After a 10-year stint at e-commerce ventures in Silicon Valley, Ahmed Alkhatib was keen to explore the prospects of a tech startup in the Middle East. Getting his business concept - MarkaVIP, a flash sales website - off the ground in 2010 was the first hurdle, but less than four years later, the company has managed to make a mark in the region's vastly expanding e-commerce marketplace.
"When we first launched MarkaVIP, e-commerce was an almost foreign concept here, but that certainly didn't deter us because we believed in the great potential of this market," the Jordanian entrepreneur said. And industry statistics suggest that his optimism had merits.
Average Internet penetration level in the Middle East is 40.2% of the population (over 90 million), outperforming the global average of 34.3%, as per InternetWorldStats.com's latest data.
In addition, an increasingly tech-savvy consumer base is fueling demand for mobile devices in the Middle East, with UAE emerging with the highest smartphone penetration in the world, according to a Google survey. The report indicated that smartphone users in the region are some of the most active worldwide, using their devices to search information, engage in social media and shop online.
Favorable market conditions prompted MarkaVIP's original team of three to take the plunge and launch their business model, an exclusive online shopping community that has access to private sale campaigns offering luxury fashion and lifestyle brands for a limited period. The company's membership has grown to over 3.3 million, with product offerings reaching more than 17,000.
As well as employing over 300 people, MarkaVIP's operation has expanded from Jordan to seven additional countries, namely Lebanon and the six GCC countries (Bahrain, Kuwait, Oman, Qatar, UAE and Saudi Arabia). Alkhatib has kept mum about the site's sales figures, but a media report in 2012 puts MarkaVIP transactions at around USD 320,000 per day.
MAKING MONEY IN THE DIGITAL SPACE
Alkhatib said MarkaVIP's sole revenue stream comes from the sales it generates through the luxury products it sources all over the world.
"Big brands seek alternative channels to clear their stock and flash-sales [or deal-of-the-day concept] is one of those channels. In addition, local brands seek to expand their business and find it very attractive to display their latest collections on MarkaVIP. With its lean operations, and state-of-the-art infrastructure, MarkaVIP succeeds in delivering those products efficiently thus generating value for itself and its customers," the company founder and CEO explained.
With its own logistics system in place, the company can offer value-added services by delivering a significant chunk of the orders using its own resources, Alkhatib said.
The growth of MarkaVIP's consumer base has attracted international investors to give the firm a much-needed shot in the arm, after local financiers failed to embrace e-commerce. In 2011, a year after launching, MarkaVIP secured USD 5 million and in 2012, it received a further USD 10 million.
E-COMMERCE POTENTIAL
Alkhatib said e-commerce in the region presents many opportunities, but the complexity of starting up a business varies from country to country. The UAE, he said, has free zones that have easier registration and legal processes. Other countries like Jordan require very little capital.
"As is the case with all pioneers, our journey has not always been easy and we've had our share of challenges along the way. This market is not similar to what you see in Europe or the US in terms of logistics and payment infrastructure so you really have to be aware in order to succeed," he said.
Among the issues that online businesses face are: cross-border transportation, legal matters, payment and logistics concerns, as well as cultural sensitivities. But in order to excel in this highly competitive field, Alkhatib said efficiency, security, reliability, choice and convenience are crucial.
WHAT BUDDING ENTREPRENEURS SHOULD KNOW
The MarkaVIP CEO offers some advice for those looking to take the SME plunge:
"First of all, ensure your funding comes from the right investors - people who can add more value than just money, who can impact your business and open doors for you. Secondly, you need to overcome the emotional founder problem and be willing to share a stake of your business with the right investor or partner."
He added that believing in one's own path to success and having a vision of what one wants to achieve are essential. And having the right team is fundamental.
"I like to see my company being run by entrepreneurs who are dedicated to what they do, loyal, innovative and ambitious. Without the right team, you cannot turn your vision into a reality," he said.
© Zawya BusinessPulse 2014
