While eB2B in MENA grows to $1.2B through consolidation, there's untapped potential
The eB2B sector in MENA is witnessing consolidation of existing players to achieve scale, while new players look at bringing in emerging technologies.
The eB2B—or B2B ecommerce—sector in the MENA (Middle East and North Africa) region is having its moment in the sun, thanks to the growing number of active internet users post the pandemic.
In the MENA region, the mobile internet penetration rate is forecast to reach 53% of the population—357 million people—by 2025.
During the pandemic, the eB2B sector rode on the rapid shift from offline to digital as online shopping and ecommerce became universal. This led to the digitisation of the traditional supply chain involving manufacturing, distribution, and wholesale retail.
The eB2B market has since then ballooned, reaching $1.2 billion in size, according to a RedSeer report published in December 2022.
To match step with the high growth in the MENA region and achieve scale in the fragmented eB2B market, many companies are taking the route of consolidation of existing players.
The pandemic push
The RedSeer report says that the market segment in MENA will reach $3 billion by 2025.
Hassan Awada, Senior Vice President at consulting firm Kroll, says there are several factors key to the sector’s growth.
“The benefits offered by the new sector include lower product pricing and procurement costs, price transparency, automated credit solutions, online review of products quality, more product variety, delivery tracking, and improved stock management,” he tells YourStory Gulf Edition.
Many regional governments have started paying attention to the sector as well. With the push for digital transformation, the UAE and Saudi Arabia have taken substantial digital initiatives as a core part of their individual Vision 2030 agendas. In 2021, the Abu Dhabi Investment Office and Microsoft for Startups announced a five-year partnership to help regional B2B businesses with innovation and technology.
Kuwait too aims at becoming a financial and trading hub by 2035, with eB2B playing a central role in that transformation.
“The B2B value chain is quite fundamental to how commerce is done within the regions, and governments are looking to digitise this starting with POS at retail outlets,” says Akshay Jayaprakasan, Associate Partner at RedSeer MEA.
Globally, the eB2B market is projected to reach $47,772.6 billion by 2030, growing by 11.8% annually between 2021 and 2030, according to a report by Research and Markets.
But Akshay feels that the right levers need to be pulled for the market’s sustainable growth. He says the segment is operationally complex.
“There are numerous business model choices that need to be made at a category and stock keeping unit (SKU) level to achieve the optimal balance between growth and profitability. It takes time and good-quality data to develop expertise in the segment. Players need to be more prudent with their approach considering the current funding winter,” he explains.
Consolidate with caution
However, to scale in the MENA region, many B2B commerce entities are taking over the competition.
For example, Saudi-based Retailo, a restocking platform for retailers, acquired UAE-based B2B online store DXBUY to expand business in the growing HORECA (hotels, restaurants and cafes) sector.
Similarly, Egypt-based wholesale grocery retailer MaxAB acquired Y Combinator-backed WaystoCap to expand its business across Egypt and North Africa’s B2B retail and ecommerce markets.
While consolidations can initially fuel market growth, stakeholders feel they need to be handled consciously.
“Consolidation at an early stage in the cycle of a new sector can be detrimental, as it could reduce competition, resulting in less innovation and growth,” Hassan warns.
Along with consolidation, he asserts that players should also focus on boosting customer retention by continuously innovating and expanding their services offering, especially in the face of global supply chain issues and inflationary pressures.
“Nevertheless, consolidation will generate synergies and economies of scale, reducing operating costs which will ultimately be passed to the end user. The sector will definitely enjoy significant investment and M&A activity as it continues to grow,” Hassan adds.
While current players focus on consolidation and customer retention, new players would need to focus on adopting newer technologies such as AI, ML and robotics to improve their services, says Mohit Shrivastava, Chief Analyst, ICT, Future Market Insights.
B2B smart commerce platform Dubai Blink uses AI, blockchain, and virtual business licences to facilitate connection and trading between Dubai and companies around the world. It was introduced by the Dubai Airport Freezone Authority in 2018.
Egypt-based MaxAB uses data to predict demand and build buffers of inventory to address supply chain inefficiencies.
Akshay of RedSeer MEA says that while the focus of eB2B has been on FMCG (fast-moving consumer goods) and groceries, retail offers untapped potential. As per a report by investment banking firm Alpen Capital, GCC’s retail industry will increase 5.7% annually to clock a revenue of $370 billion by 2026.
“Other segments within retail, such as fashion and electronic accessories, are untapped opportunities. The industrial and enterprise segments within the B2B value chain also present a massive untapped TAM (total addressable market) of more than $500 billion in MENA,” he says.
Edited by Kanishk Singh