PHOTO
21 May 2017
The imminent launch of Noon.com will pitch Saudi Arabia’s state investment fund and a prominent Dubai tycoon against the might of Amazon in a battle for preeminence in the Middle East’s rapidly growing e-commerce sector.
High levels of disposable income, as well as widespread smartphone adoption, will enable the region’s relatively undeveloped online retail industry to have a market size of $20 billion in 2020, up from $5.3 billion in 2015, according to consultants A.T. Kearney.
Amazon, which in March agreed to buy Dubai-based Souq.com for an undisclosed amount, has both first mover advantage regionally and the parent firm’s incredible global scale in its favour, while Noon.com has already missed its target launch date of January 2017.
Mohamed Alabbar, chairman of Dubai’s Emaar Properties, the majority owner of sister firm Emaar Malls, last November unveiled plans to partner with Saudi Arabia’s Public Investment Fund (PIF) to launch Noon.com with an initial investment of $1 billion.
At the time, Alabbar said the platform would be operational within about two months, but in May said it would now launch by year-end, a delay that may indicate the fledgling site is finding the industry tougher going than it had imagined.
“For the first two years at least, we do not see Noon.com creating the buzz expected,” Hassan Munir, chief creative officer at a Dubai-based marketing and advertising company ExtraCake P.R.A told Zawya in an interview last month.
“While stepping into the business of e-commerce in the region, Alabbar not only took it as being an easy task, but he also triggered a debate by his own retailers, who frankly, at this point, are not doing so well in the market.”
Alabbar does bring expertise of local retail - such knowledge was key to Alibaba’s success in China versus giants such as eBay, according to Ayub Ansari, a senior analyst at Bahrain’s Securities & Investment Company (SICO).
Yet Alabbar’s experience is largely through Emaar Malls and so lacks a true regional track record.
Noon will soon move its operational base to Saudi Arabia, which may make it tougher to attract international talent to work for the company. However, Alabbar said in May the move to the kingdom would allow “an excellent opportunity to bring into the organisation some of best new young Saudi talent working in this field”.
An Alabbar-led investment vehicle bought a 16.5 percent stake in Aramex last year in a move seen as trying to harness the Dubai-based courier’s transport and logistics capabilities to support his e-commerce venture.
Another Alabbar fund has also acquired UAE e-commerce site JadoPado, while he plans to set up a high-end Middle East online retailer with Italy’s Yoox Net-a-Porter after acquiring 4 percent of the European company for $113 million last year. Alabbar’s Adeptio also bought Kuwaiti food manufacturer Americana in 2016.
“Cross linkages, given Alabbar's exposure to Emaar Malls, Aramex and even Americana, provide plenty of scalable opportunities for Noon,” said SICO's Ansari, who believes Noon.com will likely be a formidable competitor to Amazon, given that the entity is backed by deep pocketed investors who can sustain it through a loss-making start-up phase.
Big deal move
Amazon acquired Souq, the Middle East’s No.1 online retail platform, in what was labeled as “the biggest-ever technology M&A transaction in the Arab world” by Goldman Sachs.
Alabbar’s Emaar Malls had made a last-minute $800 million counter offer, while Amazon at one point quit negotiations with Souq, which was eyed by other potential suitors, including eBay and Dubai-based mall and retail group Majid Al Futtaim, according to a report by The National newspaper in January. Amazon winning the takeover battle spells trouble for Noon.
“Amazon has access to a global supply chain that runs the whole way from East to West, from China to New York, and that is why I think Noon does not have any leverage over Amazon,” Nabil Alnoor Borhanu, president of venture capital firm Graphene Ventures told Zawya last month.
“Even for retailers with bigger regional experience (than Alabbar) like Alshaya in Kuwait or Alhokair in Saudi Arabia for example, Amazon has a larger leverage simply because it looks at the whole globe.”
Dubai’s government endorsed Souq’s sale, with the crown prince saying the deal demonstrated the emirate’s status as a regional and global hub for the global organisations.
However, Graphene Ventures’ Borhanu offered a note of caution.
“Although I liked Amazon’s movement, I question why the governments did not protect their market until they have a strong local player, and then let Amazon come in, especially with the government of Saudi Arabia involved in Noon,” said Borhanu. “It looks like as if you have a new baby and all of a sudden you bring him a big brother.”
