Up close and personal with MEAPT's most prominent players in the ecosystem. Today we invite Philip Johnston, Co-Founder and Co-CEO of EVM's E-commerce builder Opontia
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3 questions, 1 player, and endless insight. Welcome to the "FireSide 2022" content series where we reflect on trends, industries, investments, and venture capital in the Middle East, Africa, Pakistan, and Turkey. For today's FireSide chat, we invite the E-commerce enabler championing digital fronts in Eastern Europe, The Middle East, & Africa. Here's our chat with Philip Johnston, Co-Founder and Co-CEO of Opontia:
How would you say has the E-commerce market in the region evolved over the past 5 years in terms of accessibility, ease of setting up digital fronts, availability of competitors, and growth capital?
The E-commerce market in the region has progressed massively over the last 5 years. 5 years ago, noon didn't exist, amazon had not bought souq, and there were virtually no D2C brands in the region. Fast forward 5 years and the e-commerce spend is >$7bn in each of Saudi and UAE per year and there are more than 30,000 sellers selling on marketplaces and a similar number selling on D2C sites such as Shopify, Salla, and Zid in the UAE and Saudi. At the same time, the governments in the region have put in place policies to attract e-commerce entrepreneurs to the region, and there has been a massive increase in the availability of various forms of capital in MENA.
In your opinion, what would you say is the importance of thinking regionally for E-commerce startups, and what is the role of Smart investing (I.e growth capital, network, and expertise) in helping ventures expand and adapt their market propositions beyond their geographic borders?
It is very important for e-commerce startups to think regionally, especially for startups based in the UAE since there is a small population they need to think about expanding to Saudi. Also, the startups that can benefit from economies of scale on sourcing, logistics, brand management, and marketing will be more able to compete. It is particularly important for e-commerce startups to think carefully about smart investment to help them grow. This is because they usually have large working capital needs as they need to pay for inventory, logistics, and marketing before receiving cash. If ventures can get non-dilutive capital then they can get the working capital to expand throughout various geographies.
After a 3-year consecutive dip in VC funding in MENA, dropping by 25% between 2018 and 2020, the E-commerce sector picked up in 2021 to reach a new all-time high. Recording more than 200% YoY growth in capital invested in the sector, the E-commerce space raised south of $500M in 2021 for the first time since 2017. As recorded in our E-commerce 2022 Venture Investment Report, this was in part driven by the success of B2B solutions, raising almost 90% of all investment in the sector in geographies like Egypt over 2021.
Saudi Arabia, in particular, has a large opportunity in the short to medium term because it has a large population for the GCC with relatively high purchasing power yet still only has a slightly larger e-commerce market than the UAE with a much smaller population. Over the longer term, Egypt, Pakistan, and Nigeria have the highest growth potential as they have large and growing populations, with a growing middle class.
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