Souq.com planning IPO in the next 18 to 24 months

The online retailer has upwards of 1.5 million products on its website and is looking at expanding the range.

Ronaldo Mouchawar, CEO, Souq.com speaks at the Khalifa Fund for Enterprise Development Innovation Conference in Abu Dhabi. Mona Al Marzooqi / The National

Dubai-based Souq.com, the region’s biggest online retailer, is looking to float in the next 18 to 24 months.

“We are looking at an initial public offering but that is 18 months away at least,” said Ronaldo Mouchawar, the chief executive and founder of Souq.com. “The plans are just being drawn up so I cannot say how much of the company will be public or where we will list right now.”

He said the company has more than 1.5 million products on the site and is looking at expanding the range. “Right now online sales account for 1.5 per cent of retail sales but in mature markets that is 10 per cent or more so the growth potential is huge.”

Souq received US$275 million in a second round of funding in February from New York-based Tiger Global Management and South Africa’s Naspers to underpin its technology and expand its product line. The online retailer had raised $150m in venture funds in June last year.

It sells 60 per cent of its own inventory on the site but also acts as a market place for third-party sellers, allowing SMEs and companies to use it as a springboard into the online space.

E-commerce has slowly gained traction regionally as more companies allow customers to buy online and pick up in the shop. Souq.com lays claim to 45 million unique visitors to its site every month with the Middle East’s e-commerce market forecast to reach $20 billion this year.

Most of its growth is from Saudi Arabia, where Souq now has 10 fulfilment centres, and the UAE, but Egypt is becoming an important market.

While Souq has stolen a march on many of its rivals, Amazon, the world’s biggest retailer, has recently teamed up with Ara­mex to provide cash-on-delivery service for the region but it is not something that Mr Mouch­awar is overly concerned with.

“If Amazon join us … I can only see that as a boon for the e-commerce space,” said Mr Mouchawar. “The logistics and politics of opening fulfilment centres across many borders can be a timely and expensive business, but I welcome them.”

Neither Amazon nor Aramex answered emails from The National about the arrangement.

Souq has about 70 per cent of its sales as cash on delivery (COD), which may be a detriment to how quickly the sector may grow. “Cash on delivery means there is an extra cost of between 3 and 6 per cent for the retailer,” said Niles Younis, the vice president for market development at MasterCard.

He said many customers do not trust the seller, which is why COD is in such demand.

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