Growth of the Indian Basmati Rice Market in the Arab World

Growth of the Indian Basmati Rice Market in the Arab World

  • Basmati rice is grown in the Indo-Pak subcontinent and is considered the most preferred variety of rice consumed in nearly all parts of the Arab world.
  • Due to the phenomenal growth in sales the Indian basmati market has moved from being just a commodity to being a branded commodity.
  • Indian basmati continues to enjoy a robust growth in the Arab markets, especially in the traditionally non-basmati markets like Jordan, Lebanon, Egypt, Iraq etc. This trend is likely to continue in the next few years and thereby offers tremendous opportunities for the rice traders in the region.

Rice has been a staple grain in Arab cuisine for ages. This is true not only for the Gulf Arab states, but also for the Levant (also known as the Eastern Mediterranean) and other Arab markets. The region has fulfilled its needs for rice largely from the Indo-Pak region, Egypt, and Thailand. Each of these rice growing regions provides rice of different varieties with varying properties and is thus used for different dishes. But the most popular variety of rice consumed is the basmati from India/Pakistan because of its distinct properties.

Some of the common properties of Indian basmati rice are:
  • Non-sticky, fluffy, remains separate after cooking
  • Elongates almost double on cooking
  • High volume expansion
  • Possesses the natural fragrance (aroma) characteristic of basmati
  • Easily digestible
Basmati rice is grown in the Indo-Pak subcontinent and is considered the most preferred variety of rice consumed in nearly all parts of the Arab world. It is used for making a number of dishes that are an integral part of Arab cuisine. Also a large number of the spices used in Arab cuisine are also those emphasized in Indian cuisine. This is a result of heavy trading and historical ties between the two regions, and also because many South Asian expats live in the Gulf Arab states.
Some of the common rice dishes in the Arab world are Mandy, Bukhary, Kawazy, Zurbian, Chicken Biryani, Mutton Biryani, Fish Biryani, Vegetable Biryani, Pulao Biryani, and plain rice both white and Sella (parboiled). Although Indian basmati rice has been the hot favorite of the Arabs of the Gulf Region, over the last few years we are seeing a phenomenal rise in the consumption of it in the Levant countries. The below chart elucidates this trend in the region.
Growth of the Indian Basmati Rice Market in the Arab World1
Growth of the Indian Basmati Rice Market in the Arab World2
Source: DGCIS Annual Export/APEDA
One of the reasons for this changing trend is the return of a number of native people who have been living in the Gulf back to their home countries, these people have developed a taste for dishes like Biryani—for which basmati is the most suitable rice.
The consumption of Indian basmati is also growing in the traditional basmati markets of the Gulf and Iran. This trend is likely to progress with the passage of time as people in the Arab world are likely to continue to patronize the Indian basmati rice and consumption continues to grow.
Due to the phenomenal growth in sales the Indian basmati market has moved from being just a commodity to being a branded commodity. There has been the emergence of a plethora of brands in this category across the Arab world. Tilda was the first mover in this direction immediately after the first gulf war in 1991. It has been the dominant player since then despite the entry of other brands like India Gate, Dawat, Kohinoor, Himalyan Crown, Indian Star, Dunar, Radikal, and Raindrop to name a few.
The entry of these new brands has also fragmented the Indian basmati rice market with most players bringing in more than one variety of Indian basmati. While Tilda was selling only the traditional Indian basmati, India Gate came into the market with a new variant called 1121 Indian basmati. While the former offered aroma as the key product attribute, which is most suitable for plain steamed rice and green peas pulao, the latter offered elongation post cooking (2.2 times the raw grain size) as the USP (unique selling point)—which is very suitable for all types of Biryanis.
The other brands like Dawat, Kohinoor, Dunar, etc. came in offering multiple variants of Indian basmati, which can be differentiated by the different packaging colors. Indian basmati is also sold in different forms with each country having its own market dynamic. While the lower gulf markets like the UAE, Oman, Qatar, Bahrain, and Kuwait are raw rice markets, the other markets like KSA (Kingdom of Saudi Arabia), Iraq, Yemen, Lebanon, Jordan, etc. are parboiled rice (also called Sella rice) markets. Parboiling is obtained by steam boiling the rice paddy before processing. This makes the cooking of various dishes like Mandi, Khabsah, etc. much easier.
Indian basmati continues to enjoy a robust growth in the Arab markets, especially in the traditionally non-basmati markets like Jordan, Lebanon, Egypt, Iraq etc. This trend is likely to continue in the next few years and thereby offers tremendous opportunities for the rice traders in the region.

The article is written by Subbooh Moid for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

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Apple Watch – Is the Time Up for Swiss Watch Brands?

Apple Watch – Is the Time Up for Swiss Watch Brands

  • Apple is all set to reinvent and significantly upend the digital watch market with its Apple Watch.
  • The Apple Watch, which will be closely tied-into the Apple ecosystem, and will also incorporate its latest healthcare and mobile payment offerings, seems ready to eat into the already limited market presence of existing smartwatch manufacturers like Samsung, Motorola and LG.
  • However, it also poses a threat to Swiss luxury watch manufacturers like Richemont & Swatch, which are adopting a wait-and-watch approach and hope not to witness another version of the something they woefully refer to as the “quartz crisis”. 

When Apple launches a new product, it does so with the intention to disrupt an entire industry, and Apple Watch will be no different (Tim Cook said earlier this year “Apple aims to be the best, not the first, with everything it makes”). Continuing its track record of innovation and disruption, Apple has launched its first wearable device – the “Apple Watch”, which is expected to be the new ‘game changing’ product in the wearable technology space. Just the way iPod crushed players in the MP3-player space, the iPhone became a game-changer for the smart phone industry, and the iPad created the tablet market, the Apple Watch is expected to disrupt the digital watch business.

The direct competition comes from existing smartwatch manufacturers, and the Apple Watch seems to have all the technological, design, and marketing components to beat the competition in the wearable technology market. With 70% of the smartphone market in developed nations being saturated, technology companies have been trying to diversify and create disruptive wearable technology (for example, Google Glass). Smartwatch is fast emerging as a hot product category, and most players have attempted to capture this market. Samsung, Motorola and LG have already launched smart watches, but they have received mixed reviews and moderate interest from consumers.

