Dubai's Noon expands with eBay tie-up to rival Amazon-backed Souq.com

Noon, the $1 billion e-commerce venture backed by a Dubai businessman and Saudi Arabia's sovereign wealth fund, is expanding globally via a partnership with eBay amid competition with Amazon-backed Souq.com

The tie-up, which will allow regional customers to access products in the US and other parts of the world, will be available in the second half of the year in the UAE and Saudi Arabia, Noon said in an emailed statement on Tuesday. Noon and eBay will also explore opportunities in marketing and know-how to capitalise on the "strong growth" of  online shopping in the Middle East.

"We are offering our customers access to products that are not otherwise readily available in the region," Mohamed Alabbar, founder of Noon, said. "E-commerce continuously evolves, and this partnership guarantees Noon stays on top of the trends and consumer preferences."

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Ebay's partnership with Noon follows the acquisition of regional rival Dubai-based Souq.com by US e-commerce giant Amazon last year. Global companies are entering the market on a bet that the Middle East's online retail scene is poised to boom, driven by a young, tech-savvy population and high smartphone penetration levels. The Gulf's e-commerce market is expected to grow to $20 billion by 2020, global consultancy A T Kearney said in a report.

Noon is a joint venture between Mr Alabbar, the founder and chairman of Dubai-based developer Emaar Properties, and Saudi Arabia's Public Investment Fund, that was announced last year.

Noon will start offering products on the eBay marketplace through a standalone app and will provide doorstep delivery in the UAE and Saudi Arabia, it said.

Mr Alabbar is increasingly interested in e-commerce ventures. Emaar Malls Group, a unit of Emaar Properties, bought a 51 per cent stake in online fashion retailer Namshi last year. His Noon venture bought market platform JadoPado and a fund led by Mr Alabbar took a stake in Middle East Venture Partners (MEVP).

MH Alshaya, the Kuwaiti franchise operator which is present across the Arab world, Turkey and Russia, bought a stake in Noon last year. Alshaya, whose franchises include Starbucks, Muji, Boots, The Cheesecake Factory and Victoria’s Secret, was the first retailer to announce a partnership with the e-commerce platform.

Competition in the regional e-commerce space accelerated last year when Amazon bought Souq.com for $680 million, after an attempted 11th-hour bid from Emaar Malls, operator of the world's biggest shopping centre.

Despite the global interest in the Middle East e-commerce market, the sector is still in its infancy.

Many in the Middle East still prefer to shop in stores. Online shopping accounts for a tiny portion of retail activity in the UAE and the wider region. An  A T Kearney report shows that e-commerce contributes relatively little to the GCC's economy, accounting for just 0.4 per cent of gross domestic product in 2015. This compared with 1.8 per cent in France and 2.2 per cent in Japan, countries with similar GDP per capita levels to the GCC.

The enduring popularity of shopping malls in the UAE, both as a retail and social experience, have also rivalled the nascent growth of e-commerce.

Many customers in the region are also reluctant to purchase goods and services online using a credit or debit card. This is obliging online retailers to offer cash on delivery services amid concerns about online credit card fraud.

Last year, Dubai said it plans to create a Dh2.7 billion e-commerce free zone close to Dubai International Airport to tap the Arabian Gulf region’s e-commerce market.

Dubai CommerCity, a joint venture between Dubai Airport Freezone Authority and wasl Asset Management Group, will stretch over a 2.1 million square feet area in Umm Ramool.