With e-commerce continuing to grow globally and within the Middle East, online marketplaces continue to take market share from traditional retailers and service providers. Across the Glowfish Ventures portfolio companies, we continue to see accelerated traction amongst the marketplaces that we have launched and some major trends are emerging within this space.
- Vertical integration
There are two main drivers behind vertical integration within marketplaces: (1) delivery of consistent customer experience and (2) increased margins. For marketplaces to deliver consistent customer experience, they need to ensure quality control across all the steps of a user’s journey. E.g., for food delivery platforms this could mean having your own branded delivery drivers, whereas for classic e-commerce marketplaces, this implies investing in warehouses and even some of the inventory items. Moreover, controlling all the customer touch points allows for consistent branding and provides customers with an experience that is similar to in store purchases. Second, as many marketplaces look for increased margins, players have started owning inventory and brands (e-commerce), setting up their own kitchens (food delivery) or owning their own service professionals (service marketplaces) to capture the full margin on the transactions.
- Move to Q-commerce and hyper localisation
With an increased demand by consumers for ‘instant’ or ‘quick’ commerce, new entrants have set-up hyper local, within the hour (or even less), delivery services using dark stores, warehouses and even service centers. While this trend is not new for some industries e.g. food delivery, it is now emerging in other marketplace models like grocery shopping, e-commerce, services (cleaning services, car repair, etc.). This trend has forced traditional marketplaces to rethink their operating model and invest in more ‘off-line’ infrastructure.
- Emergence of B2B marketplaces
While the consumer market is broadly served by the big international and local players, the B2B market remains largely untapped and fragmented in the Middle East. This observation applies to proper B2B product marketplaces (similar to Alibaba) to more specialized product or service procurement platforms. However, several new players have emerged recently and have attracted hundreds of millions of dollars of funding across the GCC, Egypt and Pakistan and more investment is expected during 2022.
- Horizontal expansion
While in most of the larger markets (US, Asia, Europe), there’s a trend for niche play marketplaces (e.g. organic food delivery, specialized medical marketplaces etc.), the Middle East has seen multiple players expand horizontally, driven by relatively high customer acquisition costs and smaller, fragmented markets. You will find food delivery, grocery shopping and PCR testing all in one place and single segment specialized market places haven’t taken off that much within the region due to the lack of critical mass on the demand side.
- Increased platform complexity and AI
The days where a simple out of the box marketplace could be successful are forever behind us. Customers demand personalization, different payment options, instant customer care and cross platform consistency. AI products are being integrated in market places to predict customer behavior and optimize their purchases, new payment options and tools (e.g buy-now-pay-later) are rapidly taking off. Innovation is happening across all players from procurement to delivery, and product innovation (new services, subscription models, branded white labeled products, etc.) has become one of the top priorities for all major platforms.