Latest reports from Forbes suggest that Microsoft is also planning launch a smartwatch within the next few weeks that will passively track a user’s heart rate and work across different mobile platforms. Google has unveiled its smart watch software named “Android Wear.” However, none of the existing smartwatches have been able to drive mass adoption so far, but Apple Watch is expected to change that trend.

The Three Versions of the Apple Watch 

Apple Watch – Is the Time Up for Swiss Watch Brands1Source:  Apple

Here are the key reasons why we believe that the Apple Watch is likely to be more successful than others who have thus far attempted to capture the wearable technology market:

  • Enabling new features/services: The Apple Watch offers several big features such as health monitoring and frictionless payments with Apple Pay. As the health and mobile payments industries are yet to embrace mobile internet; the Apple Watch is expected to have a significant impact on them.
  • Innovative third-party apps: App developers are already waiting to build third-party Apple Watch apps, offering a robust ecosystem of messaging, social networking, and real-time information applications. For instance, the Apple Watch will have numerous third-party apps, including a Starwood Hotels (HOT) app that would let the user unlock a door with their wrist.
  • Massive existing user base to tap into: Apple already has a huge install base of iPhones, iPads, and iPods. During last Apple Worldwide Developers Conference (WWDC), Apple boasted a total of 800 million shipments of iOS devices, thus offering Apple an outstanding customer base to sell its new products to.
  • Extension of the iPhone: Yes, we have seen watches that check pulse, play MP3s, and check emails; however these watches are not functional extensions of the world’s most powerful smart phone. As the Apple Watch will use iPhone (which has higher speed, memory, and performance than the PCs of a few years ago) for connectivity, this creates a great advantage for Apple Watch.
  • Innovation fits in an existing product category: Unlike Google Glass, the Apple Watch is an innovative product that’s socially acceptable to the general consumers and fits into an existing product category which consumers understand.

However, smartwatch manufacturers are not the only ones that face competition from the Apple Watch.  With Apple’s track record of driving product adoption and displacing existing market leaders, the Swiss watch industry is keeping its fingers crossed and hopes not to witness another version of the something which they woefully refer to as the “quartz crisis”. The quartz crisis of 1960s involved the entry of inexpensive quartz movement-based watches from Asia to compete with the expensive mechanical watches that previously dominated the market. With Apple Watch about to hit the market, the biggest worry for watch brands (both luxury and non-luxury ones) is that consumers might forgo buying one of their products for an Apple Watch, as people become comfortable with features of a smartwatch and start wearing traditional watches less and less.

Apple Watch is expected to have the largest impact on the medium-low range of the two major Swiss watch companies’ brands, according to research conducted by Bernstein. The Swiss watch market is dominated by the two brands: Richemont — that has brands such as Piaget, Alfred Dunhill, Montblanc and Jaeger-LeCoultre; and Swatch — which makes timepieces under the Breuget, Tissott and Rado labels. According to a Bernstein report, “They could be exposed to revenue and EBIT (earnings before interest and tax) losses of around 3% if 20% of the addressable market is taken by smartwatches, but Richemont’s high-end brands look immune from any negative impact.” Indeed, in terms of pricing, only 1% of Richemont watches brands overlap with the Apple Watch market as most of its brands are high-end ones. But, Swatch, which owns a number of high-end watch ranges as well as its lower-end namesake brands, could be exposed to revenue losses. Also, Richemont generates about 46% of its revenues from watch sales; while Swatch relies on 90% from watches with 23% being generated by lower-end designs – the segment currently being targeted by Apple.

Further, to drive adoption, technological expertise is being complemented with the right marketing and hiring strategy by Apple, and should be treated as another indicator of the competition that awaits the Swiss watch manufacturers. Since 2013, Apple has been hiring leaders from the fashion industry,  to position itself as a lifestyle brand, as opposed to being a technology brand only – the most significant one being Burberry’s CEO Angela Ahrendts’ entry as the SVP of Retail and Online Stores. Angela’s presence was felt in the design and launch of Apple Watch – with sizes for both men and women (42mm wide and 38mm wide) combined with a wide range of styles, Apple catered to the desires of watch lovers and the style-conscious consumers. Here is a list of all the positions at Apple that were filled by fashion industry top-shots since 2013:

Apple Watch – Is the Time Up for Swiss Watch Brands2Source: Complex.com

While it may be too early to spell doom for the Swiss watch manufacturers, one thing is for sure – these brands will have to innovate at a much faster pace to retain and grow their customer base. Developing their own smartwatch won’t be a bad idea either, because if Apple is successful in driving Apple Watch’s adoption, it will likely expand the market for luxury watches (apart from smartwatches) among young consumers, thereby creating a large addressable user base for the Swiss brands.

In the end, it will be a toss-up between companies that only have better products, but also have the right marketing strategy to attract and retain their customer base.

May the best watch win!

The article was originally published at: Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

Mall Medicine

Mall Medicine

  • This article contains a brief description and brief outline of the history of retail medicine as well as future trends of retail medicine in the US and the UK, including both recent success and failures.
  • The article then goes on to describe how the concept could be quite lucrative in the GCC and what are the milestones needed to bring retail medicine to the Gulf. 

There is an interesting new trend sweeping the western world; healthcare is moving away from hospitals and setting up shop in malls and other large retail outlets.

I was first introduced to the concept of retail medicine at the 2007 World Innovation Forum in New York City. Seen by many medical doctors as the scourge of traditional primary care, retail medicine has revolutionized the delivery of medicine through its own unique interpretation of disruptive innovation.

It all started on a wintry weekend in 1999, when American entrepreneur Rick Krieger took his sick son to an urgent care center in Minneapolis, Minnesota. Rick knew his son needed his throat tested and soon enough, after a two-hour wait, a strep throat test was finally done.

Like many parents before him, Rick believed that there had to be a quicker, more convenient way for experienced parents and patients to get quick healthcare diagnoses, so he teamed up with a physician and a nurse to put the limits of traditional medicine to the test.

Started as QuickMedx (and soon rebranded as the Minute Clinic), Krieger’s convenience care concept was simple – treat the 20% of disease that cause 80% of the visits to primary health centers (an essential extension of Paraeto’s 80/20 principle).

To keep costs down, Krieger and his team decided to staff these ‘mini clinics’ with resident nurses instead of physicians (pushing the boundaries of clinical practice) and locate the clinics within large retailers (thereby forgoing much of the costs such as building and servicing of restrooms).

