The founder of Wadi.com predicts a major expansion of the region’s fledgling e-commerce sector.
"Anyone who executes the correct way in the next couple of years can get into the big league," said Pratik Gupta, co-founder of Wadi.com, an e-commerce market platform.
"This geography is not the same as anywhere else so you have to be diligent. I expect the next five years to be a roller coaster for e-commerce. It will be great for the customer, then I believe consolidation will happen."
The market platform was launched in the UAE in 2015 by a three-man team focused on opportunities in Saudi Arabia and the UAE.
Wadi.com is a retailer as well as a platform for other third party traders.
Mr Gupta, a former executive with Jabong, the online Indian fashion portal, with Ankit Wadhwa and Kanwal Sarfaraz, McKenzie & Co executives, saw a huge opportunity in the Middle East.
In February 2016, Wadi.com raised US$67 million, a record for Series A funding in the region, and by the end of the year achieved operational profitability two years after start-up.
"There was no one providing the service that was expected," said Mr Gupta.
He said there were tens, maybe hundreds, of e-commerce players when Wadi started but most were not specifically customer- focused and missing key opportunities.
"We found that the ecosystem in the whole region left a lot to be desired and we wanted to bring levels of service that Amazon in India and Flipkart were offering. There was a basic contradiction in the levels of smartphone penetration and internet usage which is among, if not the, highest in the world, and yet the levels of e-commerce was very low – the opportunity was massive."
Rocket International, the German tech incubator and company behind local favourite Namshi, the regional online fashion retailer, was Wadi’s main backer at start-up.
There was a high-profile exit last month from Namshi when it was 51 per cent acquired by Emaar Malls for $151m.
It was just one of a series of mergers and acquisitions that took place after Amazon, the world’s largest online retailer, bought Souq.com, the region’s biggest market platform for $580m in March.
The price, while significant for a locally built digital platform, was a far cry from the $1 billion valuation the company had touted when it received $275m investment in 2016 chiefly from two VCs – the South African Napsters and the US’s Tiger Global. It was also $220m less than Emaar Malls’ $800m bid at the 11th hour.
However Mr Gupta believes the price paid was probably subject to many pressures.
"I think investors have many reasons for exits," he said. "The investors were going to take a significant return so why fight Amazon?"
Since the Souq acquisition there has been a raft of M&A activity in the regional digital space.
Noon.com, the late-out-of-the-gate market platform announced by Mohamed Alabbar, bought Jadopado.com, a regional market platform, for an undisclosed fee at the beginning of May. Mr Alabbar also acquired a large stake in Middle East Venture Partners (MEVP) in May.
MEVP has more than $120m of assets under management and $60m in co-investments. Its portfolio includes in the music streaming service Anghami.
Majid Al Futtaim, the region’s biggest mall owner and operator, also joined the digital party, taking an equity stake in fetchr, a Dubai-based logistics delivery company, as part of a $41m funding round for the company that was started only four years ago. Mobile taxi app Careem, the region’s only unicorn with a $1bn valuation, also added another string to its digital bow starting Careem Box, following a similar business model to fetchr.
"We have become a natural choice to be bought," said Mr Gupta. "Many international companies have looked at us because the region is such a fertile ground for growth. We have a brilliant business team with 80 per cent of our inventory from third-party vendors. However the 20 per cent that is our stock makes more than 50 per cent of our revenue."
ascott@thenational.ae
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Keep it fun and engaging
Stuart Ritchie, director of wealth advice at AES International, says children cannot learn something overnight, so it helps to have a fun routine that keeps them engaged and interested.
“I explain to my daughter that the money I draw from an ATM or the money on my bank card doesn’t just magically appear – it’s money I have earned from my job. I show her how this works by giving her little chores around the house so she can earn pocket money,” says Mr Ritchie.
His daughter is allowed to spend half of her pocket money, while the other half goes into a bank account. When this money hits a certain milestone, Mr Ritchie rewards his daughter with a small lump sum.
He also recommends books that teach the importance of money management for children, such as The Squirrel Manifesto by Ric Edelman and Jean Edelman.
Company Profile
Name: Thndr
Started: 2019
Co-founders: Ahmad Hammouda and Seif Amr
Sector: FinTech
Headquarters: Egypt
UAE base: Hub71, Abu Dhabi
Current number of staff: More than 150
Funds raised: $22 million
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Rating: 3/5
Company%20Profile
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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UAE currency: the story behind the money in your pockets