The changing e-commerce landscape in the MENA region

E-commerce has long since enjoyed the top spot for startup rankings in the Middle East and North Africa, as venture capital investors have been investing in e-commerce businesses across the region. This is not surprising, as e-commerce is often one of the first waves of startups in any emerging market, along with logistics and transport startups.

Since roughly a decade ago, however, the regional e-commerce ecosystem has seen a massive transformation. Initially, we saw the rise of ‘broad’ e-commerce platforms like Souq, which offered a wide variety of goods – from laptops and games to make-up and clothing, everything is available on these platforms.

Just five years after its launch, in 2017, Souq was acquired by international competitor Amazon for $580 million, and in the same year, another ‘broad’ e-commerce platform was launched by Mohamed Alabbar, the chairman of Emaar Properties: Noon. The venture was initially launched in order to capture the quickly growing e-commerce market in the MENA region, including a pledge of $1 billion funding by investors including the Public Investment Fund (PIF) in Saudi Arabia.

The move was not without reason. According to consulting company Bain & Company, the e-commerce market in MENA reached $8.3 billion in 2017, and has been growing at a staggering rate of 25% annually. Within MENA, the GCC and Egypt account for 80% of that market, growing even quicker at 30% annually.

However, there have been shifts in the focus of the e-commerce market. While Souq, now Amazon, and Noon, the aforementioned ‘broad’ e-commerce players, still account for a large part of the regional market, there has been a rise of more niche e-commerce players, both internationally and locally.

One of the niche industries that has seen a particular increase in the number of players is fashion and beauty, with international brands such as Yoox Net-a-Porter and Farfetch aggressively expanding into the Middle East, and local startups such as Namshi and The Luxury Closet being set up to cater to the same market.

When it comes to niche e-commerce platforms, they are doing exceedingly well. The Luxury Closet recently closed its $11 million Series C and announced its acquisition of Guiltless, effectively expanding to Hong Kong. Mumzworld, is the largest e-commerce platform catering to mothers in the region. While Sprii, another e-marketplace for mums has become one of the top 10 most funded startups in the region H1 2019.

The ‘broad’ e-commerce players have not been sitting idly by, however, as they see the need to innovate in order to retain their competitive advantage. Both Souq, now Amazon, and noon increased the number of products available on their platform in order to more effectively compete with the niche players.

Amazon, through the launch of its brand-name store in the UAE and its global store in Saudi Arabia, aims to increase the number of products available to the consumers, by allowing access to ones available from the US. It also introduced Prime membership to its customers which has become widely popular in the country.

On the other hand, Noon has partnered with eBay, the American e-commerce giant, with which noon promises to make new products more convenient for Middle Eastern shoppers. Moreover, while Amazon announced its Prime service in the UAE, Noon quietly made delivery free for all its shoppers, with a minimum spend of AED 1 currently.

Aside from the increase in products, the platforms have looked to partner with international entities in order to improve their product offerings as well. For example, this week Noon announced its partnership with Chinese technology company Neolix to trial driverless delivery vehicles designed to make last-mile delivery even smoother.