It started when Amazon acquired Souq. In March 2017, Dubai’s Emaar Malls made an $800 million offer for Souq.com, which was considerably more than what Amazon was to pay for Souq. The problem for Emaar Malls was simple: Souq’s management had signed an exclusivity agreement with Amazon. Souq is a pioneer in Middle East e-commerce. It created a marketplace that offered sellers and buyers from the Middle East the opportunity to purchase products without having to purchase products via cross-border e-commerce. The prize for both Souq & Emaar Malls is simple: a market that is growing at 23% and is forecast to be valued at $69 billion by 2020. Prior to Souq’s acquisition, the Middle East provided investors with one of the last opportunities to invest in a market that could generate sizable returns as no market leader existed.
Alabbar starts acquiring and investing to counter the Souq disappointment
One has to remember that Souq and for that matter, e-commerce, places Emaar Malls in a difficult situation. Customers are slowly spending less time at shopping malls that are owned and operated by Emaar Malls. The opportunity to acquire the market-leading marketplace Souq made total sense. When Souq became a part of Amazon’s global assets, it became apparent that Emaar Malls and Mohammed Alabbar realized that they need a competitor that is owned by Emaar Malls to impact the growing Middle Eastern market.
An investment fund that is managed by Mohamed Alabbar acquired Jadopado, a then-competitor to Souq. Keep in mind that this transaction occurred within a month of missing out on Souq. Jadopado shut down its website and placed a message that “it has been acquired by a large regional business.” According to Wamda, Jadopado said in a blog post on May 11: “The Jadopado team will be moving into executing great new work, and this, unfortunately, means that we’ll be closing down the Jadopado marketplace as well as Jadopado hotcake.” The level of initial secrecy for the Jadopado transaction makes it clear that Alabbar and Emaar Malls felt that they need to act swiftly.
Two weeks after acquiring Jadopado, Emaar Malls acquired 51% of Middle East fashion platform Namshi from Rocket Internet’s Global Fashion Group. It is worth noting that according to TechCrunch, Namshi said that it was profitable in 2016 on revenues of 555 million UAE Dirham, equivalent to $151 million which happens to be equal to the price paid by Emaar Malls for its majority share in Namshi.
In late July, Alabbar led two investor groups in buying a combined 16.45% stake in Dubai-based courier Aramex. Aramex is the dominant logistics business in the Middle East and thus the investment makes sense as for any large e-commerce business it needs reliable logistics partners.
In late 2017, Emaar Malls unveiled its most ambitious business, Noon.com. Noon.com has, according to Reuters, $1 billion in funding from Saudi Arabia’s Public Investment Fund (PIF) and other private investors. Noon.com was 50% owned by the Saudi sovereign wealth fund, while the other 50% was owned by Mohamed Alabbar and other regional private investors, which he declined to identify.
Noon.com is being aimed at being a homegrown, Arabic-first marketplace that offers customers in the Middle East with a real competitor for Souq. Keep in mind that Emaar Malls acquired a 100 million-Euro stake in Yoox Net-a-Porter in 2016. While the Yoox Net-a-Porter agreement precedes the heavy investment into online commerce, it would not be a stretch to believe that Yoox Net-a-Porter gives Noon.com access to high-end fashion, something that Souq does not have in large amounts. Noon.com is essentially a sum of all parts of the Emaar Malls investments.
In early 2017, Noon.com entered into a strategic agreement with Saudi-Arabia’s United Electronics Company (eXtra) to have access to consumer electronics and home appliances brands such as Samsung, LG, Sony, Braun, Kenwood and Moulinex. This specific partnership is indicative of Emaar Malls’ close partnerships with the local Middle East retail community. In middle December 2017, Noon.com opened in Saudia Arabia.
In the middle of 2018. Noon.com partnered with eBay to offer customers in Saudi Arabia and the United Arab Emirates a way to more easily buy products online from the U.S. and other parts of the world. According to Logistics Middle East, Noon will now fulfill all eBay orders made via Noon and deliver the purchases to customers in the Middle East. This means less shipping costs and faster delivery, according to Noon. The eBay partnership can be attributed to Souq starting to provide customers access to millions of international products that are shipped via Amazon’s logistics networks.
Adding auctions and groceries to Noon’s offering
In April 2018, Arabian Business reported that Noon would be adding auctions to its platform. It is worth noting that auctions failed on Souq.com and could provide customers with access to lower-priced products based on auction bids and Noon.com’s partnering with local retailers.
In August 2018, Arabian Business reported that Noon.com was looking for a partner that could enable it to offer groceries to customers in the Middle East. Souq has been offering groceries to its customers since October 2016 and also invested into a startup that is focused on groceries.
Is Noon.com making any kind of an impact on Souq.com?
A look at SimilarWeb data paints a picture that shows just how dominant Souq is in the Middle East. The data shows that for June 2018, Souq.com had 78x more visitors than Noon.com. While both companies use mobile apps and marketplace websites, it is clear to see why Emaar Malls would want to offer Noon.com as a part of Dubai Square (the new super mall that is being built in Dubai). It is very important to note that while Noon.com has only been trading for less than a year whilst Souq.com has been around since 2005.
Spending and investing heavily can grow a business fast but a marketplace that has a 12-year head start on its leading competitor is a very difficult mountain to climb for a new marketplace
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