Landmark logistics to test Saudi online battle between Amazon and noon

Retailers in Saudi Arabia face a new online challenge with the arrival of noon.com, the regional rival to Amazon. (Reuters)
Updated 18 October 2017
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Landmark logistics to test Saudi online battle between Amazon and noon

RIYADH: In a country 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 Oct. 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.
Investors in Noon.com, including Dubai billionaire Mohamed Alabbar and Saudi Arabia’s sovereign wealth fund, have put $1 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 UK, 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 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.”


Nicaragua puffing up status in rarefied world of premium cigars

Updated 24 min 7 sec ago
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Nicaragua puffing up status in rarefied world of premium cigars

  • Nicaraguan cigar exports to the US have increased by 40 percent since 2008
  • Half of town of Esteli is employed in the tobacco industry

ESTELI, Nicaragua: From “rich and full-bodied” to “complex with hints of licorice,” aficionados exhaust the lexicon to capture the essence of Nicaragua’s most highly-prized produce — not wine, but cigars, which are especially popular in the United States.
The recognition turns the vibrant green hills of Esteli, in the troubled Central American country’s northwest, into a hive of activity come harvest time.
Here, 800 meters (2,620 feet) above sea level, half of the population of 110,000 is employed in the tobacco industry — picking, drying or curing, or rolling cigars in factories.
“No one has soil as good for tobacco as Nicaragua,” explains Nestor Plasencia, whose family business is one of the country’s leading cigar exporters, as he sits and savors the sweet aroma of one of their creations.
Nutrient-rich volcanic soil and know-how imported from Cuba more than 50 years ago, as well as a knowledgeable workforce have set Nicaragua apart when it comes to growing flavorful top-quality tobacco.
Apart from Esteli, the two other tobacco-growing regions are the Condega and Jalapa valleys in the north, each with their own distinct soils and minerals.
Part of the lure of Nicaraguan tobacco is that “the same seeds planted in different soils and climatic regions give different flavors,” Plasencia said, between spiralling puffs.
Cuban cigars may easily outsell the lesser-known Nicaraguan product in Europe, but Nicaraguan brands have taken advantage of the crippling US embargo on Havana — in place since 1961 — to sell to the Americans.
Nicaraguan cigar exports to the US have increased by 40 percent since 2008, reaching 140 million cigars in 2018, outstripping the Dominican Republic and Honduras, according to figures from the Cigar Association of America (CAA).
Nicaragua’s industry is a young one — it was started by Cuban exiles who fled Fidel Castro’s revolution in 1959. When the Central American country’s civil war ended at the start of the 1990s, the industry started to flourish.
“My family started in tobacco in Cuba in 1865. Today we operate in Nicaragua and Honduras,” says Plasencia, whose father hails from the Caribbean island.
Today, the country has 70 factories producing more than 5,000 brands, says the director of the Nicaraguan Chamber of Tobacco Producers, Wenceslao Castillo.
Karina Rivera, a quality control supervisor at Plasencia Cigars, tests an average of eight cigars a day.
“If I see that it’s not at the level of quality demanded by customers, we report immediately to find out where the problem is,” she said.
Smokers say a lot is going on in a cigar during puffs, tasting richness, balance and complexity — a variety of flavors and aromas that have helped several Nicaraguan brands conquer the US market.
In 2018, American trade magazine Cigar Aficionado named seven Nicaraguan brands in the top 10 of its annual ranking.
As for the Best Cigar of the Year, the “E.P. Carrillo Encore Majestic” is made in the Dominican Republic, but with Nicaraguan tobacco, the magazine says.
“The strength of the Nicaraguan tobacco industry is our focus on quality, which is why we are today the largest exporter of premium cigars to the United States,” Castillo says proudly.
It’s clear that in the rarified world of premium cigars, names are important. To the aficionado, in clubs and the best bars, they trip off the tongue — La Opulencia Toro, La Imperiosa, Villiger La Vencedora Churchill...
“We believe that 60 to 70 percent of our success is due to the way tobacco is dried and the time spent on fermentation and aging — we don’t rush things,” says Castillo.
“The trilogy of this success is the soils, the microclimate and the people, the care they put into their work,” says Plasencia, who runs two factories in the Central American country and exports 15 million cigars a year to the United States.
The cigar industry has had to do more that resist climatic changes to survive.
It’s one of the few to emerge largely unscathed from the political and economic crisis that has rocked Nicaragua for more than a year, after a violent crackdown on anti-government demonstrations left more than 325 people dead and forced 62,000 into exile.
It also put 400,000 out of work in an economy that had enjoyed annual 4.0 percent growth, according to the private sector.
“If it weren’t for these factories, Esteli would surely be deserted,” says 43-year-old Silvia Moreno, who has worked in the tobacco industry for half her life.