The GCC’s largest e-commerce platform after Souq.com, Wadi.com, is pursuing a unique approach to its logistics arrangements in the region as it bets on greater consolidation in the regional online retail scene. According to Pratik Gupta, co-founder of Wadi.com, major expansion is imminent for the e-commerce market, which has until now been held back by a lack of reliable customer service.
“Anyone who executes e-commerce the correct way in the next couple of years can get into the big league,” Gupta told a local paper in an interview in June. “This geography is not the same as anywhere else so you have to be diligent. I expect the next five years to be a roller coaster for e-commerce. It will be great for the customer, then I believe consolidation will happen.”
Unlike most e-commerce platforms, which focus on the UAE market and use it as a springboard into Saudi Arabia, Wadi.com has put the kingdom front-and-centre in its logistics network, recognising the country’s clout as the largest consumer market in the Middle East.
It was also no coincidence that a high-profile Saudi investor saw enough in Wadi’s business model to commit to a fairly substantial exposure. The Al Tayyar Travel Group played the lead investor’s role in a $67m (AED246m) funding round in early 2016, just one year after the platform was launched by a three-person team focussed on opportunities in Saudi Arabia and the UAE.
“That investor coming in made us a very Saudi-focussed company – there was less competition as well,” says Gupta. “We did not want to get into a lot of things and burn up a lot of money... fortunately we got investors who understood that.”
One of these co-founders is Kanwal Sarfraz, alongside Ankit Wadhwa and Pratik Gupta. According to Sarfraz the company’s Saudi-centric approach to its business has paid dividends.
“Today we process close to one million SKUs (stock keeping units) per month from over 2,000 international brands including Apple, Samsung, Lacoste and Hugo Boss and have a large network of our own delivery system for better customer experience across these cities run by more than 200 delivery vans and drivers.”
There have of course been challenges in pursuing a strategy that many others avoid. “Recently we have been facing challenges in KSA, with the ability to ship goods to KSA from other countries, delays in KSA customs, and lack of address systems in the country,” Gupta explains. “We are working with the KSA government on advanced geo mapping technology to overcome these challenges to better service our customers in KSA.” But Wadi is confidently ahead of its rivals in cross border trade.
Customer as king
User experience is the core focus for Wadi.com. “We found that the regional ecosystem left a lot to be desired. We wanted to bring levels of service that Amazon in India and Flipkart were offering,” explains Gupta. “There was a basic contradiction in the levels of smartphone penetration and internet usage, which is among the highest in the world, and yet e-commerce levels were very low – the opportunity was massive.”
Sarfraz adds that customer experience is at the core of Wadi’s 2017 plan, with an aim to achieve efficient, around-the-clock deliveries. “We have a large network of our own delivery systems across the UAE and KSA, run by more than 150 delivery vans and drivers,” she says, adding that, because Wadi.com is a retailer as well as a platform for other third party traders, they’re selective about whom they work with.
“Wadi.com aims to be the e-commerce site with the broadest range of products available, connecting our customers to the best vendors in the UAE and Saudi Arabia, with the best deals available,” she explains.
Because efficiency is the primary focus of an e-commerce platform, more than 80 percent of orders are delivered by its own delivery network. About 20 percent is done by third-party logistics.
“Wadi.com currently caters to the KSA and UAE markets, and to ensure consistent distribution we established warehouses and distribution centres in the UAE and KSA. Our warehouses and centres are in the range of 1,000 tonnes per 50,000 sq ft depending on the city of operation,” says Sarfraz.
And the company has more than 15 of these centres servicing in more than 25 cities in KSA and the UAE alone, out-gunning even the likes of Souq.com, whose purchase by Amazon.com was primarily to take control of its significant e-commerce logistics infrastructure in the region. According to Sarfraz, this level of logistics penetration for Wadi.com has been possible through its own delivery and partnership with third-party logistics.
“In the e-commerce market, we have the most competitive logistics set up in terms of speed of delivery, percentage of delivery, cash remittance and cost to company, allowing Wadi.com to serve customers better at lower costs with lower working capital requirements.”
A consolidating marketplace
The Middle East e-commerce sector in its entirety is smaller than the annual turnover of Amazon alone, and yet is home to hundreds of e-commerce players. According to Sarfraz and Gupta, e-commerce players need to play to their strengths or risk absorption by a larger brand.
There were hundreds of e-commerce players when Wadi.com started but most were not specifically customer-focussed and missing key opportunities and as a result the majority have either folded or merged with other platform in a spate of M&A activity since the $580m acquisition of Souq.com by Amazon.
Rocket International, the German tech incubator was Wadi’s main backer at start-up. There was a high-profile exit from Namshi in May when it was 51 percent acquired by Emaar Malls for $151m.
Noon.com, the late-out-of-the-gate market platform announced by billionaire Dubai businessman Mohamed Alabbar, bought Jadopado.com for an undisclosed fee at the beginning of May. Alabbar also acquired a large stake in Middle East Venture Partners (MEVP) in May.
Majid Al Futtaim, the region’s biggest mall owner and operator, also joined the digital party, taking an equity stake in fetchr, a Dubai-based logistics delivery company, as part of a $41m funding round for the company that was started only four years ago. Mobile taxi app Careem, the region’s only unicorn with a $1bn valuation, also added another string to its digital bow starting Careem Box, following a similar model to fetchr.
While this M&A activity has increased local competition, with larger brands competing for ever-larger pieces of a growing pie, Wadi.com isn’t concerned. “We are attracting regional and global attention,” says Gupta. “Many international companies have looked at us because the region is such a fertile ground for growth. We have a brilliant business team with 80 percent of our inventory from third-party vendors.”
Industry experts agree, predicting that Wadi will be the next company to be snapped up by a tech giant. As always, the lesson is that there is real value in getting the fundamentals right.
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