March, the Central Bank of the UAE (CBUAE) launched a plan comprising 5 pillars to promote easier access to reserve balances, improve liquidity, temporarily release capital reserve obligations and provide flexibility in loan ratings for clients affected by extraordinary circumstances.

Amazon imposes additional fees

As an indirect consequence of the conflict, some online merchants will face extra costs overseas.

Amazon announced a 3.5% fuel and logistics surcharge for third-party sellers in the US and Canada using its fulfillment services, scheduled to take effect from 17 April. The extra charge will also affect clients of remote fulfillment services from the US into Canada, Mexico and Brazil.

From 2 May, the surcharge will be extended to sellers using the Buy with Prime and Multi- Channel Fulfillment options. In a note to sellers, Amazon said the decision followed “elevated costs in fuel and logistics,” which had “increased the cost of operating across the industry.”

According to the e-commerce giant, the surcharge will be, on average, $0.17 (€0.14) per unit for US products, and CAD 0.26 ($0.18/€0.15) per unit for Canadian supplies. The final amount will vary according to size and dimensions.

Similarly, the multinational carrier FedEx announced a temporary surcharge effective 10 April. The company justifies the ‘demand surcharges’ by citing elevated volumes, high demand for capacity and increased operating costs across its network.

Pressure on margins

According to Akash Bedi, Group Rotating CEO and CEO for North America, the Middle East and India at H&H Group, this will create a “modest but meaningful” pressure on margins in the short term, especially if it persists over the next few months.

“The impact is more pronounced in categories where fulfillment costs already represent a high percentage of revenue, such as pet food, including dry kibbles, wet cans and larger pack sizes,” Bedi tells GlobalPETS.

The CEO explains that while manageable in isolation, this additional cost adds to broader pressures stemming from the volatile situation. For instance, he says that inbound costs rose from 10% to 30% over the past 4 weeks across nearly all categories.

The company, which owns brands such as Zesty Paws, will first try to offset higher costs through operational efficiencies. “To mitigate this, we are working closely with our marketing and commercial teams to drive a more favorable product mix, which we expect will help offset a significant portion of the impact,” he adds.

Akash Bedi adds that Amazon’s fulfillment network is a critical part of the company’s strategy due to its scale and speed. “Amazon represents a significant portion of our overall sales mix and remains a key growth driver due to its customer reach and fulfillment capabilities.”

The health and nutrition firm is also investing to diversify its channel mix with direct-to- consumer options, social commerce and offerings in other marketplaces.