Billion-dollar online marketplaces predicted for GCC
Possible unicorns spotted in Gulf region as vertical marketplaces expected to boom, says VC
Online retail sales are expected to grow ten-fold over the next 10 years in the region, with $1bn marketplaces serving specific sectors expected to emerge, according to BECO Capital.
The regional venture capital company predicts that online retail with grow from $10bn to $100bn by 2025, as local markets adopt flock to online trading platforms.
Dany Farha, chief executive officer of BECO Capital said that there is potential in the region for individual marketplaces with volumes of trade hitting $1bn per year, based on the initial success of vertically-focused portals such as Careem and Jadopado.
"The opportunity to build regional US$ 1 billion online marketplaces has been unlocked, and we already have a handful of ‘unicorns' in the making in our portfolio," Farha said. "The Middle East is at an inflection point where we are witnessing the beginning of a seismic shift, driven by strong dynamics. We have 85 million Internet users, 60 million smart phone users and over $10 billion in e-commerce spend in 2014. We also have a nearly five times higher purchasing power per capita than India, which attracted 80% of emerging market venture capital globally, producing 15 Unicorns and many more in the making. Ours is the next story after India."
The company said that online retails sales only currently account for 1-2% of the total retail market in the GCC, compared to 5% globally. This could shift to 25% online sales, as the shift to digital services, driven by factors such as smartphone penetration encourages more online business.
"All our investments in online marketplaces possess two pillars of success. For an online marketplace to thrive, it has to be able to generate scale. The second pillar of success we looked for is the ability to trigger a dramatic transformation in an entire industry. This is achieved through a value proposition that offers a ‘brand experience' that is new and unique," Farha said.
"Think of Propertyfinder, Bayzat, Roundmenu, Jadopado, Airbnb and Careem. They each enable a marketplace of buyers and sellers, under one virtual roof, typically on a smartphone or tablet, to increase exposure. Delivering more choice, quicker and for less cost in a safe environment."