In 2009, Yahoo acquired Jordan-based web portal Maktoob for $164 million, marking the Silicon Valley Internet giant's entrance into the Arab world. The deal excluded Maktoob's four-year-old e-commerce business Souq.com.
In hindsight, that was a lucky break, Souq CEO Ronaldo Mouchawar says. Mouchawar has since grown the online marketplace--now valued at more than $1 billion, according to Souq--into one of the most successful e-commerce companies in the Middle East. The Dubai-based company has raised $150 million from investors like New York-based investment firm Tiger Global Management and Naspers, a South African mass media corporation.
With sales of everything from electronics to baby clothes, Souq is often compared to retail giant Amazon.com, which doesn't have a presence in the region. By contrast, Souq operates in Egypt, Saudi Arabia, Kuwait and the United Arab Emirates and also ships to Oman, Qatar and Bahrain.
The two companies naturally operate on two very different scales: Amazon made $75 billion in sales last year, while Souq is aiming to hit $1 billion by the end of this year. But as a tech-savvy generation comes of age in the Middle East, Souq is constantly in the position of figuring out how to accommodate increasing demand--proving that while the region may be on the other side of the world, it's hardly a wasteland for growth-oriented businesses.
Prior to co-founding Souq in 2005, Mouchawar got in touch with Maktoob co-founder Samih Toukan to discuss his reasons for wanting to start the company.
"I had told Samih at the time that we think e-commerce can be very empowering to people," says Mouchawar, who is from Syria. "There [are] a lot of small shops and merchants, and connecting them through the Internet would be something very powerful for our region."
'Copy, Paste, Innovate'
Today Souq's user experience looks and feels much like that of any other e-commerce platform, but Souq has hardly just copied Amazon's model, says Habib Haddad, CEO of Wamda, a Dubai-based organization that supports entrepreneurs through research, accelerator programs and events.
"What happens in the background is very different, and that's what many people don't understand of emerging market players. They look like copy and paste, but they're more like copy, paste, innovate," he says. "The innovation is not in what the user gets, but it's in how the company gets it to the user."
To successfully get goods to users, Souq must focus on solving problems in two main areas: payments and delivery.
Credit card use is more common in some areas than others. Unlike in Dubai, only about 10 percent of the population in Egypt, for instance, have credit cards, according to Mouchawar. So Souq must come up with alternative payment methods. For example, it created a prepaid card, which can be purchased for cash in brick and mortar stores and then redeemed online.
Local Challenges, Global Opportunities
Beyond that, Souq has to consider how products will actually get to customers, including those who live in locations that don't have addresses.
"The No. 1 challenge has always been the 'last mile' of logistics," Washington, D.C.-based investor Chris Schroeder says. Schroeder is the author of Startup Rising, a book that documents entrepreneurship in the Middle East.
"While things seem to be improving, the ability to find addresses in Saudi Arabia--and a lot of basic stuff in the last mile of execution... is going to be a big question they're always wrestling and thinking about," he says.
The company hit a major stumbling block after White Friday, the region's equivalent of Black Friday. The promotions led to much more sales than usual, and Schroeder says packages that should have been delivered in days took weeks to reach their destinations. This is the result of the fact that much of the region's logistics infrastructure is simply "not there," as Mouchawar puts it.
Mouchawar acknowledges how challenging it is to promise deliveries to areas without a dependable mail service or, in some cases, any address system to speak of. He has tackled the problem using a number of approaches, including developing Souq's own local delivery system, investing in logistics companies and coordinating with numerous local couriers.
"It's very stressful, difficult to manage, but it makes you grow as a business," he says.
Even though Maktoob was headquartered in Jordan, Mouchawar settled on Dubai as Souq's home. He says he's likely able to attract better talent because Dubai is a nice place to live. Souq's 2,000-person team is made up of many ex-patriates including some from the U.S. who have worked at eBay, Yahoo and Procter & Gamble.
"I think there is a lot of room for many players. I don't think they are obsessed about competitors at this point. And I don't think they should be," he said. "They need to be obsessed about the customer."
'A League of His Own'
Meanwhile, what keeps Mouchawar's mind occupied is keeping up with the pace of technology.
"We are not isolated from the global trends. We are part of creating global trends," he says. "What keeps us up [at night] is always understanding the trends, figuring out what our customer needs, scaling our service to meet our customer, but also adapting to things as they change."
Schroeder is bullish on Mouchawar's abilities. He's "in a league of his own," he says. "I think he's worth watching. Both for what he's doing at Souq, but also what he's doing for the ecosystem more broadly."