Today, with over 500 clinics and close to 2 million mostly walk in, cash paying customers with a 99% satisfaction rate, the Minute Clinic (through its partnership with CVS Caremark Corporation) has opened up the US market to a whole new age of medicine. Even traditional medical power players such as the Mayo Clinic, have extended their brands into the retail medicine space, in this case via the Mayo Express Clinic.

More significant is box retailer Wal-Mart efforts, which started with a pilot program in 2005 for 75 clinics in 12 US states and and has since expanded to include plans for 6,600 medical clinics by 2012 through a partnership with various retail medicine companies such as RediClinic. Across the Atlantic, British supermarket giant J Sainsbury will also be adding government-paid doctors to some of its stores, where shopping patient will be alerted by a pager when their appointment arrives.

The ability now exists to put your next medical checkup on your grocery list.

The popularity of retail medicine lies in the trend of patient convenience. People want to have flexible visiting times. This is the millennium of multitasking and retail medicine is moving fast up the healthcare continuum as a complement to larger primary care clinics and hospitals.

In the UK, employees spend around 3.5 million working days a year traveling to and from doctors, costing the British economy close to $2 billion (estimated by the Confederation of British Industry). In the US, insurers have also advocated for increased healthcare options through retail medicine as evident by CIGNA Healthcare members in Dallas, Texas being offered convenience through the insurer’s addition of MedBasics Family Health Centers to its network.

However, the success of retail medicine is not without its share of skepticism. Many people and institutions (American Medical Association, American Academy of Pediatrics,) are concerned about quality of care, hygiene issues and the limited scope of the clinicians running these ad hoc facilities. These issues, coupled with an inability to maintain the salaries of healthcare professionals, have forced retail medicine corporations such as CheckUps and Take Care Health Systems to shut down multiple walk-in clinics in both Wal-Mart and RiteAid respectively.

Industry experts estimate that a company can consume $300,000 to $600,000 to finance and maintain a retail clinic, breaking-even at about 25 to 30 patients a day. This should be no problem for retailers within the GCC, where the desert heat pushes the average consumer to frequent the mall over 70 times per year (according to Dubai based market researcher GRMC).

The GCC retail industry is an extremely attractive sector globally, according to At Kearnery’s 10th annual Global Retail Development Index (GRDI) which ranks seven countries from the MENA region make it into the top 20 in the 2011 index of top ranked emerging markets for global retail expansion, including Kuwait (5th place internationally), Saudi Arabia (ranked 7th) and the UAE (ranked 9th).

With over five million square meters of retail space currently available in the GCC (worth over $100 billion and expected to treble in the next nine years according to Retail International), proprietors of retail medicine should have no problem carving out a niche for themselves with the right strategy and scope.

Developing a retail medicine concept specifically for the GCC would require significant investment and expertise. A number of detailed assessments need to be taken into account, starting with scope of service where the individual retail clinics must have a well-defined and limited scope of clinical services that falls within the local government regulations and is catered to local cultural norms. Also, an evidence-based medicine approach to clinical services and treatment must be implemented and quality improvement-oriented, in addition to the selection of the highly specialized staff.

Once the scope and staffing have been completed, an international partnership may be necessary to bring international best practices to the GCC.

The operations of the facility must be also carefully considered, with a team-based approach encouraged. Even retail walk in clinics should have a formal connection with physician practices in the local community, preferably with family physicians, to provide continuity of care. Other health professionals, such as nurse practitioners, should only operate in accordance with local regulations, as part of a team-based approach to health care and under responsible supervision of a practicing, licensed physician.

Most importantly, a steady referral stream also needs to be established where the clinic must have a referral system to physician practices or to other entities appropriate to the patient’s symptoms beyond the clinic’s scope of work. The clinic should encourage all patients to have a “medical home.”

Finally, it is also essential to have electronic health records set up to gather and communicate the patient’s information with the local healthcare providers.

The article is written by Dr. Mussaad Al Razouki for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

Amazon is stealing your customers by paying their employees to leave

Amazon is stealing your customers

  • Regional competition for customers shows focus on customer satisfaction as the key business driver
  • Developing a customer centric corporate culture is essential for success
  • Motivate employees to care and be creative to keep customers happy and develop employee growth
How committed to your customer are you?

No company wants to say that, do they?  And while the Region sorts out logistical, cultural, and human capital specifics, Amazon.com and their CEO Jeff Bezos are already doing a growing business here.

Now, while you may say the GCC and Regional organizations have adopted a steep learning curve to meet customer needs and things are improving; the reality is simply this: you’re customers are there already and they’re waiting with high expectations for you to take care of them.   And if you don’t, Jeff et almost certainly will.

Today, commitment to the organization’s success is expressed directly as commitment to the customer.  And in our Region and around the world, it has to be.  Otherwise you won’t survive for long in today’s highly competitive marketplace.

The secret is to bring smart and creative customer driven employees and timely value based solutions to customers so they are happy and continue to buy from you. Simply said, you need a customer-centric culture to drive organizational success.  Commitment to your customer must be paramount.

Take Zappos, which has been acquired by Jeff Bezos’ amazon.com, and how they both feel about the importance of customer service and the need for staff to buy into their concept.  For Tony Hsieh, Zappos’s CEO, this meant taking his customer-centric philosophy to another level. Zappos employee training and orientation process sought to retain only the best employees with the most customer oriented mindset.  This paradigm was so engrained in its culture,  Zappos designed a program unheard of in the industry.  Hsieh referred to it as the “walk-away option” where newly trained employees were offered up to one month’s salary to walk away after completing their intensive training program.

That’s right, after finishing Zappos’s comprehensive and intensive training, newly hires were given the option of leaving the company to pursue other job possibilities.  About 2-3% would take the offer, but the vast majority, or upwards of 97-98% decided to stay.  For Hsieh, this method created an internal culture driven to be the best and drove out anyone who wasn’t as committed to their programme’s customer-based ideals.

This unorthodox approach, along with Zappos strong brand attributes, caught the eye of Amazon’s CEO, Jeff Bezos.   After Bezos acquired Zappos, he tweaked Hsieh’s idea and adapted it to the Amazon culture.   Bezos has adopted a similar pay-to-leave program aiming to copy its subsidiary’s selective recruitment and retention strategies.

Once a year, Amazon’s front line employees have a chance to reflect on their work, their company, and their coworkers to decide if they are committed or if they wish to take a pay-to-leave package.  Those who choose to stay and forego the quick cash remain a more closely tied group of committed employees.