© Zawya 2017
The imminent launch of Noon.com will pitch Saudi Arabia’s state investment fund and a prominent Dubai tycoon against the might of Amazon in a battle for preeminence in the Middle East’s rapidly growing e-commerce sector.
High levels of disposable income, as well as widespread smartphone adoption, will enable the region’s relatively undeveloped online retail industry to have a market size of $20 billion in 2020, up from $5.3 billion in 2015, according to consultants A.T. Kearney.
Amazon, which in March agreed to buy Dubai-based Souq.com for an undisclosed amount, has both first mover advantage regionally and the parent firm’s incredible global scale in its favour, while Noon.com has already missed its target launch date of January 2017.
Mohamed Alabbar, chairman of Dubai’s Emaar Properties, the majority owner of sister firm Emaar Malls, last November unveiled plans to partner with Saudi Arabia’s Public Investment Fund (PIF) to launch Noon.com with an initial investment of $1 billion.
At the time, Alabbar said the platform would be operational within about two months, but in May said it would now launch by year-end, a delay that may indicate the fledgling site is finding the industry tougher going than it had imagined.
“For the first two years at least, we do not see Noon.com creating the buzz expected,” Hassan Munir, chief creative officer at a Dubai-based marketing and advertising company ExtraCake P.R.A told Zawya in an interview last month.
“While stepping into the business of e-commerce in the region, Alabbar not only took it as being an easy task, but he also triggered a debate by his own retailers, who frankly, at this point, are not doing so well in the market.”
Alabbar does bring expertise of local retail - such knowledge was key to Alibaba’s success in China versus giants such as eBay, according to Ayub Ansari, a senior analyst at Bahrain’s Securities & Investment Company (SICO).
Yet Alabbar’s experience is largely through Emaar Malls and so lacks a true regional track record.
Noon will soon move its operational base to Saudi Arabia, which may make it tougher to attract international talent to work for the company. However, Alabbar said in May the move to the kingdom would allow “an excellent opportunity to bring into the organisation some of best new young Saudi talent working in this field”.
An Alabbar-led investment vehicle bought a 16.5 percent stake in Aramex last year in a move seen as trying to harness the Dubai-based courier’s transport and logistics capabilities to support his e-commerce venture.
Another Alabbar fund has also acquired UAE e-commerce site JadoPado, while he plans to set up a high-end Middle East online retailer with Italy’s Yoox Net-a-Porter after acquiring 4 percent of the European company for $113 million last year. Alabbar’s Adeptio also bought Kuwaiti food manufacturer Americana in 2016.
“Cross linkages, given Alabbar's exposure to Emaar Malls, Aramex and even Americana, provide plenty of scalable opportunities for Noon,” said SICO's Ansari, who believes Noon.com will likely be a formidable competitor to Amazon, given that the entity is backed by deep pocketed investors who can sustain it through a loss-making start-up phase.
Big deal move
Amazon acquired Souq, the Middle East’s No.1 online retail platform, in what was labeled as “the biggest-ever technology M&A transaction in the Arab world” by Goldman Sachs.
Alabbar’s Emaar Malls had made a last-minute $800 million counter offer, while Amazon at one point quit negotiations with Souq, which was eyed by other potential suitors, including eBay and Dubai-based mall and retail group Majid Al Futtaim, according to a report by The National newspaper in January. Amazon winning the takeover battle spells trouble for Noon.
“Amazon has access to a global supply chain that runs the whole way from East to West, from China to New York, and that is why I think Noon does not have any leverage over Amazon,” Nabil Alnoor Borhanu, president of venture capital firm Graphene Ventures told Zawya last month.
“Even for retailers with bigger regional experience (than Alabbar) like Alshaya in Kuwait or Alhokair in Saudi Arabia for example, Amazon has a larger leverage simply because it looks at the whole globe.”
Dubai’s government endorsed Souq’s sale, with the crown prince saying the deal demonstrated the emirate’s status as a regional and global hub for the global organisations.
However, Graphene Ventures’ Borhanu offered a note of caution.
“Although I liked Amazon’s movement, I question why the governments did not protect their market until they have a strong local player, and then let Amazon come in, especially with the government of Saudi Arabia involved in Noon,” said Borhanu. “It looks like as if you have a new baby and all of a sudden you bring him a big brother.”
© Zawya 2017
