Impact Hub in Dubai hosted SOUQ.com CEO Ronaldo Mouchawar last night as part of their #DisruptiveCEO event series. The charismatic leader of this Arabic online success story covered a wide range of topics including some of the challenges for e-commerce in the region and the trends that will change the game.
Here are some of my notes from the evening.
E-Commerce is mostly commerce.
The billion dollar question is not a technology question. It’s a customer experience one. Ronaldo asks:
Are our customers happy?
Commerce means that understanding local laws and regulations relating to commerce is important. Other factors which affect commerce – online or offline are supply, payment and logistics.
This is an advantage for local sites over international sites. Things like delivery times, censorship and returns are harder for foreign firms to get right. Souq.com has worked hard on ‘reverse logistics’ – keeping customers happy by making it easy to do returns.
E-Commerce in the MENA region.
E-Commerce is at about 2% in the UAE – it should be at least 8% according to Ronaldo. However – smartphone penetration is bigger in the UAE than in the UK, so mobile will change the game and growth will come from M-Commerce based transactions.
E-Commerce laws are lagging behind practice. If you are selling – online or offline, then your local partner must be onshore. E-Commerce is hard in Egypt and in Saudi, it’s almost impossible. Access to markets can be hard – consider a German brand made in China sold in Saudi!
‘Cash on Delivery’ (COD) is going in the wrong direction! In the last 12 months is has increased from 75% to 80% of transactions on Souq. The reason is because of growth coming from first-time online shoppers. The first time customers use Souq they pay cash, as they become more trusting of the platform they convert to online payment.
This isn’t an e-commerce issue, COD is prevalent in retail as well. The percentage of transactions in cash in supermarkets is higher in the region than elsewhere.
COD has a big impact on cashflow and working capital. There is a need to raise finance to cover differences and lags in lead times and delivery times. It’s highly inefficient – especially when cash has to be remitted back to suppliers.
There are changes coming – 9 million Saudi cards will ‘come online’ this year – cards that previously were not allowed to be used for online transactions.
Mobile, Mobile Mobile.
Mobile is totally changing the dynamic and the way we engage with customers
Mobile already makes up nearly 50% of traffic on Souq. By September, Ronaldo estimates that more transactions will be completed on mobile devices than desktop devices.
We need to disrupt ourselves on mobile. We need to innovate, or we will lose.
Merchandising for mobile devices is totally different – think one or two products on a landing page as opposed to 50.
Scalability, Culture and People
Souq.com started as a consumer to consumer (c2c) model, and while they would do it the same way again, the business had to change in order to scale. Ronaldo says that he knew the first 1000 sellers by name and now he has to rely on CRM systems and the data to maximise the opportunities.
Scaling is not just a technical issue. One of the biggest challenges faced by a company like Souq is maintaining a cohesive culture and finding talent.
The good news for the region is that talent is being attracted back to the region to work for Souq. It’s not hard to attract talent, but sometimes it is hard to keep it – though most of the leadership team have stuck around. Some of the best people at Souq are people who have been entrepreneurs and failed.
The company is changing. Data is changing the company. Souq needs to be more numbers driven and some people have to change to make decisions based on the numbers – not just on a hunch. Things like ‘re-targeting’ based on purchase is something that requires using the data in the best way we can.
Innovating for the Future
Speed is paramount. Ronaldo says to his team “Come to me with projects that we can implement in 2 weeks.”
The thinking within the company is that they need to own end to end including content. Some of the processes and systems could be spun out and be very valuable to the company.
Logistics is a business we will invest in.
Souq can be a start for companies that want to build eCommerce capability. The company shares conversions and allows suppliers to reduce their working capital while they get their sales and brand off the ground.
We can guide sellers off Souq to their own stores. That happens almost everyday.
Whatever happens next – Souq.com is happy to be creating business and creating jobs. It’s a great Arabic success story that has a few chapters to be written yet.