This kind of environment  is one wherein Amazon and Zappos are not only saying “there’s the door if you don’t like it”, but “here’s how much we care for our customers.  If you’re not fully on board, here’s the door and cab fare as well to take you home.  Thanks for coming.”

Creative retention and employee training programs like these may be a key driver to attract people to your company.   Furthermore, this could be key in developing an internal brand identity whose hallmark is serving customers’ needs.  And of course, no matter what your business is, when customers’ needs are met or surpassed, business succeeds.  We can thank Zappos for a creative option to building a culture of customer service and yes, Jeff Bezos for building on a solid construct in customer-centric thinking.

The article is written by Jonscott Turco for Arab Business Review To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

The Surge in Online Classifieds

The Surge in Online Classifieds

  • Recent data reveals that classifieds ads are migrating to the Internet. The number of printed classifieds ads in MENA is shrinking, while Arabic language online classifieds websites are booming. 
  • The shift to online classifieds has improved the experience of consumer-to-consumer and business-to-consumer selling and buying. It also created billions of dollars in value for start-up founders and their investors.
  • Globally, online classifieds is a business that is mostly local or regional, where global websites are usually of low value outside their geographical area. For this reason, the region’s homegrown online classifieds companies have high growth potentials.

If you like to get your hands dirty with an inky, fat and heavy print classifieds newspaper made out of dead trees on a Friday or Saturday morning, and circle classifieds that are of interest using that bold red pen, over a cup of coffee, then you must have noticed that the number of classified ads has shrunk. This is especially true in the autos and real-estate segments, as the volume of ads has fallen over the past couple of years and even more so during the last 12 months.

Where did the classified advertisements go? You won’t have to look far. Just pick up your computer or smart device, do a quick search, or download a regional classifieds app, and you’ll find all you’ve missed and much more.

Between 2000 and 2010, US newspaper classifieds revenue fell from $19.6 billion to less than $6 billion. In fact, today most cities in the US don’t have a classifieds print newspaper.

Europe did not need long to follow. A couple of years ago, France’s most iconic classifieds paper –which was the inspiration behind many of the classifieds prints in the Middle East– decided to stop printing. While we are yet to see leading classifieds newspapers in the region shut down, it’s easy to predict that this may happen in less than 5 years.

A look into the regional print classifieds industry reveals that business from classifieds listings has stopped growing 2 or 3 years ago, while most titles have witnessed 20 to 30 percent decline in revenues and volume of ads last year. This year seems to be following suit.

While this may be bad news for publishers who made a bet on print classifieds, and set a blind eye to the obvious shift to online classifieds, the migration of classified advertising to the Internet has been a win-win for all. This includes consumers, small and medium-sized companies, and online classifieds start-ups and their investors.  The shift drastically improved the experience of consumer-to-consumer and business-to-consumer selling and buying. It also created billions of dollars in value for start-up founders and their investors around the world, which made-up -multiple times- for the lost value in print classifieds. Despite starting mostly with a free offering, online classifieds have been able to prove their success in monetizing users infinitely more than print classifieds, in a far more scalable manner, and with much higher margins.

It is not an exaggeration that more than 50 percent of the 135 million Internet users in the Arab world rarely use a print classifieds newspaper. From a seller or service provider’s perspective, one can get immediate gratification and results by posting ads for free, or paying a small fee, to get premium exposure without having to leave the comfort of his couch or wait for the newspaper print date. For example if you want to sell your car or house, all you’d have to do is pull out your smartphone, take few photos, tick a few boxes, and boom, your advertisement would be online.

From a user’s perspective, spending hours going through print pages and circling ads, setting-up comparison tables, writing down phone numbers and waiting for next week’s edition for new options is now replaced by a sophisticated search that allows you to look for cars by brand, year, body type, fuel type, and price, get in touch by email or phone, and set-up alerts in case what a user wants is not available now, but could become available in the next minutes or hours. The same great experience applies to real-estate, jobs, electronics, services, and whatever buy/sell category you can imagine.

To understand the seismic nature of the shift that happened in the past few years, approximately 25 percent of Internet users in the Arab world have used online classifieds. This put the total audience of top regional classifieds websites at an estimate of more than 35 million users per month by mid-2014. This includes varying using habits from daily to weekly or more, which far exceeds not only the audience of print classifieds, but that of all print media in the Arab world –be it daily, weekly, or monthly.

On a country basis, a leading classifieds website in Saudi Arabia for example reaches 250-400 thousand users a day, depending on the day of the week, while the leading newspaper and leading classifieds weekly in the country prints no more than half this number on their best day. In terms of depth, classifieds websites usually have tens of thousands of postings per day, compared to a maximum of several hundred posts in the daily, and low one-digit thousand posts in weekly print classifieds.

Online classifieds have become so popular in the Arab world that in some countries the leading classifieds website is more popular than Facebook. This is the case for leading Arabic classifieds website OpenSooq.com, which is a leader in its category in several countries including Saudi Arabia, Kuwait and Jordan. With a simple, easy to use website and popular iOS and Android apps, OpenSooq is not only leading in countries that have mature online audiences, but also in countries where the number of Internet users is growing very quickly via smartphones, such as Iraq and Libya.

In expat-dominated countries such as UAE, Qatar, and Oman, English-language generic classifieds website Dubizzle has done well by focusing on business-to-consumer advertising in sectors such as real estate, offering advanced search functionalities, and a more elaborate user interface.

OpenSooq.com and Dubizzle are joined by category leaders who have focused on specific verticals, such as Propertyfinder, focused on real estate in the UAE, and Haraj, the undisputed leader in automotive classifieds in Saudi Arabia.

Globally, online classifieds is a business that is mostly local or regional, where global websites are usually of low value outside their geographical area. The sector is also usually one of the first categories to mature with emergence of regional leaders. This has been the case indeed in MENA, with the business leaders in online classifieds mostly being home-grown start-ups that are now valued at tens of millions of dollars. That’s just for starters, as they have tremendous growth potential ahead of them.  I’d advise you to keep an eye on this sector.

The article is written by Khaldoon Tabaza for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

Al Etihad Credit Bureau: Making the UAE Creditworthy!

Al Etihad Credit Bureau

  • The absence of a formal consumer credit rating system in the UAE resulted in consumers having easy access to loans without any check on the repayment capacity. However, the launch of the Al Etihad Credit Bureau is expected to change the scenario by providing banks access to consumers’ credit history, thereby curbing excess lending and raising the quality of retail lending in the country.

