Battle for Saudi e-commerce market begins

Investors in Noon.com including Dubai billionaire Mohamed Alabbar, above, and Saudi Arabia’s sovereign wealth fund, have put $1 billion into the project. (Reuters)
Updated 15 October 2017
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Battle for Saudi e-commerce market begins

RIYADH: In Saudi Arabia, a kingdom where postal codes are rarely used, most people pay in cash, and shopping is done in giant air-conditioned malls, building an online retail business is no easy task.
But two powerfully-backed companies are trying to do just that, betting a young, tech-savvy population will eventually deliver up a large slice of the Arab world’s largest consumer market.
After months of delays, Noon.com launched in the UAE on October 1 and said it would enter the Saudi market “within the coming weeks.”
That will start a race for dominance in a largely untapped market against Dubai-based Souq.com, which is already present in Saudi Arabia and poised for expansion after its acquisition this year by Amazon.
Both companies are well armed for the fight.
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SPECIAL: Our secret shopper reveals best online bargains for Saudis
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Investors in Noon.com, including Dubai billionaire Mohamed Alabbar and Saudi Arabia’s sovereign wealth fund, have put $1 billion (SR3.75 billion) into the project. The business also plans to leverage existing assets from Alabbar’s Emaar Malls, Aramex delivery service and Namshi and JadoPado online marketplaces.
Souq.com was known as the “Amazon of the Middle East” even before its purchase by the world’s biggest online retailer, having built up a following and brand relationships since its launch in 2005.
“Amazon and Souq.com will benefit from early-mover advantage in our view,” said Josh Holmes, a consumer analyst at market researcher BMI.
But with online sales in Saudi Arabia expected to surge to $13.9 billion by 2021 from a projected $8.7 billion this year, he said there would be plenty for Noon.com to play for.
“While the rivalry between Amazon/Souq and Noon.com will be intense, we believe there is more than enough room for both players to thrive in Saudi Arabia and the wider region,” Holmes said.
Shifting retail online would be a sea change for commerce in the Middle East, where Internet sales now represent less than two percent of total retail, twelve times less than in the United Kingdom, according to a Boston Consulting Group report.
In Saudi Arabia, which has lagged behind regional leader the UAE, it is only 0.8 percent of the total, and both Noon.com and Souq.com will have to adapt to the particular challenges of the market to prosper.
One is getting deliveries right. Currently, delivery companies in Saudi Arabia regularly ask for landmarks rather than addresses, with drivers often requesting WhatsApped locations.
Then there is payment. With less than half the population owning credit cards, e-commerce businesses often have to offer cash on delivery options, increasing their risks.
There are other dangers too. High unemployment among the kingdom’s millennials could cap spending power in the long term.
Yet analysts point to the young population, high rate of technology adoption and high-quality transport networks as reasons for optimism. Some companies are already thriving.
E-commerce now represents more than 40 percent of logistics provider DHL’s inbound parcel business into Saudi Arabia, said country general manager Faysal ElHajjami, forecasting this would continue to grow.
Start-ups are also developing ways to accommodate the kingdom’s last-mile delivery quirks.
Dubai-based Fetchr, for example, operates an app that allows users to identify their location by using GPS, like Uber.
“We realized nobody in Saudi really has a formal address, but everybody has a smart phone attached to their hip,” said co-founder Joy Ajlouny, speaking with partner Idriss Al-Rifai.
Over the last year, Fetchr has grown its presence in the kingdom from three to 84 cities, with plans to tackle another 25 by the end of the year, and now employs about 1,000 people.
Ajlouny and Al-Rifai estimate market growth of 20 to 30 percent per year over the next five years, but caution that a five percent value added tax, planned for introduction next year across the Gulf, could check that forecast.
As planned, the tax would be applied each time a product crosses a border, they said, which could be a 15 percent total by the time a customer receives the parcel and 20 percent if he or she decided to return it.
“It would be a huge hindrance,” said Ajlouny. “Everybody is talking about the growth of e-commerce, but this would completely cripple that growth.”


Oil prices rise on Libyan export interruption, but markets remain weak

Updated 11 December 2018
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Oil prices rise on Libyan export interruption, but markets remain weak

  • The rise came after crude prices dropped by 3 percent the session before amid ongoing weakness in global stock markets and concerns that slowing oil demand-growth could erode supply cuts
  • Crude futures have lost around a third of their value since early October amid the financial market slump and an emerging oil supply overhang

SINGAPORE: Oil prices edged up on Tuesday after Libya’s National Oil Company declared force majeure on exports from the El Sharara oilfield, which was seized at the weekend by a local militia group.
Despite that, overall sentiment on oil prices remained weak amid worries over global stock markets and doubts that planned supply cuts led by producer club OPEC will be enough to rein in oversupply.
International Brent crude oil futures were at $60.19 per barrel at 0336 GMT, up 19 cents, or 0.3 percent, from their last close.
US West Texas Intermediate (WTI) crude futures were at $51.16 per barrel, up 16 cents, or 0.3 percent.
Libya’s National Oil Company (NOC) late on Monday declared force majeure on exports from the El Sharara oilfield, the country’s biggest, which was seized at the weekend by a militia group.
NOC said the shutdown would result in a production loss of 315,000 barrels per day (bpd), and an additional loss of 73,000 bpd at the El Feel oilfield.
The rise came after crude prices dropped by 3 percent the session before amid ongoing weakness in global stock markets and concerns that slowing oil demand-growth could erode supply cuts announced last week by the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers including Russia.
Crude futures have lost around a third of their value since early October amid the financial market slump and an emerging oil supply overhang.
In a show of no confidence, money managers cut their bullish wagers on crude to the lowest in more than two years in the week ending Dec. 4, the US Commodity Futures Trading Commission (CFTC) said on Monday.
The financial speculator group cut its combined futures and options position in New York and London by 25,619 contracts to 144,775 during the period. That is the lowest level since Sept. 20, 2016.
In physical markets, Kuwait and Iran this week both reduced their January crude oil supply prices to Asia
“There remains a lot of uncertainty if the production cut is thick enough to make a significant dent in global supply,” said Stephen Innes, head of trading for Asia-Pacific at futures brokerage Oanda in Singapore.
“The general risk-off tone in global markets and the stronger dollar ... are contributing to the selling pressure.”
The OPEC-led group of oil producers last Friday announced a supply cut of 1.2 million barrels per day (bpd) in crude oil supply from January, measured against October 2018 output levels.