Complex Made Simple

The e-commerce battleground between Noon and shifts to Saudi

In May 2017, Mohamed Alabbar, Founder of the new e-commerce marketplace Noon that recently went live in Dubai, said that he was creating a permanent base in Saudi and that the plan would be carried out at the end of 2017. However, before this happens, the successful businessman had a trick up his sleeve.

Alabbar announced that Noon was investing in building a new era of Saudi youth entrepreneurship in partnership with the Public Investment Fund (PIF), owner of 50 per cent of the $1bn e-commerce platform, with the other half financed by Alabbar himself.

Not only has Noon catered to the objectives of the 5-year National Transformation Plan 2020 and Saudi Vision 2030, which will witness a new generation of tech-savvy Saudis launch themselves into investor-friendly business opportunities, but it banked on the very essence of today’s entrepreneurship needs: rushing to the World Wide Web to do business, reach new markets and stay tuned to the latest business trends, gadgetry and styles.

Read: Why is Etisalat a good deal for Noon and vice versa?

Success and nothing less is expected from a man whose enterprising portfolio speaks for itself, but that only sets the stage for the digital battle ahead.

Is this the first salvo being launched?

Noon’s initiative

On the sidelines of the recent Future Investment Initiative in Riyadh, Alabbar said that Noon was a customer-focused Arabic-first digital marketplace “born in Saudi Arabia,” for the region, by the region and in the region.

“We are excited to launch operations in Saudi Arabia shortly. Noon delivers on the goals of Saudi Vision 2030 with an innovative digital enterprise that is underpinned by strong public-private sector partnerships and a focus on creating high quality jobs and business opportunities for young Saudis. It also supports the development of the Saudi small and medium enterprises, another objective of the national transformation plan announced by His Royal Highness Crown Prince Mohammed bin Salman.”

Faraz Khalid, Chief Executive Officer of Noon, said: “We share our data insights with Saudi retailers to help them expand their market reach and enhance the customer experience. Noon is investing in delivery infrastructure and technology to bring a world-class shopping experience to customers in Saudi Arabia.”

A Noon release said that it would have an array of products covering fashion, beauty, fitness, sports, technology, games and a wide collection of modern gadgets and electronic goods.

Battle lines

Saudi is no UAE when it comes to online shopping, but the size of the Kingdom makes it seem as if the two countries have similar e-shopping purchasing strengths.

The UAE retail market is forecast to grow from Dh207.6 billion ($56.4bn) in 2016 to Dh219.3bn ($59.6bn) in 2017, according to Euromonitor International. Research data from global consultancy firm AT Kearney suggests that online sales in the UAE will be worth up to $10bn by 2018. Josh Holmes, a consumer analyst at market researcher BMI, told Reuters in October this year that online sales in Saudi Arabia are expected to surge to $13.9bn by 2021 from a projected $8.7bn this year.

Read: Let the battle begin: how plans to fight Amazon

Reuters said in October that a race for dominance would take place in Saudi against Dubai-based, which is acquired by Amazon this year and already present in Saudi Arabia.

It’s a fight pitting Alabbar’s Emaar Malls and Aramex delivery service, boosted by ownership stakes in Namshi and JadoPado online marketplaces, against Amazon’s might as the world’s biggest online retailer.

Challenges and potentials

The Saudi market cannot rely on delivery addresses, because they aren’t as well defined as those in Dubai.

This very fact will make WhatsApp’s location sharing crucial for Saudi, as it comes to the rescue of e-retailers, whose key success factors usually revolve around not only price, innovation and availability but also efficient and timely delivery of purchased products.

Reuters said that less than half the population owned credit cards and that “e-commerce businesses often have to offer cash on delivery, which increases their risks.”

Read: Could Noon launch be ecommerce game changer?

On the brighter side, and in line with Alabbar entrepreneurship aims, with half the population of Saudi comprising of young people who are digitally adept, smart-phone connected and social media active, the online platforms are hoping to tap into the same people who drive the change forward.

A.T. Kearney says that the Gulf region’s e-commerce market is expected to grow to $20 billion by 2020.