American e-commerce giant Amazon, which expanded its presence in the Middle East market with the purchase in March of Dubai-based Souq.com, responded to the launch of local rival Noon.com by immediately cutting its prices, according to the latter's founder and major investor Mohamed Alabbar.
Speaking at a Leadership Dialogue panel held at the first day of the Dubai Investment Forum at Emirates Towers on Monday, Alabbar and DP World chairman Sultan bin Sulayem discussed the impact of technology on their respective businesses.
Recalling the launch of Noon.com, which announced it was open for business on October 1, Alabbar, said: "The interesting thing about this business is that it is wide open, which means that the day Noon opened we were being watched by the Amazon boys and they dropped their prices straight away," he said, adding that the entry of Noon.com into the market was good for consumer choice.
"My question always [is] that what would happen to prices if Noon was not there?”
Noon.com was announced in November last year and was initially due to launch operations in January, but it was hit by several delays, including the departure of some key staff.
The venture has an initial capital outlay of $1 billion, according to a company statement, with funding coming from a group of prominent Gulf investors including Alabbar, Saudi Arabia's Public Investment Fund and Kuwait's MH Alshaya, among others.
Alabbar, who is also the chairman of Emaar Properties, the developer behind Burj Khalifa and The Dubai Mall, said the e-commerce business was exciting due to the region's demographics and increasing smartphone penetration. According to GSMA, the mobile operators’ trade body, the number of smartphones in the Middle East and North Africa is set to grow from 167 million units last year to 463 million by 2020. However, he added that "you really have to be on your toes" to succeed, given the speed of technological change, consumer demands and the actions of competitors.
"Because keep in mind that these [technology] companies are giants. They are the best in the field.
"You really have to have bedrooms in your offices to deal with this. And I always joke with the guys in Noon because I tell them that 'we are going to convert all of our working habits to the way you guys work', because they almost sleep one night at home and one night in the office."
Souq.com, Amazon’s local partner, did not respond to a request from Zawya to comment on Alabbar’s views of their pricing strategy in the wake of the launch of Noon.com.
Staying in the loop
Bin Sulayem said that technology had also had a dramatic impact on a number of areas within the DP World business, changing the way in which the company views its own role. Citing the Port of Rotterdam as an example, he said it is now "totally automated".
"Which means if you go in the port, there are no people. The people work beyond the gate."
He said that port operators had previously generated revenue from "the time when the ship comes to the quay until the cargo leaves the gate".
Now, however, he said that staff were more involved in "removing inefficiencies in the supply chain".
"Basically, we have changed our thinking that our business is not from when the ship comes, but from when the cargo leaves the factory until it reaches the customer."
He added that DP World was working on a new idea that could increase the throughput of its container terminals five-fold, pointing out that expanding a port to add a new terminal can currently cost it anything between $300 million-$700 million.
"It's an idea that we were working on when we were working to find a way to use Hyperloop," Bin Sulayem said. "Then a spin-off of that idea came to us, that if we are the people who are handling the cargo, how can I make it so fast that I can put one after another in the loop?"
He added that a Hyperloop system itself is not the basis of the idea, but that the concept his team is working on could "predominantly change the way we work".
DP World provided $50 million in Series C funding to Hyperloop One - one of the firms competing to build Hyperloop systems - in October last year.
Two months earlier, the pair had agreed to carry out technical and feasibility studies to see how Hyperloop could improve the efficiency, profitability and sustainability of DP World's flagship Jebel Ali Port.
DP World announced on Wednesday it is adding more container handling capacity to terminal 3 at Jebel Ali port, as the first of 84 new ship-to-shore automated gantry cranes arrived at the port. Once installed, these will help the port to increase the amount of containers handled at the port each year by 1.5 million TEU (twenty-foot equivalent units), bringing its total capacity to 19.5 million TEU.
The company is a government-owned operator of more than 78 marine and inland terminals. It reported a flat profit of $606 million for the first six months of 2017, despite a 9.6 percent increase in revenue to almost $2.3 billion.