Making History (Literally): Souq.com CEO Ronaldo Mouchawar The co-founder and CEO of Souq.com has changed the MENA entrepreneurial landscape forever.
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"There's a job and there's passion. The kind of passion that comes from knowing you're part of something great, that you have a decent shot at making history, that you can enchant customers and empower businesses every day, and that you can transform yourself in the process. This is Souq.com. Welcome."
This is the message that greeted me by the door of Souq's Dubai offices, and after my hour-long conversation with the company's co-founder and CEO Ronaldo Mouchawar, I couldn't help but marvel at how aptly these words described the singular spirit and ceaseless drive of this Syrian entrepreneur. This conversation with Mouchawar takes place about a month after news broke of Souq's acquisition by Amazon; a deal whose value hasn't yet been publicly disclosed, although the Financial Times had reported it to have been in the range of US$650 million. For the MENA entrepreneurial ecosystem, this was the exit that it had long been waiting for, and at the same time, its significance for the region at large cannot be understated either- it's worth noting here that elevating the Arab world has been a goal that Souq has been working toward ever since its 2005 inception. "We had a mission- we wanted to connect the Arab world," Mouchawar remembers. "We wanted Souq as a marketplace, as a brand. We felt we needed one; we should be able to build it and break the borders between the countries [of the region] as best as we can, at least economically, for trade. Something politically could take ages. With tech, you are able to do it faster, and just enable people all over."
For an e-commerce platform that today hosts more than 8.4 million products and enjoys over 45 million visits a month, Souq started out as something quite different to what it is today. "We launched Souq as an open marketplace; [it was] a very simple listings site till about 2009," Mouchawar says. "That's how the business was." Launched as a part of the Arabic web portal Maktoob. com, Souq had a number of verticals on it which included everything from online auctions to real estate classifieds. Following Maktoob's sale to Yahoo in 2009, Souq came into its own as an independent entity, and that was when it began to pivot from its original model. "We felt [that] the bigger pie was retail," Mouchawar remembers. "Retail is 50% of many economies, especially with the consumer here [in this region] and their buying power. And so we took a very hard decision that, for us to be able to meet customer expectations and grow the B2C (business-to-consumer) function, which is the area we wanted to focus on, we need to stop many things that were working at Souq." Mouchawar notes that this was a testy period at the enterprise- after all, those facets of Souq that were being shut down, such as the online auction and the classifieds, were fairly significant generators of both traffic and revenue. But Mouchawar and his team stuck to the plan that they had laid out for Souq, and began building up its retail section, with the primary aim being to ensure a comfortable shopping experience for their customers. "We started this journey of [finding out] what our customers want, and how we can adapt."
Mouchawar recalls this period in Souq's lifecycle to be a turning point for the company, but building up and transforming the website's product catalogue was, at the time, a rather tough process for everyone involved at the startup. "It was not easy when we went through the transition," he says. "We got many calls from sellers who were unhappy with the ecosystem changing. But, you know, we also tried to explain to them that we were doing this because we wanted the customer experience to improve. We want to be able to understand pricing, product gaps, categories, what customers like, how do you recommend other products- and you cannot do this until you structure your work." However, this was just the beginning of Souq's transformation into the Middle East e-commerce giant it is today- once the company felt it had improved the experience of the shopper on its website, it then began to look at improving whatever happened postclick, and that resulted in major investments being made in payment, logistics, after-sales and other such areas of the customer journey. All of this took time, of course, and yes, funds too- by early 2016, Souq had been able to raise a total of $425 million in two rounds of funding from investors such as Tiger Global Management, Naspers, IFC Venture Capital Group, and others.
