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Fri 25 Nov 2016 01:49 AM

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High Noon: Alabbar's plan to conquer e-commerce

Backed by a Saudi sovereign wealth fund, Mohamed Alabbar is set to transform the region’s e-commerce market with the launch of Noon.com. He tells Arabian Business how he plans to conquer and dominate an industry that will be worth $70bn within the next decade.

High Noon: Alabbar's plan to conquer e-commerce

Mohamed Alabbar is in a hurry. We are in the lobby of The Armani Hotel, and he is busy fidgeting with his iPhone. “I have so much to do, it’s absurd. I have to get a flight to London in a few hours, and I haven’t booked it yet. It’s my daughter’s party, and I haven’t organised a cake yet. And I am hungry. Anyway, give me a minute.”

He is back on his iPhone. About two minutes later, to be precise, he is all smiles again. “Job done. Everything sorted. Flight booked. Cake delivered. Food on the way. You see, this is the world we live in today. This is the future. This is the digital world.”

And it is a world that Alabbar is about to turn upside down, before promising to again turn it all upside down in another six months. Welcome to Alabbar’s new dawn, his game-changing world of e-commerce.

If game-changing sounds familiar, it’s probably because we have been here before with Alabbar. He helped turn Dubai Aluminium Company into a world beater. His stint at the Dubai World Trade Centre helped put Dubai on the global stage. His Malaysia-based Tradewinds Corporation re-invented real estate in South East Asia. His Singapore-based RSH did the same for the retail industry in that region. And then of course, Emaar, the company he built from scratch into one of the world’s greatest property developers, giving us the Burj Khalifa and Dubai Mall along the way.

But if you thought Alabbar was about to start writing his long-awaited memoirs, think again. There is at least one more chapter to come, and it is a big one. Arguably the biggest yet. Two weeks ago, he announced the launch of his e-commerce venture Noon, with $1bn of financial backing — half coming from Saudi Arabia’s Public Investment Fund, with the remaining 50 percent owned by Alabbar himself and a group of GCC investors.

When it goes live in January 2017, Noon will have 20 million products to sell - ten times more than Souq.com, the current biggest regional player. Fashion, food, fast cars — you name it, within months it is anticipated that Noon will stock just about every product you can think of — and a fair chunk more than the 15 million of total products on sale in Dubai’s biggest malls.

“Any vision to change the world necessarily has to be big. A quantum leap cannot be small. When Alibaba was launched, Amazon was already a large public company. That didn’t stop Jack Ma [Alibaba’s CEO] from dreaming big. Today they are the largest e-commerce company in the world, and Amazon is almost non-existent in China,” Alabbar says.

Mohamed Alabbar launched the “game changing” Noon e-commerce platform at Dubai Opera, alongside son Rashid.

He adds: “We all know digital is the only way to go, this is the future. We are not exit people that are putting the money in and after three years asking ‘what is my exit strategy?’

“What is our exit strategy? It is that we are going be large, sophisticated, dedicated, long-term and go public one day,” he says. “I can sum this all up in one word: dominate. That is the only thing we are going to do.

“With what we have done in our lives and the people and the capital and the markets, there is only one way to go. What is stopping us? Do you know anything stopping us? We are going to dominate and the region will be ours.”

Alabbar isn’t short of confidence, charisma and cash — but the numbers also add up very much in his favour. 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. 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.

The company has created its own payment gateway, a wholly owned e-commerce platform, while its after-sales service, Alabbar says, “Will go above and beyond anything seen here”. Sources suggest Noon will have its own repair centre for products, meaning brands like Apple that are purchased and faulty can be fixed by Noon rather than customers facing delays incurred by returning products to the brand. It is also likely that Noon will steal a march on delivery times, with same day delivery for its premium service.

Given this is a region where each person spends an average of four hours a day on smartphones, uses them 150 times a day and sends 40 WhatsApp messages a day, there is no shortage of demand and accessibility.

Alabbar says: “We are starting on day one with 20 million products but our plan is to get to 100 million. Initially it will be the popular consumer items such as fashion, electronics, books, and so on, though the range will keep growing.”

By the latter part of next year, although Alabbar won’t confirm, it is possible that perishable foods will be added to the list.

Still in real estate, Alabbar is also building The Tower at Dubai Creek Harbour.

“This region has one of the youngest populations in the world, with 50 percent below 25 years. Internet penetration, usage of smartphones and per capita income are all high; the region is all but ripe for an e-commerce revolution,” Alabbar says. “But we still have people buying online from Amazon US and UK even though they have to wait for a long time for delivery. Countries like the USA, China and the UK have an e-commerce penetration of 15-18 percent of retail but it is negligible in the Middle East. Local giants have emerged in e-commerce around the world, like Alibaba in China. Why should it be any different in the Middle East?”

