Businessmodel of Souq.com

Customer Segments

Souq has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate: businesses that sell products (merchants, small and medium enterprises, brands, and distributors) and consumers in the Middle Eastern region who buy them.

Value Proposition

Souq offers four primary value propositions: accessibility, convenience, risk reduction, brand/status.

The company creates accessibility by enabling businesses in the Middle East, particularly small shops, to obtain customers who might not be able to visit their physical stores. It also provides a channel for small firms that cannot afford a physical presence. Souq likewise increases access for consumers by enabling them to obtain goods they might otherwise have a difficult time finding. Furthermore, it sells pre-paid cards in physical stores so customers without pay cards can buy goods on its site.

The company offers convenience by enabling flexible payments. It partners with several top UAE banks to provide plans through which customers can pay for their purchases in monthly installments. These plans charge 0% interest for a period typically lasting between three and 12 months. Consumers must spend a minimum amount in order to qualify. Souq also provides the option of “cash on delivery” payments, through which consumers can pay at the time of delivery.

The company reduces risk by maintaining high safety and security standards. It enables customers to return any purchased product within 15 days, taking responsibility for return shipping costs. If the item is returned due to being defective, damaged, counterfeit, or different than as described on the website, the company issues a full refund. Souq also works to protect intellectual property rights, actively encouraging site users to report the selling, using, or listing of counterfeit, unlicensed, copyrighted, or trademarked products on the platform to its legal department.

The company has established a powerful brand due to its success – in fact, it is known as the “Amazon of the Middle East.” It maintains the largest eCommerce platform in the Arab region, with operations in six markets: UAE, Egypt, Jordan, Kuwait, KSA, and India. It maintains a portfolio featuring over 1.5 million items in 20 distinct categories from over 75,000 sellers, including consumer electronics, fashion, baby products, household goods, fragrances, and toys. It generates over 35 million visits from 10 million unique visitors on a monthly basis. It has garnered AED 1 billion (USD$275 million) in investments, more funding than that obtained by any other eCommerce business in Middle Eastern history. Lastly, it has won many honors, including a Gulf Business Industry Award for Company of the Year (2013), an Arabian Business StartUp Award for Digital Business of the Year (2013), and a Retail City Award in the “Best Online Retail“ category (2011).

Channels

Souq’s main channel for consumers is its website, while it reaches out to businesses through its direct sales team. The company promotes its offering through its social media pages and participation in conferences.

Customer Relationships

Souq’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. The company’s website provides answers to frequently asked questions. That said, there is a personal assistance component in the form of phone and e-mail support.

Key Activities

Souq’s business model entails maintaining a robust common platform between two parties:  consumers and sellers of products. The platform includes its website and mobile apps.

Key Partners

As mentioned previously, Souq maintains partnerships with leading UAE banks through which it offers customers payment plans consisting of monthly installments. The specific banks it works with are ADCB, NBAD, Emirates Islamic, Emirates NBD, Mashreq, and Samba.

Souq maintains an affiliate program through which it invites third parties (including website owners, bloggers, individual entrepreneurs, and large networks) to promote its service on their platforms (websites, mobile apps, etc.). The parties add banners and product links to the platforms, and earn commissions every time a customer clicks on them and conducts a transaction on Souq.com. Commissions can reach as high as 10% of the transaction cost. Membership in the program is free, with no charges, hidden costs, or set-up fees.

Lastly, Souq forms strategic partnerships with the purpose of providing added value for its customers. High-profile examples of these alliances include the following:

• In June 2016 it was announced that Souq was partnering with Nestlé Egypt to sell the brand’s products on its website, making it the first FMCG Company to market its goods on the site. The deal reflects Souq’s effort to establish and maintain a foothold in the grocery world.
• In April 2016 it was announced that Souq was partnering with MasterCard to enable its customers to use the brand’s cards to make payments on the platform. Souq will also work the company to develop joint marketing campaigns to promote cashless payments. ### Key Resources

Souq’s main resource is its proprietary software platform, which connects over 75,000 businesses with more than 10 million monthly visitors.

It depends on its engineering employees to maintain the platform and its customer service staff members to provide support. The company has important physical resources in the form of warehouses in UAE, KSA, Egypt, Kuwait, and Saudi Arabia, as well as technology centers in Jordan and India.

Lastly, as a startup it has relied heavily on funding from outside parties, raising $425 million from seven investors as of February 2016.

Cost Structure

Souq has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions.

Its biggest cost driver is likely marketing expenses, a fixed cost. Other major drivers are in the areas of customer support/operations and administration, both fixed expenses.

Revenue Streams

Souq has two revenue streams:

Transaction Revenues – Revenues generated from the following:

• Commission fees charged to sellers for transactions that occur through the site; fees represent a percentage of an item’s selling value, with a minimum charge of 5 AED per item
• Processing fees charged to sellers for each order (7.5 AED) Advertising Revenues – Revenues generated from fees charged to sellers for ad services used for the promotion of their products; available services include display advertising, e-mail marketing, and sponsored products, which are products publicized to customers searching for related items