Ronaldo Mouchawar, the co-founder and chief executive of Souq.com has said that “for now, Souq will continue to operate its current websites as is” following the completion of the US$650 million (Dh2.39bn) acquisition by Amazon.com this week.
The deal, announced in March, has been formally concluded with work on integration under way, the two companies said. Customers are now able to log into Souq using their Amazon account details.
Mr Mouchawar described this as “a milestone for the online shopping space in the region” as it made its offering much more accessible, adding that the company would now be “moving into the next phase of the integration to bring more products and offerings to the region’s customers”.
Currently, Souq offers more than 8.4 million products across 31 categories, but Amazon offers 480 million products worldwide.
“It is an exhilarating time for the e-commerce industry in the region. Integration of Amazon’s technology and global resources with our local expertise will help us to offer a great service to our loyal customers,” Mr Mouchawar said.
Amazon.com’s senior vice-president for its international consumer business, Russ Grandinetti, said: “We are working to quickly integrate Souq and Amazon capabilities, in terms of both customer experience and fulfilment, to provide an ever-improving shopping experience for customers in the Middle East.”
Souq is the region’s biggest online marketplace, and it currently attracts 45 million visits per month, with localised operations in the UAE, Saudi Arabia and Egypt.
Just before Amazon and Souq announced their tie-up in March, a last-minute, $800m bid for Souq was submitted by Emaar Malls, the shopping mall division of Emaar Properties, which subsequently bought a 51 per cent stake in online fashion retailer Namshi for $151m.
Mr Mouchawar said that the tie-up between Souq and Amazon was "guided by many of the same principles as Amazon" and that the deal provided a critical step in growing its customer base.
Mohamed Alabbar, the Emaar Properties’chairman, is also heading the launch of noon.com – a $1bn e-commerce start-up which has received about $500m in funding from Saudi Arabia’s Public Investment Fund. This was initially due to be launched in January, but has yet to commence operations. It recently bought out competitor Jadopado.com for an undisclosed sum.
David McAdam, the chief executive of the Middle East Council of Shopping Centres, said that e-commerce penetration rates in the region remain "very low", owing partly to a hesitancy in the region for sharing credit card information online, as well as the fact that "last mile" delivery is more problematic in Middle East markets.
“This last mile delivery is such a headache for so many different businesses. Amazon still loses money on its last mile delivery [in the US]. How are they going to do that here? There’s a long way to go before it’s really smooth.”
However, he said that despite such problems, a continued growth in e-commerce sale in the region is inevitable.
“Of course it will come – it’s just a matter of when,” said Mr McAdam.
“I think the other thing that is important to know is that one of the ways in which Amazon grows is to gather more products online. I think that some of the franchise owners here of brands will probably join in the Amazon movement and pay a fee to Amazon to list their products online as long as the pricing that they agree to enables them to carry on in the stores as well as in the online market. It will happen, but it’s going to take time for everyone to embrace these changes.”
Mr Mouchawar said that it was continuing its efforts to promote consumer confidence in the region's e-commerce. "We recently collaborated with Dubai Economy for co-operation on the 'Digital Protection' initiative for consumer rights. This makes Souq the first certified e-commerce website to display the consumer protection logo of Dubai Economy," he added.
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- Visibility: Often dramatic with thick "walls" of sand
- Duration: Short-lived, typically localised
- Travel distance: Limited
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Dust storm
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Biography
Favourite Meal: Chicken Caesar salad
Hobbies: Travelling, going to the gym
Inspiration: Father, who was a captain in the UAE army
Favourite read: Rich Dad Poor Dad by Robert Kiyosaki and Sharon Lechter
Favourite film: The Founder, about the establishment of McDonald's
THE SPECS
Engine: 2.0-litre four-cylinder turbo
Transmission: eight-speed automatic
Power: 258hp at 5,000-6,500rpm
Torque: 400Nm from 1,550-4,400rpm
Fuel economy, combined: 6.4L/100km
Price, base: from D215,000 (Dh230,000 as tested)
On sale: now
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