Al Etihad Credit Bureau (AECB) will start providing consumer credit reports to financial institutions from September 2014, and this is expected to have widespread implications for consumers, banks, and the UAE’s economy. However, in order to assess the impact that the Al Etihad Credit Bureau (AECB) is expected to have, it’s important to understand the history of credit check activities in the UAE.

The first step in the credit check history of the UAE was the creation of the Emirates Credit Information Company (Emcredit) in January 2006. Emcredit, the first private credit company in the UAE, was expected to be compliant with international standards of data protection and security. It provided industry information to a federal technical advisory committee working for creating a regulatory framework to share credit information across UAE. Between 2006 and 2008, Emcredit established a database of 5.6 million consumer identification records, and also gathered payment behaviour information on consumer and commercial borrowers, and held 35 per cent of mortgage data in the UAE.

However, the global financial crisis in 2008 impacted the UAE as well, most notably the real estate sector in the country. As the real estate bubble burst, the regional economic boom in UAE came to an end, and banks suffered the most with large scale debt default. This forced the banks to revisit their existing portfolio and take a strategic decision on their future lending activities.

Among other things, it made the government and lenders (banks and other lending institutions) realize the importance and urgency of strengthening the process of gathering and sharing credit information on consumers. In March 2009, the Credit Information Law was approved by the Cabinet, allowing the establishment of a Federal credit information company that would provide comprehensive services and solutions related to credit information. In July 2010, a law was passed making it mandatory for all the lending institutions, utilities and telecoms companies, to share client information within the UAE with Emcredit.

Timeline of Credit Check Activities in the UAE

Al Etihad Credit Bureau-1

Source: TheNational, Arab Business Review Research

With increasing need for a centralized consumer credit information system, bylaws were prepared for establishment of a federal bureau and Al Etihad Credit Bureau (AECB) was established in 2012. The ministry of finance established the AECB with a paid-up capital of Dh200 million. It started compilation work in 2013 and is expected to start providing consumer credit reports to financial institutions from September 2014. In addition, the bureau is also expected to come up with regulations to curb excess lending and rising consumer debt.

AECB is aiming to achieve its goals in a multi-phase process. The first phase will be launched in September 2014 allowing the banks and financial institutions to access existing and potential customers’ credit reports electronically. This information can be purchased as credit reports on submission of required documents. The lending institution will, however, need a written consent from the borrower to obtain the report. The customers can also access their credit reports by paying a fee through customer service centres. The report will include name, current address, and employment, credit repayment history for last 24 months, credit and loan histories, and overdues and default records for past 24 months.

To start with, the reports will be based on UAE data only, however, in future there is a plan to work closely with international credit bureaus like Experian, Equifax, CIBIL, SIMAH etc. to provide a more complete report. As of now, the credit report issued by the bureau will have no relevance overseas as the bureau will not get access to credit history of the banking consumers outside UAE.  By 2015, the AECB is expected to provide credit coverage on companies as well.

The retail lending environment in the UAE is expected to undergo a radical change, as the bureau becomes operational and start issuing credit reports.

For banks, the credit reports from bureau will provide much needed inputs in the lending process and therefore improve the quality of credit. The reports will highlight unclosed bank accounts, non-cancelled or unused credit cards, outstanding payment and loans on several credit cards and overdraft facilities. Therefore, it will enable the banks in decision making and reject requests for loans and credit cards to individuals having a poor repayment history even if they have the capacity to pay. It will also help the banks to charge high or low interest rates depending on the risks associated with each consumer. As banks will have more clarity on consumer’s payment history and current loans status, they can ensure that they do not over-lend, and therefore have a relatively high-quality loan portfolio.

It is also likely to lead to a growth in the personal loans for debt settlement with consumers consolidating their debt positions. As a result, products such as Abu Dhabi Islamic Bank’s Al Khair Liabilities Settlement are set to benefit from the AECB’s consumer data reports.

For consumers, these reports will act as bitter pills as they will stop individuals from applying for multiple loans beyond their repayment capacity, and ensure that they do not fall into a debt trap. Individuals with better credit profiles will be rewarded as banks will be keen to lend to individuals with a good credit profile. Further, with the UAE Central Bank setting limits on the share of government-related enterprises (GRE) lending in banks’ loan portfolio, banks will seek to increase their lending to private companies, SMEs and individuals – once again, companies and individual with a strong credit history will stand to benefit.

The short-term impact will include slower credit growth, which could have its spill-over impact on the overall economy; however, in the long-run, the bureau will help improve the credit environment for consumers and lenders, alike.

As the UAE transitions from its current lending environment to a new one, credit growth is likely to be impacted as over-indebted customers may not be able to get new loans. This will impact banks like Abu Dhabi Islamic Bank and Dubai Islamic Bank that have retail loans as a major contributor to their loan book. For consumers, access to credit will no longer be as easy it was in the past, and growth in credit for existing borrowers will be much slower. A tightened lending regime will likely reduce liquidity and thus spending, and might pose a short-term challenge to UAE’s economy, that has recently shown signs of recovering from the 2008 financial crisis.

However, on the positive side, growth in new customers without any credit history will be rapid. Also, credit reports will make UAE nationals more aware of financial management and ensure that they maintain a good repayment profile to improve their future credit prospects. In the long-run, the system is expected to lower the default rates, improve customer pricings and improve the risk charged on personal loans.

In a nut-shell, if executed well, the AECB’s roll-out will put an end to free-for-all lending and support the economy via a more sustainable credit cycle.

The article was originally published at: Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

Step into green logistics

Step into green logistics

 

  • Defective supply chains are costing companies billions every year in lost revenue and create significant negative environmental impact.
  • Warehouses can play an important role in mitigating the environmental impacts of logistics activities through green initiatives.
  • Logistics centres being an integral part of manufacturing, the concept of green warehousing is going to be an operational norm, and should attract investment from both MNC’s and SME’s.
  • MNCs having aggressive targets of reducing carbon emissions from both mobile infrastructure and immobile infrastructure in the entire supply chain, are likely to be the prime investors in this segment.

A superior logistics system is a ‘proprietary asset’ of any organization that cannot be easily duplicated. Logistics have a pivotal role to play in making the whole supply chain experience seamless. Many organizations have begun to view business logistics as an effective competitive weapon. Although winds of change are sweeping across supply chain business the industry is becoming more complex with increased globalization and has become the centre stage of discussion.

