Posted on Tuesday, May 31st 2016
According to a PayPal report, the e-commerce market in the Middle East was expected to be worth $15 billion in 2015, with about 10% of the transactions occurring on mobile devices. Another report from Payfort put the value of the e-commerce sector in the Middle East at $7 billion in 2015 and projected that the industry would be worth up to $10 billion in the UAE and Saudi Arabia by 2020. Souq.com is a leading e-commerce company in the Middle East that has recently joined the Billion Dollar Unicorn Club.
Often called the Amazon of the Middle East, Dubai, UAE-based Souq.com was founded in 2005 by CEO Ronaldo Mouchawar, Jabbar Internet Group’s Samih Toukan, and Hussam Khoury. It was initially an auction site that was linked to the Arab Internet portal Maktoob. Following Maktoob’s acquisition by Yahoo! in August 2009, Souq.com was spun off as part of Jabbar Internet Group. Then in early 2011, Souq.com pivoted to a marketplace with a fixed price model. In late 2011, it launched its retail division.
Today, it is the largest e-commerce vendor in the region, featuring about 1 million products across 31 categories such as consumer electronics, fashion, health and beauty, household goods, baby clothes, watches, and perfumes. It has over 45 million visits per month. It operates both as a retail site and as a marketplace for third party sellers, and it has a network of over 75,000 traders. It offers a convenient and safe online shopping experience with online payments, option to pay cash on delivery, and free returns.
It has commercial offices in Egypt, Kingdom of Saudi Arabia, and Kuwait and a technical and development center in Jordan. It employs over 2500 people including several expatriates from the US who have worked at eBay, Yahoo!, and Procter & Gamble.
While Souq.com follows the Amazon model, it has had to adapt it to address the two main challenges of payment and delivery. Credit card usage is not common throughout the Middle East. It has therefore created a prepaid card that can be purchased in brick and mortar stores for cash and then can be redeemed online. The company also owns its own payment gateway called Payfort, which has been a way to get merchants selling online not just on Souq but elsewhere too. In future, the company plans to take Payfort into offline payments, potentially with point-of-sale services.
Another huge challenge is the lack of a dependable logistics infrastructure or mail service, or in some locations, the lack of any address system. Souq.com has tackled this challenge by developing its own local delivery system, investing in logistics companies, and coordinating with local couriers.
Souq.com does not reveal its financials, but reports suggest that its turnover hit AED500 million ($136 million) in 2014 and it expected to hit AED1 billion ($270 million) in 2015.
Souq.com is venture funded and has raised a total of $425 million from investors including Tiger Global, Naspers, Standard Chartered Private Equity, Baillie Gifford, MENA Venture Investments, and International Finance Corporation. In February 2016, it closed a funding round of over $275 million (AED 1 billion) that valued it at $1 billion. An earlier round in March 2015 for $ 75 million had valued it at $577 million.
The new capital will be used to continue building out its business in the region by investing in technology, scaling its marketplace operations, launching new product categories, and recruiting the best talent.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
This segment is a part in the series : Billion Dollar Unicorns
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