Dubai
There’s one rule that eCommerce vendors in the region have followed without fail — try and make it big in the UAE and then make a move on the other Gulf markets. But the people behind Wadi.com — one of the Big 3 online marketplaces currently in play — are having none of that.
“We are more skewed towards Saudi Arabia — purposely so,” said Pratik Gupta, one of three founding partners in Wadi.com. “When we entered the market, the competitive landscape there offered better opportunities for us.”
It was also no coincidence that a high-profile Saudi investor saw enough in Wadi’s business model to commit to a fairly substantial exposure. The Al Tayyar Travel Group played the lead investor’s role in a $67 million (Dh246 million) funding round early last year.
“That investor coming in made us a very Saudi-focused company — there was less competition as well,” said Gupta. “We did not want to get into a lot of things and burn up a lot of money ... fortunately we got investors who understood that.”
With its young demographic and one of the fastest adoption rates for anything digital or social media related, Saudi Arabia is a natural market for eCommerce in the region. Get the logistics right, and the market is ripe for the taking.
Wadi.com has had two rounds of funding since inception in 2015. The size of the first one has not been revealed, but one of the investors included Rocket internet, the German internet giant. It also took part in the second.
“We are essentially a marketplace and don’t stock anything,” said Gupta. “If at all we do, we do so on behalf of an entrepreneur who is taking the risk for us and we are giving him the sales.
“When you work in a marketplace environment, you are shifting a certain part of the responsibility and ownership to the vendors. There is less margin ... but lesser headache as well. I am OK with that.” (Apart from Saudi Arabia and the UAE, the vendor also has a presence in India.)
According to Gupta, transformations can already be seen in the region’s eCommerce space. No longer is the virtual retail sector driven by demand for smartphones or other tech gadgets. In fact, the impression among industry sources is that audience tastes for what they want to — and can — buy online is on the cusp of a major change.
“Certainly, the skew towards electronics has reduced ... but it will always lead in terms of revenues,” said Gupta. “And electronics will always remain good for setting up an (eCommerce) business.
“But when vendors are looking to profitability, they need non-electronics categories — fashion, beauty products, kitchen accessories, watches, you name it.
“When we entered, the region was one of the few geographies with a good basket value. but not enough competition from the inside or outside.”
With Noon.com waiting in the wings with its 20 million product inventory, the region’s eCommerce industry could be in a situation where the online marketplace can grow exponentially but also be in for major consolidation as smaller players fail to measure up. There is also the persistent speculation that Amazon is also lining up with its armoury, through a rumoured alliance with Souq.com.
Be it the big-ticket transaction with its juicy margins or the small everyday items, Wadi.com wants to be in the thick of action. “As eCommerce scales up, shoppers will start buying daily ticket items,” said Gupta. “For the small-ticket items, the delivery costs are the same.
“As you get bigger, the logistics become tougher from this point of view. You have larger scale and you will need to negotiate better margins. The same delivery person can cover a smaller circumference and make more deliveries.
“When we started, we did not have access to significant capital or at levels our competition had. As a result, we focused on the product-line and customer experience so that we didn’t have to acquire the same customer again and again.”
He will hoping that the formula will keep on working.
