Ahmed Alkhatib, the Founder and CEO of MarkaVIP, a leading online shopping destination in the Middle East, speaks to My Startup World, about his passion for entrepreneurship, the ecommerce market in the Middle East region, the challenges, the opportunities, and more.
How has ecommerce market grown in the Middle East region?
When we first started the business back in 2010, ecommerce was almost a foreign concept here, but if you look at the latest industry reports the Middle East is now one of the fastest growing ecommerce markets in the world and has grown by an astonishing 45% in the last year alone.
The Arab region has seen a tremendous increase in the number of people who shop online and there is great potential here with a tech-savvy population and high spending power. The offline retail industry is estimated at around 450 billion dollars and if we capture even five percent of this market it’s a massive opportunity. We are still, of course, in the early stages of e-commerce development but this is definitely an exciting market to be in and we are excited to be part of it.
How hard / easy is it to open up an online business here in the Middle East?
The Middle East region, an emerging market with high potential, presents great opportunities for tech start-ups thanks to high internet and smartphone penetration rates, young and tech-savvy consumers, and a strong appetite for shopping. Nevertheless, the complexity of starting-up an online business varies widely from country to country.
For instance, Jordan requires very little capital for any start-up to get going while in the GCC countries the laws and requirements are far more demanding. Some countries like the UAE have free zones which offer more business freedom and provide easier registration procedures.
In 2014, we will be seeing accelerated growth of companies that enable ecommerce start-ups, to work in more efficient ways and overcome the various challenges to creating a more sophisticated user experience. These enablers will include offering smoother payment options and less complicated logistics processes. There will also be more substantial growth in the number of A and B rounds of venture funding for e-commerce start-ups which will further enable the growth of the market.
Are there any red tapes aspiring entrepreneurs need to address before they can set up an online business?
The Middle East region is broad and diverse when it comes to laws and requirements of particular countries, so it’s very important that any aspiring entrepreneur do their research during the initial stages of setting up.
For example, many GCC countries require a local sponsor to register a business outside a free zone, while the bankruptcy laws are still under development making it more challenging for banks to help small businesses. It’s also important to mention the cultural restrictions and sensitivities which need to be taken into consideration.
What sort of opportunities the Middle Eastern ecommerce scene presents?
As mentioned before, this is a young market with great potential. We are currently in an era of digital renaissance and the Middle East is certainly at the center of it. This new generation of shoppers embraces the latest technologies so they are well-connected and want a convenient easy-on-the-go shopping experience. Success for e-commerce companies will come to those who are nimble, respond quickly to demands, embrace the latest innovations and technologies and offer a smooth, secure and easy shopping experience.
According to the latest reports by Paypal the ecommerce market is set to grow from US $11.2 billion today to US $15 billion by 2015. There are still many challenges to tackle, but as the market matures we see an opportunity in every sector of ecommerce from hospitality to consumer goods.
How easy is it to gather information regarding setting up an ecommerce site?
There are many online resources which provide essential information regarding legal requirements and the market in general. In some countries like the UAE, the information is more easily available and there are many interactive forums, information sites and organizations looking to help young entrepreneurs. In all cases, it’s essential for any startup to plan sufficiently, assess any risks and conduct market research to identify the best sector opportunities.
Are users in the Middle East comfortable with using their credit cards / banking info when dealing with online payment gateways?
While many online shoppers still prefer the cash-on-delivery payment method, we are slowly seeing an increase in the number of credit card users. Online security still remains one of the primary concerns for Middle Eastern shoppers, but the presence of international trusted platforms like Paypal and Cybersource to provide secure electronic payment methods is helping to reassure the market. We will definitely see more people converting to credit card payments, as confidence and trust is built.
Do you feel the process of fraud checks in place in this region is enough to counter fraudulent transactions?
With a growing number of online and mobile payments one of the main concerns for any online retailer is to offer its customers an easy and secure payment method. The level of fraud checks in this region varies from country to country but the ecommerce sector, in general, is always one of the highest at risk from fraudulent transactions.
Investing in the latest security tools and technology is key in the prevention of fraud for online businesses and, as previously mentioned, international platforms like Paypal and Cybersource are helping us to build the confidence of Middle Eastern customers in online payment.
We are laser-focused and uncompromising in the protection of our customers’ data and building trust, which is why we embrace the latest technology available.
How has MarkaVIP’s business grown over the years?
MarkaVIP is a pioneer in the region, becoming one of the first e-commerce players to develop our own logistics and last-mile capabilities across the Middle East. We established MarkaVIP in Jordan in November 2010 using the tried-and-tested flash sales model to suit local consumers and retailers. After getting backing from high profile European, U.S. and Middle Eastern investors, we expanded to the rest of the GCC as well as Lebanon and Turkey.
Today MarkaVIP is the largest fashion e-commerce business in the Middle East with a community of over 3 million members. We offer over 17,000 products on any given day ranging from fashion apparel and accessories to electronics and home décor.
Most recently we introduced a new online platform and launched the MarkaVIP mobile app in order to deliver a more sophisticated and safer shopping experience for our customers. We believe strongly in the potential of this market and while there are still challenges to overcome, it’s a very rewarding experience and we are proud of the results achieved so far.
What sort of advice do you have for aspiring entrepreneurs?
There are a couple of elements that they should take into consideration. Firstly, it’s vital for any start up to get funding from the right investors – those that can really benefit your business and open doors. There are many entrepreneurs out there who focus on raising capital which is good, but getting the right investor on board can have a much larger positive impact.
The second important thing is being able to overcome an emotional problem many entrepreneurs have – worrying too much about how big a stake they will have in their business. While this is certainly an important aspect, it should not become a roadblock to successful fundraising during the early stages of setting up a business.