Although the official launch was just two weeks ago, the pace of Noon’s growth has been astonishing. Alabbar and his core team, which is now 200 strong, have been working flat out on the project in secret for 18 months. Fodhil Benturquia became CEO in August 2015. long before anyone had the slightest idea that Alabbar was venturing into e-commerce.

Benturquia launched MarkaVIP and worked for Souq.com in Saudi Arabia for five years, and like much of the core team has an impressive track record in the industry.

And absolutely nothing is being left to chance. You want fashion items? Through his family holding operation Alabbar Enterprises, he has a 4 percent stake in YOOX Net-a-Porter (YNAP) — the global online giant that owns six multibrand websites including Net-a-Porter.com. Don’t be surprised to see the two of them partner up soon for Noon. His son Rashid already owns the highly successful website SIVVI.com, which sells clothing and accessories from 130 high street brands.

You want the best delivery system? Alabbar Enterprises has taken a 16.5 percent stake in Aramex, and the Dubai-based courier will be an integral part of the ecosystem. New technologies that Aramex is testing on 2 million customers are likely to be rolled out in full for Noon.

You want food? Alabbar recently completed a $2.4bn takeover of Americana, which owns the Middle East franchises for food chains including KFC and Pizza Hut. Watch out for a Noon tie-up there.

Fodhil Benturquia has secretly led Noon’s development.

He is even planning to launch his own messaging service to compete with WhatsApp, and has taken a majority stake in the Diwan Group, the region’s largest multi-channel network (MCN), which has 20 million subscribers to its video channels and 600 million viewers a month. Through Diwan, a talent agency for social influencers will also be added. With the influencers on the books (and their own reach of over 50 million people), it means Alabbar can kiss goodbye to the days of needing a $30m marketing budget. For a fraction of the cost, his influencers will do the work for him.

Right now, the Middle East has only one technology firm valued at over $1bn, which is Souq.com, estimated to be worth around $1.3bn. Come January when Noon goes live, the region will have two, and Souq.com will be the distant second.

Alabbar says Noon could list on the stock market “in around five to seven years”. If he does, that already looks like being the IPO of the next decade.

There is a case to be made for Noon being worth more than $20bn on day one. Is it? Alabbar says: “That’s one way to interpret it. Having said that, our focus is not on valuation, but on serving our customers and on reinventing their shopping experience with a massive and relevant selection of products. For us, the valuation is merely an output of our customer-centric vision and execution.”

One of the biggest economic benefits of Noon for the region will be job creation. An estimated 11,000 delivery drivers are likely to be on the payroll in Dubai alone, with thousands more in the GCC.

Alabbar was a lead investor in two investor groups that bought into Aramex.

“Launching a large e-commerce platform also has a positive impact in the job market through creating new job opportunities for the youth and those at grassroots level,” he says. “This will create a lot of jobs, especially in Saudi Arabia — in advertising, marketing, and deliveries. But far more importantly, and I think this is very significant, is that Noon will be a great platform for small to medium sized enterprises. They can come to Noon and get access to millions of customers. This will effectively, by increasing their sales, actually create a huge number of jobs in the offline retail sector.”

If anything, Alabbar’s growth forecasts could be conservative. One of the biggest global e-commerce success stories has been the UK, where the online share of retail trade is already a massive 17 percent (and around 12 percent in the US). One of the main reasons for the UK’s success, experts argue, is the construction of huge warehouses outside major cities that have brought down delivery times to under a day. This rings a bell with the Noon model of mega warehouses, with delivery times expected to be around the same. 

That said, the UK is also forecast to see a change in the offline market, with many major shops eventually becoming “brand experiences” rather than places to actually sell goods. Rather ironically, as chairman of Emaar, Alabbar is also spearheading the construction of Dubai Creek Harbour, which will be three times the size of Downtown Dubai. With 11.2 million square metres of retail space, it is fair to assume that there will be a decent number of shops and mega malls located there. So isn’t he shooting his offline retail plans in the foot by launching Noon?

He says: “The reality is we live in two worlds. If e-commerce is 5 percent of total retail or even 20 percent of total retail, total retail is increasing anyway. A successful organisation has to be successful on retail and digital. We believe that if we want to sustain our physical retail business, it has to be complemented by a venture like this. Large-scale retail destinations — by that I mean malls — if they are not customer focused with merchandise technology and customer experience then they will fail,” he says.

So will Dubai Creek Harbour be a different kind of shopping experience? Intriguingly, he says: “We are humans and humans have needs. We need to go out, we need to socialise. On the Creek we are building a completely different animal. You will never see one piece of marble or granite. You will see a lot of digital and a lot of social places — oh, and by the way there will be some shops there. The physical will always be there, but we need to reinvent it. The digital is the future.”

Alabbar Enterprises own 4 percent of YOOX Net-a-Porter. (YNAP).

As we end our meeting, Alabbar’s food arrives.  He says: “I’m so sorry, I completely forgot to ask – did you want something to eat? It’s only a click away.”

Come January, Noon, its 20 million products and a seminal moment in the digital revolution, will also be only a click away.

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