FEATURE: Wadi.com forges own path

Undaunted by growing rivalry in the e-commerce space, online retailer Wadi.com is pursuing a Saudi-centric strategy that it hopes will set it apart from the competition.
Kanwal Sarfaraz, co-founder, Wadi.com.
Kanwal Sarfaraz, co-founder, Wadi.com.
Wadi.com has a fleet of more than 150 delivery vans and drivers.
Wadi.com has a fleet of more than 150 delivery vans and drivers.

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The GCC’s largest e-commerce platform after Souq.com, Wadi.com, is pursuing a unique approach to its logistics arrangements in the region as it bets on greater consolidation in the regional online retail scene. According to Pratik Gupta, co-founder of Wadi.com, major expansion is imminent for the e-commerce market, which has until now been held back by a lack of customer service.

“Anyone who executes [e-commerce] the correct way in the next couple of years can get into the big league,” Gupta told The National in an interview in June. “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.”

Unlike most e-commerce platforms, which focus on the UAE market and use it as a springboard into Saudi Arabia, Wadi.com has put the Kingdom front-and-centre in its logistics network, recognising the country’s clout as the largest consumer market in the Middle East. “We are more skewed towards Saudi Arabia — purposely so,” Gupta told Gulf News at the beginning of this year. “When we entered the market, the competitive landscape there offered better opportunities for us.”

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It was also no coincidence that a high-profile Saudi investor saw enough in Wadi’s business model to commit to a fairly substantial exposure. The Al Tayyar Travel Group played the lead investor’s role in a US $67 million (Dh246 million) funding round in early 2016, just one year after the platform was launched by a three-person team focused on opportunities in Saudi Arabia and the UAE.

“That investor coming in made us a very Saudi-focused company — there was less competition as well,” said Gupta. “We did not want to get into a lot of things and burn up a lot of money ... fortunately we got investors who understood that.”

One of these co-founders is Kanwal Sarfaraz, alongside Ankit Wadhwa and Pratik Gupta. According to Sarfaraz the company’s Saudi-centric approach to its business has paid dividends. “Today we process more than one million SKUs per month from over 2,000 international brands including Apple, Samsung, Lacoste and Hugo Boss and have a large network of our own delivery system for better customer experience across these cities run by more than 150 delivery vans and drivers.”

The customer experience is the core focus for Wadi.com.

“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,” explains Gupta. “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.”

“Enhancing customer experience is at the core of Wadi’s 2017 plan with an aim to achieve efficient, around the clock super-fast deliveries. For better customer experience across the UAE and KSA, we have a large network of our own delivery systems run by more than 150 delivery vans and drivers,” says Sarfaraz, adding that, because Wadi.com is a retailer as well as a platform for other third party traders, they’re selective about whom they work with.

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“Wadi.com is an online marketplace that aims to be the e-commerce site with the broadest range of products available, connecting our customers to the best vendors in the United Arab Emirates (UAE) and Kingdom of Saudi Arabia (KSA), with the best deals available,” she explains.

Because efficiency is the primary focus of an e-commerce platform, Wadi.com has outsourced more than 80% of its logistics operations to 3PLs. “Wadi.com currently caters to the KSA and UAE markets, and to ensure consistent distribution we established warehouses and distribution centres in the UAE and KSA. Our warehouses and centres are in the range of 1,000 tons per 50,000 sq ft depending on the city of operation.”

And the company has more than 15 of these centres in KSA and the UAE alone, out-gunning even the likes of Souq.com, whose purchase by Amazon.com was primarily to take control of its significant e-commerce logistics infrastructure in the region. According to Sarfaraz, this level of logistics penetration for Wadi.com has been possible through its partnership with 3PLs.

“We use 3PL to ensure that each step of the supply chain is executed in the most efficient and cost effective way.  We also work with various partners for additional warehousing and logistics across the UAE and KSA when necessary,” she says.

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“In the e-commerce market, we have the most competitive logistics set up in terms of speed of delivery, percentage of delivery, cash remittance and cost to company, allowing Wadi.com to serve customers better at lower costs with lower working capital requirements.”

The Middle East e-commerce sector in its entirety is smaller than the annual turnover of Amazon alone, and yet is home to hundreds of e-commerce players. According to Sarfaraz and Gupta, e-commerce players need to play to their strengths or risk absorption by a larger brand.

There were hundreds of e-commerce players when Wadi.com started but most were not specifically customer-focused and missing key opportunities and as a result the majority have either folded or merged with other platform in a spate of M&A activity since the US $580-million acquisition of Souq.com by Amazon.

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.

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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.

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 US $41-million funding round for the company that was started only four years ago. Mobile taxi app Careem, the region’s only unicorn with a $1-billionn valuation, also added another string to its digital bow starting Careem Box, following a similar business model to fetchr.

While this M&A activity has increased local competition, with larger brands competing for ever-larger pieces of a growing pie, Wadi.com isn’t concerned.

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“We are attracting regional and global attention,” says 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.”

But with same-day delivery being offered by Souq.com in Dubai, matching the Amazon Prime service in the United States, Sarfaraz says that Wadi.com is putting a lot of effort at present into changing the regulatory environment in Saudi Arabia, its largest market.

“Recently we have been facing challenges in KSA with the regulatory environment in the country, with the ability to ship goods to KSA from other countries, delays in KSA customs, and lack of address systems in the country,” she explains. “We are working with the KSA government on advanced geo mapping technology to overcome these challenges to better service our customers in KSA.”