Can one man build an entire business ecosystem? Probably not, but Ronaldo Mouchawar has done his fair share of building. And we are not talking about bricks and mortar. The co-founder and chief executive of Souq.com created what is now the Arab world’s largest e-commerce platform, and this was in 2005 when online shopping was almost non-existent in the region.
His story is similar to Amazon’s billionaire founder Jeff Bezos, who acquired Mouchawar’s Dubai-based firm in September for $580m. And both are moving fast. Souq last week announced the launch of Amazon Global Store on its website, offering over a million products from the American giant.
In a meeting with Arabian Business at his Dubai offices, shortly after the announcement was shared on Souq, Mouchawar is evidently excited, pointing to a stack of product boxes behind his desk that he has spent all morning checking. He is undoubtedly a hands-on leader, and this approach has served him well, having secured a large cut of the region’s e-commerce market, years ahead of giant players such as Emaar chairman Mohamed Alabbar, who launched his much-awaited competitor Noon.com in October.
But Mouchawar has got his hands on something even more significant: promising regional start-ups.
Growing start-ups on Souq
In September, Mouchawar acquired Wing.ae, a Dubai-based e-merchants logistics service that helps provide faster shipping. And it worked. Souq’s recent White Friday sales doubled compared to last year’s November 22 event.
“If you look at the Wing acquisition, we wouldn’t have been able to do what we did on White Friday if we did not have more courier companies help us deliver the massive number of products we sold,” he says. “Wing’s technology enabled its couriers to serve Souq customers and merchants. It was a perfect fit, and we will continue to look for young and bright people.”
Mouchawar is fulsome in his praise of the region’s innovators, and says this is the key to success in his business. “You need the entrepreneurs, people who are passionate about solving problems. That’s what we do and what we also invest in.”
To this end, Mouchawar has also invested in InstaShop, an online grocery delivery app, which is a growing category on Souq’s platform, and online generally.
While the aquisition of start-ups undoubtedly complements Souq, in terms of product offerings and technical or logistical support, it is the established website that offers start-ups a space to grow – and quickly.
“We’re a marketplace, so we allow a lot of smaller companies to grow. As we grow, they grow,” Mouchawar explains. “When we double on White Friday, they also double; it’s our sale as much as it is their sale. We have seen these companies scale from five to 10 people. The type of ecosystem around the thousands of merchants is very exciting.”
Funding an ecosystem
Last year, Aramex founder and Wamda Capital chairman Fadi Ghandour said investing in early stage start-ups is a crucial part of building a healthy business environment in the region. He urged investors to put their money in regional ideas, telling Arabian Business, “There are thousands of start-ups, but if we don’t fund them then we don’t have an excuse if our ecosystem is failing. When the investors from South Africa came for Souq, it is because Souq were not able to find funders here.”
Ghandour was referring to the South African-based internet and media group Naspers, which had a 36.4 percent stake in Souq before selling it to Amazon this year. He went on to say that Aramex also struggled to find regional funding, because investors in his own backyard didn’t believe in Aramex. “The minute I went public, investors said, ‘Oh, now you’re eligible for investment.’”
Someone was certainly listening to Ghandour. Today, Mouchawar provides start-ups with the funding he did not find in the region. And e-commerce is the perfect fit. The co-founder argues it is much easier to operate an e-commerce business than it is a traditional bricks-and-mortar store, especially with Souq as a platform, since it provides marketing, distribution and cash on delivery, solving many pain points for entrepreneurs.
“A lot of people do create products, but sometimes it’s hard to enter the traditional retail market because it’s expensive to rent stores. And sometimes the cast cycles don’t work for those entrepreneurs, because they have to place products in the stores in advance and they get paid quite late. In e-commerce it’s faster, more efficient and you can start with a lot less capital,” he says, most of which goes into the development of technology.
Back to bricks
Many of the biggest Middle East retailers are moving into e-commerce with the new wave of digital, including luxury fashion distributors Chalhoub Group and Al Tayer, with the latter launching its multi-brand site Ounass in December last year. International players are also looking to grab their share of the market, with Mr Porter, part of the Yoox Net-A-Porter Group, already localised in the region as part of its joint venture with Alabbar and his firm Symphony Investments, which owns 40 percent of the group’s shares.
Fashion has particularly boomed in e-commerce, despite taking a longer time to popularise. “People thought fashion is a category you have to touch, feel and wear, but as brands speed up innovation, you start to know your size and you get comfortable shopping online. The speed of how fast brands can go from inception to distribution is so much faster, and the whole online platform gives you unlimited choices,” says Mouchawar, who has seen significant uptake in the category on Souq.
With the launch of the Amazon Global Store, he expects the numbers to grow significantly. The storefront, only available in the UAE at the moment, allows customers to browse in Arabic or English, pay in dirhams and choose from two delivery options: priority (two to five business days) and expedited (six to ten business days).
Interestingly, however, Souq still sees regular footfall in its ‘customer experience centre’ on Sheikh Zayed Road, where buyers can check products and pick them up if they do not wish to wait for extended deliveries during events such as White Friday.
Retail veterans such as Patrick Chalhoub, co-chief executive of Chalhoub Group, have long argued that e-commerce and bricks-and-mortar go hand-in-hand. “It always reminded me of the cinema and movie theatres, where you had your television but you also wanted to go to the movies to have an experience,” he told Arabian Business in August this year. “The good sign is that the Amazons and Apples of this world are opening retail stores, so it goes both ways.”
More e-commerce brands are indeed turning to physical shops. UK-based fast fashion e-retailer Missguided opened its first store in London in 2016, followed by another one in Dartford this year. Men’s luxury fashion website Mr Porter also opened a pop-up shop in London this September to celebrate the release of the Kingsman film for which it had done a special collection. While that store is temporary, it is one of several examples that show how online and physical stores may very well be complementary, eliminating the either/or argument.
Mouchawar agrees to an extent, claiming a lot of customers like to pick up their products, especially in Saudi Arabia, where Souq has multiple pick-up locations. He says the experience centre on Sheikh Zayed Road is a way for him to find out if the customer wants a proper, traditional store, and he doesn’t reject the idea of adding Amazon Global Store products in the centre. “If it’s something customers want, it’s not difficult to do,” he reasons.
Arab youth employment
As for the online Amazon store launch, Mouchawar says it will expand to the rest of the GCC and Egypt, but is not ready to specify dates. However, he does mention a possible return to his hometown Aleppo. “We were just talking about some of the pictures on the wall,” he says, pointing to framed photos of Syria. “And we discussed the rebuilding of the country. There were a lot of good technology programmers and engineering schools in Syria. It’s a talent that we have all over our region.”
Mouchawar remains optimistic that “anything we did there before could be done again once things calm down. It would be in everyone’s interest for the people around us to do well,” he adds.
While he may not be able to return to his country for the time being, he is lending a hand to youth elsewhere in the Arab world, where unemployment rates are as high as 30 percent, according to the 2017 Arab Youth Survey. Both Souq and Amazon have posted new jobs since the acquisition in September.
“Our sector, especially, is set for massive growth. A lot of new opportunities are being posted, and we’re getting a lot of bright, young people from the region, and we’re going to continue to look for them,” he says.
Amazon’s technology should speed that process considerably. Mouchawar’s Souq now has the means to expand the e-commerce ecosystem for everyone. And that is just what the region needs.
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