Noon.com is going to battle to grow market share in the Middle East ecommerce market. Amazon purchasing Souq.com might be one of their more prudent acquisitions and have huge long term upside for Amazon and Middle East customers. Noon.com is yet to launch and seemingly are going to struggle to catch up to Souq.com.
Troubles at Noon.com
In hindsight one can now understand why Emaar Malls bid $800 million to acquire Souq in the midst of the Amazon acquisition talks. As a mall operator that has a dominant business in the Middle East and online platform like Souq could have negative future impact for eMaar Malls. What Emaar Malls did not bargain on is that the shareholders of Souq.com would ultimately sell to Amazon for $580 million. One of the most underrated elements of Amazon’s impact on global ecommerce is their ability to negotiate fair pricing for the businesses they acquire.
Souq, led by its founder, Syrian entrepreneur Ronaldo Mouchawar, fills an important geographic gap for Amazon. The e-commerce company sells nearly 2 million products — books, electronics, toys, home products, and more — to customers in countries such as United Arab Emirates, Egypt, and Saudi Arabia.
The domain experience that the Souq team has is not to be undervalued and thus it is obvious to see why eMaar Malls would want to purchase the business at a significantly higher price.
Joining the Amazon family will enable us to drive further growth, benefit from their technological investment, offer an even wider product selection through worldwide sourcing, deliver an enhanced customer service experience, as well as continue Amazon’s great track record of empowering sellers locally and globally.
eMaar Malls purchases other MENA assets to boost Noon.com
eMaar Malls then started to use their financial clout to acquire other businesses to power their Noon.com platform. Noon.com is ultimately a way for eMaar Malls to stay relevant as ecommerce becomes a bigger part of MENA retail. Noon.com is ambitious, it has no ecommerce fundamentals but has significant financial investment competence.
Funds that are linked to eMaar Malls acquired JadoPado and ensured that the startup shut down without too many details about its future being made public.
In a statement to Reuters May 11 it was announced that Jadopado’s acquisition, which was announced on May 2, was by a tech fund led by the Emaar Properties chairman Mohamed Alabbar.
In an email to Wamda Jadopado’s CEO Omar Kassim said: “We’re incredibly excited to exit to what is fast shaping up to be the region’s most exciting digital and ecommerce play. Mohammed Alabbar’s vision to make digital a cornerstone of his future strategy led us to believe that this was the right call and will help propel our business to the next level.
Soon after that they acquired a 51% stake of Rocket Internet’s Namshi. The fashion business in the Middle East has huge growth potential and thus Rocket Internet selling 51% in an asset that was profitable (the other assets inside the Global Fashion Group has been making losses) indicates their model clearly. Build an asset to value and then sell it to other investors. I suspect that in due course we will see eMaar Malls buying the remaining shares in Namshi and then exiting the Global Fashion Group.
Global Fashion Group (“GFG”) has announced today a strategic partnership with Emaar Malls (DFM: EMAARMALLS), the shopping malls and retail business majority-owned by property developer Emaar Properties.
Under the partnership, Emaar Malls will acquire a 51% stake in Namshi, the leading online fashion retailer in the Middle East, for a consideration of USD 151 million including investment in the company for its future growth, with GFG retaining the remaining 49%. This partnership will accelerate Namshi’s development in the region and allow it to continue to flourish as the region’s pre-eminent fashion e-commerce destination.
The reality is that whilst these acquisitions went on, the public was led to believe that Noon.com’s launch was imminent. According to my own notes, we are still waiting for the public launch of Noon.com, 8 months after the initial press buzz about Noon.com.
The acquisition of JadoPado lead to the team behind the business getting leadership roles inside Noon.com.
Omar Kassim, the founder of JadoPado, has left his senior role at Noon.com only weeks after it acquired the online marketplace. “I just didn’t know how deep the problems ran,” said Mr Kassim, referring to the deferred launch of Noon, which was first announced by Mr Alabbar in November as a US$1 billion joint venture with the Saudi government and a string of private investors. It was originally slated to launch in January with 20 million products on its platform.
So Noon.com has laid off staff, has been burning capital and are not yet launched publicly.
Amazon/Souq.com accelerate into the distance
It was by my count 3 weeks after the transaction closing that customer could log in on Souq.com with their Amazon credentials. Customers are now able to purchase Amazon private label products on Souq.
Amazon has begun selling products to UAE consumers through the recently-acquired Souq.com, as the world’s largest retailer takes its first steps toward creating an online shopping culture in a country still dominated by bricks and mortar retail.
Earlier this week Souq announced that they acquired the remaining shares in Wings.ae after an initial investment into the business.
SOUQ.com today announced it has entered into a definitive agreement to purchase Wing.ae, a marketplace for merchants and couriers in the UAE, providing innovative mobile and web-based user-friendly delivery solutions for businesses and individual consumers. SOUQ.com previously invested in Wing.ae and will be acquiring 100% of the company.
As the days become months, Souq.com is driving their considerable advantage in Middle East ecommerce further. Noon.com has to battle a company that has ecommerce expertise, understand local customer habits and also have various shipping options available. Noon.com has an enormous distance to try and catch up to the definite market leader.