Industry Challenge

Defective supply chains are costing companies billions every year in lost revenue. At this point there is a need for optimization, automation, risk mitigation and innovation. According to reports, around 75 per cent of a company’s carbon footprint comes from transportation and logistics alone. In such a scenario, warehouses can play an important role in mitigating the environmental impacts of logistics activities through green initiatives.

The demand for quality Logistics infrastructure is being strongly felt across all industries owing to growth in the emerging economies, the future of the warehousing sector seems bright. The driving force behind the green movement is the continuous rise in fuel costs. Moreover, growing demands from global players for green supply chain processes and the need to cut down on external and wasteful costs that leave carbon footprints in environment are other major factors driving companies to go green.

Potential investors

Logistics centres being an integral part of manufacturing, the concept of green warehousing is going to be an operational norm, as the concept will provide the much desired qualification to engage in business with the MNC’s and SMEs. MNCs in general are going to be the prime investors in this segment and have aggressive targets of reducing carbon emissions from both mobile infrastructure and immobile infrastructure in the entire supply chain. This situation demands companies to adopt green measures. This also helps in bringing long-term benefits to these companies

Where to Start?

To facilitate the Green supply chain process, a comprehensive review of operations across the supply chain and the value proposition for implementing an advanced supply chain planning and logistics solution is required. The scope of this effort includes all supply chain processes across the following functional areas:

  • Prioritize potential business capability improvements
  • Outlined technology solutions required to support these improvements
  • Implementation of a series of program and infrastructure upgrades
  • Optimization of resources,
  • Adaption of technology in different areas of warehousing,
  • Automation of order to cash processes, and outsourcing
  • Integration of warehousing with efficient transport & Distribution network systems.
  • Waste disposals & recycles

Create a Value proposition

The environmental initiative builds the value proposition of a logistics company and sets it apart from the competitors as it reflects its commitment to the environment. The benefits of undertaking green logistics and environmental initiatives include

  1. Brand building for being projected as an Eco-friendly company holding corporate social responsibility
  2. Cost management from energy savings by reducing fuel consumption and CO2 emissions resulting in efficient and sustainable supply chain infrastructure, which creates an opportunity to earn carbon credits.
  3. Human well-being index results in increased productivity of employees.

Material compliance & Automation

Implementation of Green supply chain is a challenge as it involves both automation and material compliance meeting the carbon reduction. Logistics automation has virtually made inventory paperless and the use of information technology is bringing warehouse operation towards the greener side. In addition, using construction materials that possess good strength and durability proves to be of utmost importance like the precast as it reduce the CO2 emissions. It plays an important role as the warehouse structures are expected to exist and perform over long periods of time, and hence the construction materials used should be compliant to sustainable standards to bear the long-term wear & tear and reduce the cost of replacement to a large extent. For e.g the roof structures facilitating use of solar PV, usage of skylight concepts will drive reduction in costs of alternative fuels on a year-on-year basis, insulated steel panels will ensure lower consumption through the grid and eventually play a crucial role in the green technology.

Seven steps to Green implementation

  1. Building a road map based on corporate social responsibility
  2. customer acceptance and good business sense
  3. Looking for customer competitive advantage and USP s
  4. Evaluating green initiatives in terms of cost, timescale and business case
  5. Measuring and bench marking
  6. Adopting the right green practices for Eco-friendly
  7. Design energy-efficient construction and operations in warehouses

Operational Excellence

Today, the manufacturing industry is facing a volatile economy, intense competition and rising energy / material costs. Improving operational efficiency has become an imperative not just for margin purposes, but also for long term success. Cost reduction, quality and productivity improvement have now become key levers for gaining competitive advantage. Operational Excellence is the pursuit of conducting business in a manner that continuously improves the quality of goods and services, reduces cost, and enhances speed and flexibility to achieve competitive superiority. Green Optimization of the supply chain can significantly improve company profitability and support in achieving Operational Excellence.

 

The article is written by Raghu Menon for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

The MENA Franchising Opportunity and Success Factors

The MENA Franchising Opportunity

 

  • The franchise economy in Middle East and North Africa (MENA) is worth $30 billion and is growing by 27% per annum. High disposable income of consumers, favorable regulations, and a young and upwardly mobile consumer market are the key factors driving growth. GCC nations are at the forefront of growing the franchise economy in the Middle East, while Egypt is the leading franchising destination among African nations.
  • Food and beverage (particularly fast food) sector is the biggest beneficiary of the growing franchise economy, while other sectors like education, maintenance and health services, are underdeveloped and are growing slowly.
  • International brands looking to expand rapidly into the MENA region usually prefer to opt for the master franchising (also called as sub-franchising or multi franchising) format.
  • A strategic entry into the franchise market of the region must also take into account the legal, regulatory, cultural, religious and social norms that define the preferences of the governments and consumers.
  • Just Falafel stands out as a success story – adopting the franchising route has this Middle Eastern start-up expand to 18 different countries with more than 900 outlets, increase its sales by 35 times, and become the Biggest Falafel Franchise in the World.

 

The franchise economy in Middle East and North Africa (MENA) is worth $30 billion and is growing rapidly. As per Middle East and North Africa Franchise Association (MENAFA), the franchise industry in the Middle East and North Africa is worth over $30 billion today, and is growing at a CAGR of around 27% annually. Concentration of high net-worth individuals, favorable regulations, and a young and upwardly mobile consumer market are the key attractions for franchisors looking to expand their operations within the region. On the other hand, the driving factors for franchises and local governments are the entrepreneurial opportunities presented by the franchising model, job creation, and the ability to inject international grade skills and processes into the economy. Further, investors also feel more confident opening a store under the umbrella of a large, multi-national corporation, as they expect franchises to respect the strict quality standards issued by the mother company, and also benefit from the well-established operating, marketing, and accounting practices of the franchisor. 

Not surprisingly, GCC nations are at the forefront of growing the franchise economy in the Middle East, while Egypt is the leading franchising destination among African nations. With a combined population of 1.4 billion, a GDP of $1.9 trillionan affluent customer base and (relatively) business friendly environment, the Gulf Cooperative Council (GCC) – Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman – presents the biggest opportunity for existing and potential franchisors and franchisees in MENA. 

