Middle East Online Marketplace Slowly Taking Shape

eCommerce has become a natural part of life in many parts of the world, but that hasn’t been the case in the Middle East. Most of the region’s eCommerce traffic is coming from a single country: the U.A.E. There are myriad barriers to wider acceptance, and though they’re starting to break down, change will likely come slowly. There are, however, positive trends afoot.

Alternative payment options stand to fuel acceptance as they alleviate customers’ fears surrounding credit cards and fraud, and domestic online marketplaces are beginning to take root.

See Wadi.com, for example, a market for consumer electronics, beauty products, jewelry and home and kitchen goods serving the U.A.E. and Saudi Arabia; Namshi.com, an apparel site selling Western fashion to customers in Saudi Arabia, Qatar, Oman, Bahrain and Kuwait; and Themodist.com, a luxury designer site catering to women who wish to dress modestly for cultural and religious reasons.

To top it all off, Amazon has bought itself a $600 million foothold in the market by acquiring the Middle Eastern and North African eCommerce platform Souq.com. But Amazon won’t get to enjoy its status as the only major online marketplace in the region for long.

There’s a new contender poised to debut, and it’s going to have a truly regional focus. Noon.com was domestically built and funded and will welcome third-party sellers, creating an unprecedented opportunity for local businesses to carve out their online niche before the competition.

The site will reportedly feature a large assortment of original products in such categories as fashion, fitness, sports, books and games. Amazon may be planning to introduce Prime to the region and develop warehouses to accelerate delivery, but Noon, too, has a “state-of-the-art fulfillment center” in the works and is also working on secure payment gateways and logistics.

All the pieces are there for Noon to give Amazon a run for its money in the Middle East. The only problem is that Noon lost a big chunk of its employees, including its CEO, in May, just months before its beta site was slated to go fully operational.

The setback was dramatic but temporary. The eCommerce platform appointed Faraz Khalid, formerly of Namshi, as CEO at the end of July, and is now saying it is still on track to launch by the end of the calendar year.

“Noon presents the opportunity to create a dynamic eCommerce platform for, by and in the region,” Khalid said. “With our local market knowledge and presence, and our focus on product authenticity, supplier value creation, superior logistics, professional service and competitive pricing, we aim to bring a transformational eCommerce experience to the Middle East.”

Look out, Amazon — them’s fighting words.

Barriers

Though the percentage is higher in some countries than others, across the region only around two-thirds of the population use the internet and/or own a smartphone, according to global management consulting firm A.T. Kearney. Only 15 percent of the region’s brick-and-mortar retailers have an online presence, and just one-third to one-half of internet users are even aware they could shop online.

Those who are aware of eCommerce are largely (60 to 70 percent of the time) paying for those purchases in cash upon delivery due to the low penetration of credit cards in the area.

The region lacks logistical infrastructure and postal codes, so packages ordered from overseas can take weeks or even months to arrive. They can be further delayed by the customs process or garner high trade tariffs. If, after all that, a man is not home to pay the cash on delivery, then the package may not be dropped off at all. Women home alone in Middle Eastern countries often do not answer their doors for men.

Then, of course, there’s the political and economic strife in the area, and navigating the legal and regulatory systems deserves a story of its own. Suffice it to say the context has not been ideal for fostering a twenty-first century tech and commerce environment.

Signs Of Success

Not all of the Middle East is like Dubai, but behavior in the big city may indicate things are moving in its direction. Young people under 30 — who make up more than half the population in most Middle Eastern countries — can be seen using smart devices around the city, and Dubai has proven itself a bit of a hub for area tech startups.

Truth be told, we’ve only touched on the biggest names in this coverage. In reality, there are thousands trying (and so far, struggling) to gain traction. But, the fact they are out there at all is good news for the market. The U.A.E. government recently tipped its hat to the sector by changing bankruptcy laws to encourage entrepreneurship.

Another good litmus test was the recent valuation of Careem, the region’s fastest-growing ride-share company, at more than $1 billion.

Finally, Amazon’s investment in Souq.com can be read as a sign of high confidence, since the American eCommerce giant generally swoops into new regions and establishes a local base of operations for its existing brand rather than working with online marketplaces that may already be there.