We are sitting in the new Address Boulevard hotel in Downtown Dubai, yet another iconic building that is the brainchild of Emaar chairman Mohamed Alabbar.
“I wish I was 30 years old; I would control the region,” he says. But for once, Alabbar is not talking property. With Federico Marchetti, the CEO of the world’s leading online fashion retailer Yoox Net-a-Porter Group (YNAP) beside him, the two men are busy carving out a plan to conquer the world of e-commerce.
So far it is going pretty well. In April last year, Alabbar Enterprises, his private entity, took a 4 percent stake in the group for $112m. Seven months later, Alabbar’s Symphony Investments (part of Alabbar Enterprises) signed a joint venture agreement with YNAP to create what they hope will be the undisputed leader for online luxury retail in the Middle East. Symphony, which is chaired by Alabbar’s son Rashid, holds a 40 percent stake in the venture, with Marchetti’s group controlling the rest.
All this is happening while Alabbar puts the final touches to his mega e-commerce platform Noon.com, a $1bn venture that is 50 percent funded by Saudi Arabia’s Public Investment Fund (PIF). Last year, Alabbar also led two investor groups that took a 16.45 percent stake in Aramex.
“This is the industry of tomorrow. It’s where the growth is, it’s where the action is, and that’s why we are doing this,” Alabbar says.
And when it comes to serious action in e-commerce, there are few better people to partner with than Marchetti.
The 48-year-old Italian started his Yoox Group in 2000, becoming the very first player in the online e-commerce market. After merging with the Net-A-Porter Group in 2015, he heads an empire with a an unrivalled client base of more than 2.5 million high-spending customers, 27 million monthly unique visitors worldwide and combined 2015 net revenues of $1.9bn.
The group has offices and operations in the US, Europe, Japan, China and Hong Kong and delivers to more than 180 countries around the world.
But this region is where Marchetti really wants to be: the Middle East region accounted for 3 percent of global luxury consumption in 2015 and is expected to significantly outpace the growth of the global personal luxury goods market over the next five years.
The region boasts one of the highest gross domestic products (GDP) per capita worldwide, a particularly high concentration of high-net-worth individuals and a promising e-commerce landscape, driven by a young and mobile-friendly population, growing internet penetration and public investments in IT, e-services and telecoms infrastructure.
Marchetti says: “From our perspective, we see Middle East and China as our highest growth markets. But the Middle East is still a young region. When I started in 1999 I was the first one and I know there are many advantages to being the first one. By 2020 the market for luxury online fashion will, we forecast, be worth around $20bn, so there is a huge growth opportunity.”
The joint venture (JV) with Symphony will manage all of YNAP’s existing multi-brand online stores in the region - Net-A-Porter, Mr Porter, Yoox and The Outnet. The new company will operate throughout the GCC but may eventually expand beyond, including North Africa.
A local office is being set up with staff now being hired, and a new distribution centre is being built in Dubai, which will allow for same day deliveries. Both the local office and distribution centre are due for completion this year, with products from Yoox and The Outnet going live in 2018, followed by Net-a-Porter and Mr Porter in 2019.
Rashid Alabbar, who helped close the deal with Marchetti, says the key is localisation.
“We have a checklist of over 100 different things we are working through. The final goal is to make the local customers feel everything is for them — the payment systems, the language, the range, the timings, cultural seasons — everything has to be localised and it will be before we go live.”
The younger Alabbar is himself no stranger to e-commerce. Back in the autumn of 2013, Salama Alabbar, his sister, launched BySymphony.com, the online extension to Symphony, a high-end boutique located in the Dubai Mall’s Fashion Avenue.
Less than six months later, Rashid founded SIVVI.com, a website that sells clothing and accessories from 130 high-street brands mainly to customers in the GCC.
Both brands fall within the portfolio of Alabbar Enterprises, which also runs a variety of retail and food and beverage concepts across the Middle East, Africa and Asia.
Apart from his role as chairman, Rashid Alabbar also has the unwritten role of guiding his father on the latest trends in the industry.
Mohamed Alabbar explains: “I’m just excited because Rashid guides me, these guys think differently and we are open to it. Some people are not. Every single morning I am learning. If you are not having fun you cannot keep pace, but I am having fun. Thanks to YNAP, we now have so much live data on who is buying what all over the world, and how it changes by the minute, by the season.