GCC consumers demand exclusive, superior and high quality product, and therefore are the right target segment for international brands looking to make an inroad into the region via the franchise mode. This is clearly reflected in the fact that in GCC, more than 50% of retail sales are generated from international brands and in the leading malls the retail mix is as much as 80/20 (international brands versus home-grown).  As a result, GCC malls tend to host a department store franchisee location, e.g. Saks at Kingdom Mall in Riyadh, Bloomingdale’s at Dubai Mall, or Harvey Nichols at the Mall of the Emirates in Dubai. 

Within Africa, the Egyptian franchise sector grew from 25 international brands in 1999 to 360 in 2010 and 430 in 2012, as per the Egyptian Franchise Development Association (EFDA). The biggest drivers of franchising in Egypt have been 1) the knowledge transfer from foreign franchisors (who wish to collaborate with franchises having the requisite local knowledge); and 2) job creation – the franchise sector in the country employees more than 55,000 nationals and this number is expected to grow further in the coming years as franchisors target the upper and upper-middle classes in the country. 

Food and beverage (particularly fast food) sector is the biggest beneficiary of the growing franchise economy in MENA. Franchised and licensed business have permeated all sectors including education, transportation and tourism; however, like with the rest of the world, the franchising model has found a natural home in the retail and food and beverage (F&B) sectors.  Within the GCC countries, fast food is expected to account for 40% of the franchising market, as eating out in a part of the region’s culture and tourism practices.  In addition, the liking for U.S. style casual dining has further helped drive the entry and growth of international fast food joints in the region. 

The popular international food franchises in GCC region include Burger King, Popeye, Hard Rock, McDonalds, Hardees, Pizza Hut, Pizza Inn, Fuddruckers, TGI, Chilies, and Wendy’s, while Just Falafel is the leading example of a Middle East-based fast food chain that has expanded rapidly in the region and worldwide over the past five to seven years.  Even in Egypt, nearly 75% of franchises opt to represent retail and food brands.  Industry experts and leading franchising consulting firms expect the region’s F&B franchises to grow by >25% in the coming years, and maintain their dominance over other sectors like education, maintenance and health services, which are underdeveloped and are growing slowly.  

Interestingly, while some leading hospitality brands like Sheraton, Holiday Inn, Meridian, and Ramada have adopted the franchise route in the region, others like Hilton, Marriott, & IFA remain apprehensive because of 1) lack of faith in local franchise’s ability to maintain the brand; and 2) question mark over the model’s profitability without economies of scale.  

While the MENA franchising opportunity (especially F&B) seemvery attractive, we recommend potential franchises and franchisors to follow the below guidelines to help build a successful franchise business in the region. MENA consumers have high disposable incomes, are perceived as luxury- and brand- conscious, and seem unrelenting in pursuit of the bestthereby encouraging domestic and international franchises to set-up shop in the region. However, the region’s market is idiosyncratic and a strategic entry into the region must also take into account the legal, regulatory, cultural, religious and social norms that define the preferences of the governments and citizens of the region. 

Choose the country to enter and ensure compliance with the laws of the landMENA nations have different varying laws and ownership caps for franchisees looking to set-up operations in the respective nation. The table below from a report by DLA Piper Middle East lists the percentage of GCC- and Foreign- franchisee ownership allowed by different GCC nations. 

Apart from the ownership structure, it also important to ensure that you comply with the various franchising related laws, namely, Agency laws, Commercial codes, Companies law, Civil Codes, Judicial Procedural Code, Trade Mark law, Trade secrets/unfair competition law, Employment law, and other laws which regulate import of goods, labelling. 

Maximum percentages of ownership in the share capital of a corporate franchisee by GCC nationals and foreigners in each country 

The MENA Franchising Opportunity-2

 Source: DLA Piper Middle East

Choose the right franchising format and partners:

International brands looking to expand rapidly into the MENA region usually prefer to opt for the master franchising (also called as sub-franchising or multi franchising) format. In this format, the master franchisee, or the locally present master licensee, has the rights to further market and sell franchises within a specific territory/country. These partners or ‘franchisees’ open an agreed number of brand stores or outlets in the assigned area.  This format is best suited for sectors like F&Bretail, education, beauty services, etc., and is usually adopted by franchisors looking to establish a wide footprint in a short period of time.  However, selection of the right master franchise is extremely critical under this model, as choosing the wrong master franchise can result in break-down of the complete franchising ecosystem. 

The product or single-unit franchising format allows franchisees to sells products and/or services on behalf of the franchisor and functions independently with limited assistance. It is best suited for businesses like retailing of jewellery, apparel, and footwear.

The license to manufacture format allows franchisors to grant a license to the franchisee to manufacture products under its brand name in accordance with its specifications and quality standards to be sold in a selective market segment. 

Adjust your product/menu for cultural preferences, tastes, guidelines (including religious observance) and customer expectations. This is applicable to all sectors and countries, but is especially true for the F&B sector where companies can gain or lose market share based on their ability to adapt to cultural preferences. The strategy to offer falafels which combined the authentic falafel with global flavors like Emirati, Lebanese, Indian, Greek, Italian, Japanese, Mexican and American is one of keys to the huge success of the Just Falafel food chain (discussed in case study below).  Further, Herfy’s strategy of upsizing their chicken pieces with extra batter and adding more fries at a value price helped it displace KFC as the dominant fast food chain in the Saudi Arabia. 

Choose culturally appropriate ambiance. For example, café’s in Saudi Arabia generally have a lounge feel with segregated retail space – families and single men. 

Location, location, location: with insufficient new properties, rising rentals and property cost, it is difficult to run a profitable franchising business and attract consumer footfalls at the same time.  Therefore, it is advisable to look for older properties that require innovative remodelling and renovation. 

Build brand and goodwill by participating in philanthropic and CSR activities. Franchises and franchisors should expand the brand by interacting with the local communities, considering geographic issues, political climate, linguistic and cultural nuances, and taking CSR initiatives. 

 

Case Study:  Just Falafel – From a Start-up to the Biggest Falafel Franchise in the World

Just Falafel started what it calls the “falafel revolution”, when it was founded as a single restaurant in Abu Dhabi in 2007.  The focus at that time was on creating a 100% vegetarian falafel (a traditional Middle Eastern sandwich), that would combine the authentic falafel with global flavors like Emirati, Lebanese, Indian, Greek, Italian, Japanese, Mexican, American, etc.

