E-commerce site Namshi is set for major regional expansion after securing US$20m in financing from JP Morgan Chase and Blakeney Management, one of the company’s founders has revealed.
The site - which sells shoes and clothing in the Middle East - was founded less than a year ago, and earlier today confirmed the multi-million dollar new investment.
"This investment is a turning point," Muhammed Mekki, a former executive at consultancy McKinsey & Co, who founded Namshi with partners Louis Lebbos; Hosam Arab; and Faraz Khalid, said in an interview with Arabian Business.
"It shows the commitment of some of the biggest names in international finance to the potential of this region and positions Namshi as the engine driving that sector's success," the 29-year old Iraqi American added. "All eyes are on Namshi now, the horse that has been backed. We have a responsibility to prove to other investors that this is an attractive growing and lucrative market."
Among the Gulf states, the UAE leads the way in e-commerce spending with sales reaching about US$2bn in 2010, according to a study by Visa and Interactive Media in Retail Group International. The UAE's online spending equated to 55 percent to 60 percent of total GCC e-commerce sales last year. Saudi Arabia was the second largest market, with an estimated US$520m, followed by Qatar (US$375m), Kuwait (US$280m), Bahrain (US$175m) and Oman (US$70m), according to the study. Total online spending by GCC consumers is estimated to be between US$3bn to US$3.5bn. The number of internet users in the region grew to 18.7m in 2010 from 1.2m in 2000.
"I think it's high time for ecommerce to take off in this region," Mekki said, adding "it's a well educated region that has a proven retail market".
Namshi, which went into full operation in January of this year, has over 100 employees. The capital injection will help the company expand its operations particularly within Saudi Arabia, its fastest growing market, and also increase its product selection, Mekki said.
The company launched a TV campaign that aired on satellite channels across the region, which was instrumental in helping it gain visibility, he added.
"We started the business in the UAE, then we expanded to the GCC, after which we started to see growth especially in Saudi Arabia, but post our television campaign we've seen the Saudi orders overtake other geographies and we expect that trend to continue," Mekki said.
The company has a dedicated version of its platform for Saudi Arabia, the largest market in the Arab world, and intends to invest in developing its interface with customers.
Saudi Arabia's economy grew 6.8 percent last year, the fourth fastest growing market in the Middle East and North Africa after Qatar, Iraq and Kuwait, according to the International Monetary Fund. The kingdom's economy is expected to grow by about 6 percent this year, the IMF estimates.
"We expect to invest more to educate the market on e-commerce," Mekki said.
"The value is providing our customers with the broadest selection available with [the] highest level of convenience," he added. "You can shop simultaneously on our site and view 400 brands and 10,000 styles and compare these to one another instead of going from boutique to boutique in a mall, and we will deliver anything you choose for free to your home."
Mekki declined to say whether the business model of the company envisioned an initial public offering.
"Right now we are committed to building the biggest and best running e-commerce business in the region and what comes of that we are open to all options," he said. "We are focused on building this business and are thrilled by the extra fuel this funding has given us."
The investment in Namshi is a vote of confidence in entrepreneurs and e-commerce businesses in the region, Fadi Ghandour, CEO of Aramex, the largest courier company in the Middle East, said in an interview with Arabian Business following the announcement.
"It's a substantial amount, there are very few companies in the region that have gotten US$20m other than Maktoob," Ghandour said.
In 2009, Yahoo!, which runs the second-most popular internet search engine, agreed to buy Arabic-language internet venture Maktoob.com, the largest portal in the Arab world, for about US$165m. In June, Thomson Reuters bought for about US$40m online finance and business portal Zawya, which aggregates content on the MENA region, provides proprietary research to its users and has a partnership with Dow Jones Newswires.
The investment in Namshi "sends a very clear message that e-commerce is happening in the region, that there are investors who believe in it and serious people that are building that business in the region," Ghandour said.
"As an angel investor and as the CEO of Aramex and a company that does a lot of services for the e-commerce industry, I can tell you the industry is growing substantially, and is one of the last few unconquered markets," Ghandour said. "This is our biggest growing business in the express business today. the express business in the Arab world would be growing in single digits and because of ecommerce its growing double digits now. It's a vote of confidence, big time."
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