JadoPado, the UAE-based E-commerce site, is switching tack to become an online marketplace.
The move will bring it closer to the model adopted by souq.com, another UAE-based online marketplace. It plans to host other retailers and individuals, such as artists, selling products on its site and taking a cut for each sale.“We have been operating for four years now and while some parts of the business were profitable others were not,” said Omar Kassim, the founder of jadopado.com. “Profitability was a struggle and overall we weren’t making profit.”
He said the site averaged between 280,000 and 300,000 visitors each month, but that profit margins had been “very small”.
“We will now be hosting big retailers which do not have the time or the team to invest in the e-commerce space and also individuals who do not have the money to create an online presence,” he said. “Our margin will be 4 per cent of any electronics sold or 8 per cent of other products and services.”
Online retailing is seen as a big opportunity in the Middle East with a burgeoning population and high smartphone penetration. But the sector has been comparatively slow to take off in the region as many consumers remain wary of parting with their credit card details online.
Smartphones now account for nearly 40 per cent of all phones in the Middle East, according to the latest research from International Data Corporation (IDC). Users of smartphones in the region will nearly double this year to 112.2 million, up from 67 million last year. Their penetration is expected to increase by 39 per cent in the Middle East through 2015.
The preference of people to pay for their goods with cash on delivery, however, is holding back the growth of the sector.
Souq.com has said 76 per cent of its sales are done on the basis of cash on delivery, but a bigger threat to local e-commerce players may be the big international players taking an increasing interest in the region.
“The potential for online sales in the Middle East is huge,” says Khaldoon Tabaza, founder and managing director of iMena Group which operates online businesses in the region. “However it has to be the right online businesses.
“The big pure play online retailers such as Amazon and Asos are now looking to set up fulfilment centres here, meaning the delivery will be near 24 hours, with a huge range of products and their prices are lower than most anywhere else because of their scale.
“Profitability here is elusive. JadoPado has done the right thing as it does not now have the risk of investing in stock. Think local, scaleable, businesses for online profitability is my advice.”
ascott@thenational.ae
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