Emaar Malls has finally acquired the remaining 49% stake in Namshi, Middle East’s leading fashion ecommerce platform, almost two years after it obtained the 51% controlling stake. The deal, at 475.5 million dirhams (about $US129.5 million), meant that Namshi’s valuation remained flat since the original purchase.

With this deal, Rocket Internet has completely exited from the ecommerce venture it built years ago. Namshi is finally and completely in the orbit of Mohammed Alabbar’s ecommerce ecosystem.

With Amazon now rebranding Souq (which we correctly predicted in our 2019 Middle East predictions), the battle of the different ecommerce camps in Middle East is surely set to intensify.

Past and Present

The original Namshi deal took place after Alabbar’s counter-bid to take over Souq failed (and Souq being fully absorbed into Amazon). We heard that the whole decision process to acquire Namshi was completed in a matter of days.

Namshi started with fashion, with a particular focus on brands. Gradually it also expanded into private label apparel.

Rocket was quite active in fundraising for Namshi, including a $20 million round from Blakeney Management & JP Morgan, as well as $13 million from Summit Partners in 2013.

The amounts, small by today’s standards, were quite significant for the early days of Middle East ecommerce.

In 2014, two of Namshi’s major shareholders, Rocket Internet and Kinnevik, integrated multiple ecommerce players into Global Fashion Group (GFG). Namshi became one of GFG’s five regional companies, alongside The Iconic in Australia, Zalora in Southeast Asia, Dafiti in Latin America, and Lamoda in Russia and the CIS.

According to GFG’s financial report (when they still bothered to publish it), Namshi was the only profitable entity among the five despite covering a much smaller population. The main reason is that Namshi’s basket size often surpassed $US100, whereas the basket size in other markets is at best $US30-40.

What lies ahead?

We had predicted that Namshi’s next step would be to integrate into Noon’s platform (a lot of hardwork).

1. Noon’s goal is to build a comprehensive all-category ecommerce platform that can compete with Amazon. In 2017, in addition to acquiring 51% of Namshi, it also acquired the ecommerce player JadoPado. JadoPado was subsequently shut down, with its employees, warehouses and systems transferred to Noon.

Namshi’s strength is in fashion, a category Souq has been quite weak in (especially branded fashion). The full acquisition will allow Noon’s fashion holdings to be beefed up.

2. Noon’s current CEO is the former CEO of Namshi. The talents fostered by Rocket Internet are probably the only ones in the region with strong execution experience. This is something that will help Noon while it builds and scales its operations.

Noon has also acquired a lot of talent previously working for Amazon. While it faced a lot of teething problems, culminating in its much delayed launch, it is fixing the issues and we are sure the founders and the funders have a long term vision for it.

Noon’s current CEO, Faraz Khalid

3. Namshi has a very strong user base. According to Namshi’s latest data that is publicly available, Namshi’s active customer base stood at 1.2 million in UAE & Saudi Arabia, and sales of US$230 million.

You get a rough idea of where the valuation, mentioned at the beginning of the article, came from 😉  

Battle of three forces

At present, the ecommerce landscape in the Middle East is a power play between three parties: Noon, Amazon, and Chinese cross-border ecommerce players with JollyChic being in the leading position.

China’s cross-border players have experienced great ups and downs in the Middle East in the past two years.

Early last year, many players rushed into the Middle East after learning about JollyChic’s success. However, the market was only that big and quickly saturated by Chinese players, who are often very similar to each other. Many Chinese platforms and sellers posted dismal performance during the Black Friday promotions.

The upcoming Ramadan will be another test to see whether these players can reverse their fortunes or be condemned.

A word of caution to the cross border players: DO NOT enter Egypt unless you are very sure about what you are doing.

The article was originally written by Yating in Chinese and adapted to English by Antarika

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].