E-commerce in the Middle East: Virtual gold rush

Regional online shoppers are shifting their business to indigenous suppliers

Tags: E-commerceUnited Arab Emirates
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E-commerce in the Middle East: Virtual gold rush The value of e-commerce-related transactions is about $11bn a year in the Middle East.
By  Massoud A Derhally Published  October 7, 2012

"People are investing because they're waking up to the fact that this is almost a virgin market and as the broadband penetration rate is increasing, people are using the internet for value-added services," Abbassi says. By end of 2011, there were more than 77.7 million internet users in the Arab World with an internet user penetration of around 22 percent, Abassi says.

Last month, Namshi, an e-commerce site founded less than a year ago, which sells shoes and clothing in the Middle East, said it secured $20m in financing from JP Morgan Chase and Blakeney Management.

Namshi is now set for major regional expansion, says Muhammed Mekki, one of the company's founders.

"This investment is a turning point," says Mekki, a former executive at consultancy McKinsey & Co, who founded Namshi with partners Louis Lebbos, Hosam Arab, and Faraz Khalid.

"It shows the commitment of some of the biggest names in international finance to the potential of this region and positions Namshi as the engine driving that sector's success," the 29-year old Iraqi-American added. "All eyes are on Namshi now, the horse that has been backed. We have a responsibility to prove to other investors that this is an attractive growing and lucrative market."

Among the Gulf states, the UAE leads the way in e-commerce spending with sales reaching about $2bn in 2010, according to a study by Visa and Interactive Media in Retail Group International. The UAE's online spending equated to 55 percent to 60 percent of total GCC e-commerce sales. Saudi Arabia was the second largest market, with an estimated $520m, followed by Qatar ($375m), Kuwait ($280m), Bahrain ($175m) and Oman ($70m), according to the study.

"I think it's high time for e-commerce to take off in this region," Mekki says, adding: "it's a well-educated region that has a proven retail market".

Namshi, which went into full operation in January of this year, has over 100 employees. The capital injection will help the company expand its operations particularly within Saudi Arabia, its fastest-growing market, and also increase its product selection, Mekki says.

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