Over the past decade, Souq.com has quickly risen to become the region’s largest online retailer. The company’s CEO and Founder Ronaldo Mouchawar is confident of even greater success as enthusiasm for e-commerce amongst consumers picks up pace.
By Dina al-Wakeel
Photography by Alaa’ al Sukhny
E-commerce is growing at an impressive rate in our part of the world. According to e-payment gateway Payfort, the market was worth $7 billion in 2014 and will reach $13.4 billion by 2020. At the center of this trend is Souq.com, the Dubai-based online retailer that is feeding the region’s rocketing demand for online shopping.
When Syrian-born, US-educated Ronaldo Mouchawar returned to the region from the United States in the mid noughties, Samih Toukan and Hussam Khoury were already at the top of their game running Maktoob. At the time, Mouchawar remembers, the three agreed that besides a communications platform, there was also a need for an e-commerce platform.
So in 2006, Souq.com was set up in Dubai with a primary focus on trading mobile devices, as well as an auction element that helped them generate quite a bit of traffic and create a dynamic small marketplace. “The beginnings were humble and not very easy until 2009, when Maktoob was acquired by Yahoo,” said Mouchawar. “The minute Maktoob was sold it was very clear that the next big thing in the region would be commerce.”
Following Maktoob’s acquisition, Jabbar Group was created and the team that didn’t leave with Yahoo—mainly the Souq.com team—gathered at the Dead Sea with Toukan and Mouchawar. “Toukan made incredible promises to the team urging them not to worry; [saying] we were on the right track and we were going to create history again,” recalls Mouchawar. “I look back and it was as if he [saw] what was going to happen. I didn’t doubt it but I looked at where we were and where we needed to be.”
As it transpired, they only had to wait for three years for this to happen. Souq.com delivered on its founders’ vision and is now the region’s biggest online retailer. According to Bloomberg, the company is valued at $1 billion, and Mouchawar said its online store receives 45 million visits a month.
Finding the Right Model
A major part of this success was having Jabbar Group, headed by Toukan and Khoury—who had just finished a big exit—stay engaged with Souq.com. Through Jabbar, both continued to provide funding until Souq.com had adequately scaled up. Mouchawar was reassured by this vote of confidence.
But after having been in the market for a few years, it was time to review Souq.com’s business model. “In 2010, we started focusing on what it really takes to do e-commerce now that we’ve been around for a few years. We looked at what the merchants need and then what the buyers need,” Mouchawar explained.
By the end of 2010, the founders decided to drop auctioning and embrace B2C retail. To gain control of the buyers’ experience in terms of fulfillment, logistics, and payment, they adopted new technology and learned from what similar companies were doing in the international market, tweaking it into their own model. “Today, we’re a courier company, a warehousing company, a payment company, a customer service company, a content company, and a commerce company all together,” Mouchawar said. They also didn’t shy away from hiring talents from the likes of Amazon and Yahoo.
But besides the founders’ commitment and cash, the acquisition also had a negative element to it, with the founders realizing they had lost the user base they had built up through Maktoob. “When Maktoob was acquired by Yahoo, we lost a lot of the traffic that used to come from the portal, so that was a challenge. But then ultimately we were so true to our mission … and that principle from day one: using technology, connecting more products to more things, and making it all work while creating opportunities around us,” he explained.
Mouchawar believes what makes Souq.com unique and what helped them scale was being a marketplace that allows merchants to build their own brands and their own shops onto the platform, while allowing buyers to check the website, research products, compare prices, and then ultimately buy.
Today, their biggest market in the region is Saudi Arabia, while the UAE and Egypt are quite sizable as well. Souq.com has warehouses around the region and they deliver to over 40 cities. They also have their own payment company that’s connected to banks and that processes payments locally, making it easier and faster to pay their 70,000 registered merchants.
And although cash-on-delivery (COD) is a headache for many e-commerce portals around the globe, Mouchawar doesn’t consider it a problem. “Yes, it makes e-commerce more complicated,” he said. “But at the same time with technology it’s a challenge you can take on … You can tackle the problem by building a good brand and quality service, as well as building trust.”
To reduce the impact of COD, Souq.com decided to build the right tools, creating a fulfillment company, logistic company, and a payment company. He cited the examples of Russia, China, and India, where e-commerce is growing faster than even in developed Western markets, with COD being a part of this success.
The founding team launched not only Souq.com, but also several other e-commerce projects, including Cobone, Sukar, and Cashew. E-commerce, said Mouchawar, empowers merchants, courier companies, and buyers, though the region still has a long way to go to master it.
“We had the luxury of being a part of an Internet era that changed the way people live. At the beginning, everyone believed in the Internet, but people didn’t see the potential in those businesses,” he said. “[E-commerce] is a space I have a lot of passion for, it’s very challenging because it’s not only product, but also technology and consumer plus capital so you have to touch upon financing, customer service, while creating content,” he explained, adding that e-commerce opportunities were massive in the region, particularly with the surging mobile penetration rates.
To further grow e-commerce in the Arab world, Souq.com recently launched White Friday, its answer to America’s Black Friday shopping extravaganza and which runs for three days in November. According to Arabian Business, 600,000 items sold across the UAE, Saudi Arabia, Kuwait, and Egypt in the most recent White Friday. The top selling items were perfumes, mobiles, watches, make up, and handbags, as 35 percent of all sales were made via Souq.com’s mobile app.
Besides growing the e-commerce culture in the region, White Friday is also important for the company and its employees get a chance to learn and innovate. The team, said Mouchawar, has to run the company at almost 10 times the capacity to meet the demand on that occasion. “The minute we exit White Friday, we know what went well, what can be improved, and you almost have a road map of what you need to do for next year.”
Mouchawar has a clear vision of where he wants Souq.com to go next. “I think what’s more important is that we become a household brand, that when everyone is thinking of buying a product through their mobile, they would check Souq and see if they get the best value and the best selection,” he said. “I’d also like to think of us as a destination where young Arabs can come and find great jobs, innovate, and build teams.”
An IPO is not on the cards for Souq.com. At this stage, they are focusing more on growth, and being a privately-owned company is critical as it allows the team to move fast and experiment more, Mouchawar explained.
So should Yahoo regret not buying Souq.com at the time? According to Mouchawar, Souq.com was still small, while Yahoo was at a stage where they were trying to focus more on their core media business. “From my point of view the way the deal was structured, it worked out perfectly because Souq.com was very small and it didn’t make sense at the time to exit it,” he explained.
One of the most important lessons Mouchawar learned was not to underestimate the product value of technology, while persevering to build consumer trust and creating the right ecosystem. He also encourages entrepreneurs to be stubborn in order to be able to navigate their teams and companies through difficult times.
He does not intend to venture into a new project anytime soon and insists Souq.com will remain the prime focus of his attention. “I’ve never done anything else. People ask me ‘you’ve been at Souq for 10 years, what’s next?’ I tell them next is Souq.”