NOON.COM LAUNCHES IN THE UAE – BUT OUR LOVE OF THE MALL WILL ENDURE
$1 billion online marketplace goes live amid concerns from traditional bricks-and-mortar retailers
As a new US$1 billion (Dh3.67bn) online shopping platform places the UAE on the threshold of an e-commerce revolution, retailers insist malls will remain at the heart of the nation’s shopping culture for the foreseeable future.
The long-awaited launch of noon.com, a joint venture between Gulf investors and Saudi Arabia’s public investment fund, threatens to carve new definition into the UAE’s retail landscape by selling fashion, gadgets, electronic goods and homeware to rival Amazon-owned Souq.com.
Online shopping’s meteoric rise may have sounded the death knell for traditional high street outlets in Europe and other markets, but in the UAE – the consumer attraction of a trip to the mall remains as strong as ever.
“I’ve always maintained that retail trends are regional and can vary as to where the consumer is,” said Ashish Panjabi, chief operating officer at electronics chain Jacky’s.
“If you have your own online marketplace, you have to attract visitors and that can be difficult with so much competition for traffic. It is very different to being in a mall, where you can rely on people walking by.
“If you want to go shopping in Europe, typically stores are shut in the evenings and on Sundays. Here in the UAE, many retailers open to suit consumer demand.
“There is an opportunity in the UAE for online retail growth, but there is still a long way to go.”
According to international analysts Euromonitor, global internet sales were worth almost $640 billion in 2013, equating to about $90 a head. While e-commerce accounted for just 5 per cent of global retail sales in 2013, the sector has enjoyed spectacular growth since then.
In the past five years, internet sales have rocketed by 127 per cent in current value terms according to market experts. The availability of e-commerce, buying electronically via the internet, and m-commerce for mobile phone transactions, is changing consumer habits.
It has never been easier to search for value and choice at the swipe of a finger or the push of a button. With faster download speeds and increasing internet access, new online markets are opening up all the time.
Improved, reliable delivery services and secure methods of online payment have led many to turn to internet shopping as their preferred choice of buying. The shift towards mobile devices like smartphones and tablets has added further weight to the argument that shopping in person could become a dying trend.
Retailers said economies of scale that have driven the success of global online retailers such as Amazon, could stand in the way of regional growth of the new breed of internet sellers in the UAE.
“In the US, it is an area that has taken time to evolve to become an efficient and cost effective delivery market,” said Mr Panjabi.
“Companies like FedEx and UPS had the drivers and vehicles, but were not used to delivering larger items. This is why Amazon has invested in its own logistics area. The size of the UAE e-commerce market is about four million people, with those who have access to a credit card, so the only way you can get volume in this region is if you go across borders.
“In Europe, if you are shipping from Germany or Italy, you are protected by EU law. If you were shipping from Arizona to New York, you are protected by US federal laws.
“You don’t have that protection when shipping from the UAE to Saudi Arabia, so there is more consumer risk.”
Opening hours are also less restrictive in the UAE, with bigname retailers opened for 24 hours or until the early hours of the morning during Eid and Ramadan to capture an engaged consumer market.
Samiha Mortan, a Canadian living in Abu Dhabi, said no online revolution would change her shopping habits.
“I don’t like to stay at home,” said the 60-year-old shopper at Abu Dhabi’s Marina Mall.
“When you are not working, what can you do? You go here or Starbucks.
“Many people in the Emirates go to the mall when the weather’s not so good.”
Despite loyalty towards malls, some Abu Dhabi shop managers said they had already seen a significant dip in sales, blaming the rise of online shopping.
“Sales are 90 per cent of what we had five years ago,” said Mohammed Shoaib, a sales manager at Sundarban Electronics Trading on the capital’s Hamdan Street.
“Before we could sell a minimum of Dh25,000 on the weekend. Now we can sell maybe Dh1,000 or 2,000 on weekends.”
“Five years ago the shop’s daily sales averaged between Dh5,000 and Dh10,000. Now it is considered a good day when sales reach Dh500. Rich people are going online to shop,” he said.
Noon, the US$1 billion e-commerce platform founded by the Emaar Properties chairman Mohamed Alabbar, started operations in the UAE on Saturday to tap into the region’s fast-growing e-commerce industry that is forecast to double in size by 2021.
The platform is set to go live in Saudi Arabia “in the coming weeks,” the company said in a statement.
“Today we are excited to deliver orders to our first customers,” Mr Alabbar said.
“We are proud to take this important first step in our journey, and we are committed to making Noon the region’s Arabic-first e-commerce platform.
“As digital technologies cause disruptions across industries and geographies, it is important for us to shape a digital marketplace that is relevant to our local markets and serves as a growth platform for brickand-mortar retailers.”
Noon is a joint venture project between Saudi Arabia’s Public Investment Fund, the sovereign wealth fund, and a number of prominent Gulf investors led by Mr Alabbar.
The creation of Noon comes amid a flourishing of e-commerce businesses in the region, and on the heels of Amazon’s purchase in March of the online retailer Souq.com, based in Dubai, for US$580 million.
The Middle East’s e-commerce sector is growing faster than anywhere else in the world, with online sales expected to double to $48.8 billion by 2021, according to BMI Research.
“While partly due to low base effects, we believe the Middle East is on the cusp of a major e-commerce growth spurt,” said BMI.
“With young and affluent consumers, developed transport networks for logistics and high internet penetration levelshe Middle East is home to a number of attractive e-commerce markets, led by the United Arab Emirates,” BMI said last week.
The e-commerce sector has been rapidly growing in the UAE thanks to the country’s affluent and digitally savvy population.
Mergers and acquisitions in the sector have picked up pace over the past year.
There is also a notable push by a number of home-grown brands to go beyond brick-andmortar operations that have traditionally defined the retail landscape, with a pivot to develop the online shopping industry and directly challenge the likes of Souq and Noon.
“Noon means there is going to be more competition, more digital adoption of commerce and retail, more consumer options and new funding going into the digital start-ups. As they say, ‘let the games begin,’” said Fadi Ghandour, founder of the courier service Aramex and head of the regional venture capital firm Wamda Capital.
“E-commerce is here and is eating into everyone’s margins, retail operators need to come on board or they will die. I also think retailers that have strong physical infrastructure are going to be huge beneficiaries if they know how to use their bricks to attract clicks with the ability to be local, fulfil locally say within no more than two hours.”
Noon customers can browse the platform’s catalogue of brands by visiting www.noon. com or by downloading the Noon Mobile App via the Google Play Store.
A mobile app via Apple Store will be available in the coming days. The platform’s launch has been long awaited, as it had originally planned to go live in January 2017.
In July, it appointed Faraz Khalid, the co-founder of online fashion retailer Namshi. com, as its new chief executive, to help steer the company through its launch.
Last month, MH Alshaya, the Kuwaiti franchise operator which is present across the Arab world, Turkey and Russia, bought a stake in Noon, although the size of its investment was not disclosed.
MH Alshaya will list its portfolio of international brands covering fashion, health & beauty and home & lifestyle categories on Noon’s platform.
It is important for us to shape a digital marketplace that serves as a growth platform for brick-and-mortar retailers MOHAMED ALABBAR Founder of Noon