As part of its strategic expansion in the Middle East, iHerb opened a 323,000 square foot fulfillment center in Riyadh, marking a major shift towards localized operations within the Kingdom of Saudi Arabia. Built in partnership with CJ Logistics, this temperature-controlled facility is designed to reduce delivery times across the Kingdom and the wider MENA region.
In this interview, iHerb Chief Financial Officer Michael D. Cody discusses the financial rationale behind the investment, the strategic importance of Saudi Arabia in iHerb’s global footprint, and how localization, logistics partnerships, and consumer trust support the company’s long-term growth goals in the region.
iHerb chose to build its fulfillment infrastructure in Saudi Arabia rather than continuing across borders. What are the financial and strategic considerations in this decision? Why is it a good long-term investment?
The Middle East and GCC region is very important to our business. This is one of the largest regions we sell to. Considering the volume, it makes sense for us to be local. We hope that by being closely connected to the local area, we can make our customers happy. We have confirmed that deliveries that previously took 5-7 days now arrive in 1-2 days and are working as planned. This is reflected in our growth and long-term strategy to stay close to our customers and provide them with a better experience. This allows us to understand what our customers want and tailor our product assortment more locally. We work with trusted partners like 3PL provider CJ Logistics to build the facility and we provide the inventory. It’s an operational fit.
Global e-commerce is all about speed. How does having inventory closer to your customers in Saudi Arabia change your logistics approach, including delivery times, customer experience, and scalability?
Delivery time has been cut in half. Home to almost a third of the country’s population and thus the majority of our business, Riyadh offers the fastest possible delivery. This means it could even be the same day that we get better at this area. It may take 1-2 days and 2-3 days in MENA region. This is a huge improvement in customer experience. It also improves shipping efficiency and is better for the cost ecosystem, as larger shipments can be delivered to fulfillment centers than if shipped directly from the US.
Ahead of peak wellness demand in the region, what market signals and trends give you confidence in iHerb’s trajectory in Saudi? How are you balancing long-term strategy with short-term operational efficiency?
The wellness trend is growing all over the world, and it’s gaining popularity here as well. Because Saudi Arabia’s population is so young, health and awareness have become more important. The influencer-driven economy is good for wellness. In terms of long-term and short-term strategy, we hope to get on board with this trend early on, and we see significant growth ahead. We already had a great sales base here. This creates a better operating model.
In a category where trust, quality, and reliability are non-negotiable, how does iHerb ensure fast delivery without compromising product integrity? What does this fulfillment center reveal about its blueprint for expanding globally while operating locally?
Trust is the biggest value proposition in everything we do. Other marketplaces are operated by third-party sellers. There is no guarantee of authenticity. We purchase directly from the manufacturer. Step 1 is genuine. The second thing is that we take care of it very well. For example, probiotics may be real, but they are useless in the heat. It’s essentially just a powdered pill. Air conditioning at the center is important, and if possible we will even manage it in your home. There is also an expiration date. Therefore, customers can receive it and be satisfied. That is our customer’s suggestion. iHerb is a better option.
How can you support operational excellence while maintaining financial discipline by leveraging your partnership with CJ Logistics?
CJ Logistics has been our 3PL partner since Korea’s first international fulfillment center. They are a large global company and we operate on great experience and trust. If a problem arises, we will be open and honest about it and help you resolve it. That’s something we value as partners, and it goes both ways. Financially, they have the resources to build better warehouses and deploy robots. We have nine warehouses and hundreds of warehouses around the world. They have the ability to leverage that kind of skill and scale. When you combine that with our product capabilities, it’s the perfect match.
How will a fulfillment center in Riyadh strengthen Saudi Arabia’s role as a regional logistics hub for both local and MENA-wide markets?
We’re in that zone early on, so we have to deal with the problems that come with it. It took longer than expected, but we are in a very good place now. This will create momentum for more companies to set up in this zone. The area will become stronger and stronger. The company’s expansion will help Saudi Arabia further develop its role as a logistics hub for the region, and indeed the world. We want to be at the forefront of that. Hopefully we will open more buildings here.
How does iHerb view this investment as a reflection of Saudi Arabia’s long-term strategic vision 2030 and the potential of global e-commerce?
We were one of the first companies to invest in Saudi Arabia as a leading logistics hub, and now other companies are building around us. Vision 2030 focuses on attracting continued investment to the Kingdom. We are glad to have our valuable customers here. Saudi Arabia has been very open and welcoming, which has led us to this point. We are contributors and others will follow suit.
On that note, could you also feature more locally made products on your website?
That’s probably the next evolution. We call this local sourcing. This means looking for local products that are relevant to your area. We have approximately 50,000 products, not all of which work in all countries. We want to find a more relevant and customized selection of products, not just for the Kingdom, but for the region as a whole. This will allow us to grow faster and once again contribute to Vision 2030. This will help everyone else understand what’s possible here.
