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Fri 15 Dec 2017 04:58 PM

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Opinion: regional e-comms just got more competitive

Souq launched the Amazon Global Store a day before Noon went live in Saudi, as both retail players compete in the fast-growing industry

Opinion: regional e-comms just got more competitive
Heating up: competition is in full gear in the region’s e-commerce industry.

Another week, and more proof that the GCC’s e-commerce industry is booming. A study by consultancy firm AT Kearney revealed the industry is estimated to reach $20bn by end of 2020, from just $5.3bn in 2015. But already, retailers are going head-to-head, and fast. Last Monday, Souq.com launched the Amazon Global Store on its website, allowing customers to access over a million new products from the American giant, which acquired Souq for $580m in September. Co-founder Ronaldo Mouchawar (interviewed on page 41) tells Arabian Business there is “much more to come”, hinting at plans to introduce Amazon’s various concepts to the region, such as subscription service Amazon Prime and Kindle e-reader.

Just a day after the Souq announcement, Mohamed Alabbar’s Noon.com went live in Saudi Arabia, where it is headquartered and backed by the Saudi Public Investment Fund. Noon is not his only investment in this space. After a failed attempt at acquiring Souq, his firm Symphony Investments acquired 40 percent in Italian fashion retailer Yoox Net-A-Porter last year. It is now setting up local operations for Yoox, The Outnet, Net-A-Porter and Mr Porter in the UAE.

But Alabbar did not stop there. In the same month, he bought UAE e-commerce website JadoPado and 51 percent in Dubai fashion retailer Namshi. Let us not forget about Sivvi.com, his son Rashid Alabbar’s online fashion website, which launched in 2014.

Into this space comes a rush of other operators. Chalhoub Group, which distributes the world’s most luxurious brands from Dior to Prada, has moved a lot of its operations online, while family-owned group Al Tayer has launched e-retailer Ounass. The government’s Dubai Airport Freezone Authority (Dafza) and Wasl Asset Management Group revealed a $735m joint venture to launch Dubai CommerCity, an e-commerce free zone close to Dubai International Airport, in order to help fuel the market. It will stretch over 2.1 million sq ft.

Behind the websites, sits a vast logistics operation which is vital to the success of any ecomms venture, for whom success depends on fast delivery and a seamless user experience. On page 12 Kushal Nahata, CEO of FarEye, outlines the many innovations that will reshape the sector in 2018. This includes leaps in capability for data management, cloud solutions, the rise in third party experts and artificial intelligence (AI).

Our cover subject, Shailesh Dash, founder and chief executive of Al Masah Capital, raises money and builds businesses across multiple sectors. Unsurprisingly he is looking at logistics as an especially promising space. In his interview on page 20, he says the sector will ‘explode’ due to the sudden rise in e-commerce. By 2022 to 2024, he thinks it will be “three times its present size”.

He does, however, issue a warning: although everybody is trying to get into the segment, “only the best will survive”. This is, after all, a complicated and expensive industry to be in.

Perhaps the most encouraging thing about all this is the healthy business ecosystem it is creating for start-ups in the region. Mouchawar may be lauded now, but in the early days he struggled to get investment and doesn’t want promising new players to face the same obstacles. “We have a lot of innovation in the region. That’s what we do and what we invest in,” he says.

Mouchawar has wasted no time in investing in the region’s youth either, where 30 percent are unemployed, according to the 2017 Arab Youth Survey. In September, he acquired Dubai logistics service Wings.ae, to help provide faster shipping, and it worked: sales doubled during Souq’s White Friday promotion on November 22. Both Souq and Amazon have posted new jobs since the acquisition in September, he also says, with more opportunities set to come up.

“Our sector is set for massive growth,” Mouchawar says of this growth.

“A lot of new opportunities are being posted, we’re getting a lot of bright, young people from the region, and we’re going to continue to look for them.”

It is without question, then, that regional e-commerce, and all the backend support that comes with it, is a sector to watch out for. Or, if you have a million or two to invest, a sector worth watching closely next year.

Arabian Business: why we're going behind a paywall