“Right now, I want to learn a lot about the beauty category. When we did our research we saw the Middle East has the highest expenditure per person in the world when it comes to beauty. This business online is absolutely flying. And then you take into account the fact that the customer that comes to us through YNAP is an amazing mix. He is the guy who’s going to buy the boat and the most expensive watch and fly first class.”
So what does the future hold for this deal? Alabbar has a knack of turning $100m investments into $1bn pretty fast. He says the potential here could be even greater, and possibly an initial public offering (IPO) further down the line, “if it makes sense to our shareholders.”
Marchetti adds: “For me we are not just doing this JV for growth, it is for profit. We both love to run profitable businesses. And a real focus will be on the mobile growth. Out of $2bn annual revenues for YNAP, around $1bn is from mobile and growing every month. The company is mobile-centric. And that share of mobile purchases is likely to be even higher in this region.”
Alabbar also has his hands full with the impending launch of Noon, now expected later this year. He says there will be no conflict as the YNAP deal will focus strictly on the luxury retail market, while Noon is a mass market platform.
“Nothing is easy, and Noon will launch when it is ready to do so. But what matters is we are going to be at the very centre of what is the fastest growing and most exciting industry on the planet right now. And there is nowhere else I would rather be than here,” Alabbar says.
Right now, e-commerce accounts for just 2 percent of total retail sales in the region, or around $3bn.
By 2025, the e-commerce market is expected to be worth a staggering $70bn a year. With Noon, YNAP, Aramex - and the small matter of running property giant Emaar - Alabbar clearly has his hands full. But you get the sense that the man who created the region’s most successful developer from scratch is about to do it all again with e-commerce.
When will Noon go live?
Just when Alabbar’s mega e-commerce platform Noon will finally launch is not clear. The original plan had been January this year, but late 2017 now looks more likely.
Putting together a $1bn e-commerce platform from scratch, and launching 20 million products on that platform has been no easy feat.
Noon’s CEO Fodhil Benturquia departed the company in April following delays to the launch, and other staff have also left after the company’s operational base was moved to Riyadh — where 50 percent shareholder Saudi Arabia’s Public Investment Fund (PIF) is based.
“Following the launch of Noon, our permanent operational base will be in Riyadh, and we are currently scaling up our resourcing and operations there. This allows us an excellent opportunity to bring into the organisation some of best new young Saudi talent working in this field,” Alabbar said recently.
In a statement to Bloomberg, Noon said: “Due to the shift in our operational base and the need for even greater efficiencies, there have been nominal staff reallocations and changes.”
As to when exactly it will launch, Alabbar said: “It is vital that all our systems and processes work at the highest possible level. The coming months will be spent to ensure this, particularly with some of the many supply chain innovations we have been developing.”
Noon is building the world’s largest warehouse to store its products, adjacent to Dubai’s second airport, Al Maktoum International. It will be the size of 60 football pitches. Similar centres are planned in Saudi Arabia and later across the region, as Noon launches first in the UAE and Saudi Arabia before moving across the Middle East.
There is more to come...
Is there anything Alabbar is not involved in? Last week Middle East Venture Partners (MEVP) announced that Mohamed Alabbar had acquired a large stake in the firm to create one of the leading venture capital investment platforms in the MENA region.
MEVP is one of the largest venture capital firms in the MENA region with an established track record by co-founders Walid Hanna, Walid Mansour and Rabih Khoury.
Together with Alabbar, MEVP will partner with emerging local champions to help grow them into enduring regional businesses. This is part of Alabbar’s strategy to boost the region’s digital economy and follows a series of innovative tech initiatives led by him.
Alabbar said: “I am delighted to acquire a stake in MEVP and to partner with its established VC investment team on this long-term journey of discovering the region’s future innovators and tech entrepreneurs. While preserving MEVP management’s operational independence, we will extend support to young and emerging digital entrepreneurs with growth capital, strategic advice and operational support, and help them grow into sector leaders, regionally and beyond.
“We are privileged to be building the future of the digital economy in a region that has all the fundamentals for success. The venture capital sector will take the lead in preparing the region’s businesses to evolve and remain relevant through this digital transformation.”
MEVP founder and managing partner Walid Hanna added: “We are honoured to be part of Mohamed Alabbar’s wider plans for the region’s digital sector, as his venture capital technology investment partner. This is an exciting day for MEVP and is a testament to our unique ability and proven track record in identifying and funding MENA market leaders.”
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