Mohamed Alabbar and Saudi Arabia’s government have teamed up to launch a US$1 billion e-commerce venture that will tap into the region’s rapidly changing retail landscape.
The chairman of Emaar Properties revealed plans for the site called noon.com today. The Public Investment Fund (PIF), chaired by Saudi’s deputy crown prince Mohammed bin Salman, will invest US$500 million in a 50 per cent share of the venture, while the other $500m commitment has been provided by Mr Alabbar and a group “of about 60 private individuals”.
The Saudi investment will bring equal voting rights and board members with the headquarters for noon.com located in Riyadh, with fulfilment centres in the capital and Jeddah already under construction. Noon.com’s main fulfilment centre will be a gargantuan warehouse in Dubai the size of 60 football pitches, according to Mr Alabbar.
“We expect the new venture to be a global player but we are first concentrating on Saudi Arabia and the UAE,” said Mr Alabbar, the billionaire businessman behind some of Dubai’s best known landmarks including Burj Khalifa, the world’s tallest tower.
The deal comes as Saudi Arabia embarks on a National Tranformation Plan aimed at weaning the kingdom from its dependence on oil by generating thousands of jobs in industries that include the country’s under-served retail sector.
In June, the PIF took a $3.5bn stake in Uber and last month committed to a $100bn global technology investment fund together with Japan’s SoftBank.
“The fulfilment centres in Saudi Arabia will be an employment boon for the cities, especially in Jeddah’s eastern province. We expect to launch in January 2017 with 20 million products across the retail spectrum. We will open in Egypt in late 2017 or early 2018. We will dominate the e-commerce space with our capital, our advanced technology and our focus on the customer.”
The range of products potentially includes F&B offerings and the venture builds on recent investments led by Mr Alabbar in Americana, which operates popular food brands such as KFC and in Aramex, a linchpin in the region’s e-commerce supply chain.
Amid a strong US dollar dampening demand for traditional retailers, the online segment in the UAE is forecast to be worth more than Dh6.6bn this year, according to Euromonitor International – a massive 89 per cent leap from last year. The GCC is one of the most underpenetrated markets in the world with the potential to become the world’s fastest growing e-commerce playground, according to consultant AT Kearney’s Getting in on the GCC E-commerce Game report.
“We expect the growth of e-commerce in the GCC to transform the future of businesses, economics and lives across the region,” said Laurent Viviez,a partner at AT Kearney. “It doesn’t rule out traditional retailers, who can be on the winning side of e-commerce by adopting an omni-channel approach. We see the future for the sector as not digital-only but ‘physical with digital’ – traditional retailers can really tap into this.” The move into e-commerce by Mr Alabbar points to the disruptive nature of the digital space and the future of retailing.
“I do not think it will cannibalise the traditional retail industry,” said Mr Alabbar. “But it is better to be the future than have the future overtake you. We need to turn the retail space upside down and then in six months turn it upside-down again. We need to think ahead, we will make profit in five years and maybe we will float in about seven years.”
The tie-up could pave the way for more collaboration between UAE and Saudi investors.
STC Ventures, an independent venture capital fund whose anchor investor is the Saudi Telecom Company, was an early investor in Careem the taxi-booking mobile application when it launched in the UAE. It was involved in the second round of funding to take the idea to the kingdom and has recently invested in a host of UAE based e-commerce companies looking for second round funding.
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