However, the turning point in the company’s growth story came in 2011 when the company hired Fadi Malas as its CEO and decided to adopt the franchising model to grow. The company pitched itself to franchises on the basis of 7 factors: clever positioning, brand equity, strong growth, great reputation, commitment to quality, robust franchise system and an innovative menu. The company pushed its franchising agenda aggressively through social media platforms like Facebook. During a 12-month campaign, the company received more than 2,300 requests for franchising from 73 different countries.

Ever since, Just Falafel has grown to be the biggest falafel franchise in the world, with agreements signed with commitment of developing more than 903 outlets in 18 different countries, including rolling out 100 stores in Egypt, 200 stores in the UK, 50 stores  in Turkey, 50 stores in New York, US, and 125 stores in Saudi Arabia.

As per Malas, adopting the franchising route helped Just Falafel increase its sales by 35 times and attract USD 200 million to reinvest its brand.

Just Falafel is headquartered in Dubai, UAE, and has regional offices in UK, Egypt, Lebanon, and Turkey. It currently employs more than 400 people worldwide, including 28 in the head office.

The MENA Franchising Opportunity-1

 

Source: Just Falafel

The article was originally published at: Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

 

Online Marketplaces: The new commerce power players

Online Marketplaces

  • Smart start-ups win traditional and new marketplace categories in the Arab world while traditional players stay on the sidelines.
  • While, early online marketplaces were initially launched as an extension of traditional marketplace categories, innovative marketplaces are now making their way into the Arab world.
  • The traditional marketplaces would do best to acknowledge this trend and react in-time to be a part of this growth opportunity 

Marketplaces have been at the core of commerce for thousands of years, and they continue to serve in gathering merchants and people who come together for the purchase and sale of goods and services. While marketplaces have always been at the core of economic prosperity for the cities and nations that had them, they have evolved over time –not the least from seasonal marketplaces where traders gathered in old time to permanent geographic locations, such as the famous Souk al-Khalili in Cairo and Souk al-Hamidiya in Damascus, and into modern malls such as Dubai Mall, in the Emirate of Dubai.

Yet the Internet introduced a new dimension to marketplaces, allowing pioneering start-ups to build and own generic and specialized marketplaces, focused on bringing together sellers and buyers on a technology and marketing platform. The Internet has also allowed these start-ups to own such marketplaces while extending their business models from renting spaces to charging a commission on every transaction taking place in these new digital marketplaces, and offering value added services to merchants and users. Most importantly, while traditional marketplaces were exclusive territory for owners of large capital and real-estate, new online marketplaces are now being built by smart entrepreneurs capable of recognizing an opportunity and executing on it in an efficient and aggressive manner. Moreover, the cost of building an online marketplace today is only a fraction of the cost of building a traditional one, with potential and scalability that is an infinite multiple of that of traditional markets.

Early online marketplaces were initially launched as an extension of traditional marketplace categories, such as fashion, electronics, and books. Today, generic online marketplaces, which include the famous Amazon.com and eBay, have grown over time to encompass all kinds of goods and services.  Furthermore, the nature of the Internet as a ubiquitous and seamless network allowed for the creation of new specialized markets for industries that never had their own marketplaces. Examples of such categories include transportation, healthcare, and financial services. The creation of these marketplaces has allowed consumers to request services from local and regional organizations across borders. This in turn led to the creation of several billion dollar companies, including the likes of Uber in the transportation sector, which connects passengers with limousines, MoneySuperMarket, which lets users compare financial services and products (more recently automotive services and home repair services) and procure them online from providers.

With the growth of Internet users in the Arab world reaching more than 135 million users today, and the proliferation of smartphone devices reaching 84% in countries such as the United Arab Emirates and Saudi Arabia, the time for online marketplaces in the Arab world has come. During the past two years or so several marketplace categories have emerged as mature categories in the Arab world, with undisputed leaders operating efficient marketplaces and growing at record rates, all while requiring a fraction of the investment of a traditional marketplace.

In the automotive sector, traditional car dealership markets have now been replaced by startups that allow users to sell their cars in record time and with a fraction of the hassle of selling through traditional car dealerships. SellAnyCar.com is one such startup; it was founded in the UAE and has now expanded into Turkey and Saudi Arabia.  Another is the automotive section of the leading Arabic classifieds website, Opensooq.com, which offers more cars for sale and requests to buy cars than any traditional cars marketplace in the Arab world, all at a fraction of the cost it takes to build and operate a traditional car dealership, and with unsurpassed convenience and market efficiency.

In the transportation sector, startups like EasyTaxi now allow users in Saudi Arabia, Jordan, Kuwait, Qatar, and Bahrain to order taxis with a tap of a button on their smartphones, using a free app that automatically matches users with taxi drivers nearby. Not only does this startup improve the efficiency of taxi drivers, saving them the hassle of wandering in the streets, but it also offers safety and comfort especially for passenger categories such as women and teens, and reduces pollution and power consumption.

Innovative marketplaces that did not exist before the Internet are now also available in the Arab world. They include ReserveOut.com, which acts as a marketplace for restaurant reservations, allowing users to discover new venues and guarantee immediate and free reservations from the comfort of their desks or through their smartphones. Online food ordering marketplace, hellofood, is now probably the largest food court in Saudi Arabia, Jordan, Qatar, and Lebanon, allowing users to order in food from their favorite restaurants, rendering old business models such as food ordering by phone or through catalogues obsolete.

The technology and user experience components of online marketplaces have already been commoditized. This in turn means that marketing and execution are the key aspects for the success of online marketplaces. First mover advantage has also become key to leading marketplaces; early market entrants tend accumulate the largest number of service providers and users, and therefore they get even bigger and more successful with time. Furthermore, unlike traditional marketplaces, which allow competition the opportunity to start in new geographic locations in the same country, the national and cross-border nature of the Internet means that the leading online marketplace will make it very difficult for competition to gain market share. In fact, in many of the cases there is only a handful of winners in each category.

So far, new start-ups built by smart founders and supported by strategic value-adding investors are winning marketplace categories one by one in the Arab world. Meanwhile, very few traditional marketplace players have understood the major shifts taking place in the market, in addition to the change in tastes and the consumer behavior of new millennials in the Arab world. This does not appear to be changing in the near future. Smart stakeholders should move fast to leverage any remaining value proposition they have through their existing relationships or capital availability, and partner-up with leading Internet market players before it’s too late.

The article is written by Khaldoon Tabaza for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review