Souq, however, wasn't done growing yet, and the company had begun looking into all of the available options to fuel its next phase. Mouchawar reveals that he and his team did wonder about raising another round of funds, and yes, going public was also a choice they considered, but they were also looking at other enterprises Souq could perhaps join hands with, and an alignment with Amazon definitely made sense. "When you do all the work and get to where you are, and you look at who are the potential matches or fits for Souq, then suddenly, the list dwindles," Mouchawar says, noting the kind of like-mindedness in terms of how Amazon and Souq conducted themselves- after all, there were already plenty of parallels drawn in the ways each of the two companies approached innovation and customer-centricity to fuel their respective businesses. From Amazon's perspective, it was looking to enter the Middle East as part of its international expansion- and Souq proved to be the perfect vehicle for it to do just this. In a statement released by Amazon, its Senior Vice President, International Consumer, Russ Grandinetti, said, "Amazon and Souq.com share the same DNA– we're both driven by customers, invention, and long-term thinking. Souq.com pioneered e-commerce in the Middle East, creating a great shopping experience for their customers. We're looking forward to both learning from and supporting them with Amazon technology and global resources. And together, we'll work hard to provide the best possible service for millions of customers in the Middle East." The deal is still being closed, and at the moment, Mouchawar reveals that discussions and processes are underway in learning how best Amazon can help Souq, and vice-versa as well.
When Souq's acquisition by Amazon was finalized, it was his family to whom Mouchawar told the news to first, following which he touched base with his team, investors and shareholders. "The biggest thing I told the team was that you should be very proud, because we just joined the most innovative company in the world," he recalls. "That was kind of what kept going on in my head- that, you know, this journey resulted in something that, I think, will take us and the region to a whole new level." And it's not just the retail sector that could benefit, Mouchawar says- the road ahead for Amazon in the Arab world could perhaps see, say, the creation of a Kindle that can allow for Arabic content, or an Amazon Prime division that produces videos catered toward the population here. All of this will also help address the problem of unemployment that pervades the region today- as Mouchawar put it: "We were able to create 3,000 jobs… What could happen in the next 5-6 years?" As for Souq itself, Mouchawar thinks the platform by itself is going to further evolve and grow- it's got a good base and structure now, sure, but Amazon will help it to continue to innovate in all sorts of capacities. "We'll continue to push that edge, in terms of things that we have done, and continue to do," he says. "But I think, overall, customers will see more choice, that's very clear, because we'll be able to hopefully tap into the global supply of Amazon, its merchant base, and the partners that they work with. We already work with many of them in the region, but it [the acquisition] will put it on an accelerated path."
As for the e-commerce landscape itself, Mouchawar doesn't seem to be worried about competition in the region, be it with existing players in the market, or soon-to-launch entities like the billion dollar Noon.com, the Souq CEO believes that each player will have their own strategy, and their success will ultimately depend only on how they deploy and execute it. "I think it's quite already a fragmented market, and there will be many players," he says. "You just have to find what your customer wants, and build your segment in that share. I think, globally, this is what happens; there is always competition. On the internet, competition is even more fierce, because customers don't need to travel, so you're not protected by distance. It's a URL that you change, or an app that you switch. We always compete also with the offline world. For a long time, we were disadvantaged because we were quite small, but we depended on technology to cross that hurdle, and bring together many merchants to enable to provide an ecosystem that thrived and became fueled by itself. And customers liked it, it brought more customers, more merchants, more products, and suddenly, when you look at it and see a nine million selection [on the site], and now, you are bigger than the bigger malls. So I think we just live with competition; everyone will have a strategy; everyone has customers. We would feel we know our customers in the region… Customers come to this destination, but they go to other places as well, and ultimately, there will be many players. I don't see that changing: global players, local players, niche players, and horizontal players."
Mouchawar's vision for the future makes it clear that there's a lot of work ahead for the Souq team, but then again, that's the way it has always been at this homegrown enterprise. "You know, this came with a lot of hard work, and I think that's the common theme. It is people who have vision, people who have the will to work... Initially, it was never about finance and rewards; we didn't have that any way to give." There have been challenges aplenty- be it with hiring people during the early years, or with flash businesses that seemed to be a threat to Souq's standing in the market- but Mouchawar and his team persevered. "At every stage, we faced a different challenge- every step, there always was a solution. Because we're a team of builders and innovators; so, you know, we had to figure out what we need to do. We have always focused on our customers, not as much on our competition, which, I think, has helped us to always be ahead of everyone else." At this point, I ask what is it that drives Mouchawar to do all that he does- I am curious to know the source of this entrepreneur's unrelenting enthusiasm for what he does. In response, Mouchawar smiles and draws my attention back to the mission that Souq was founded upon. "Our model is very simple; it's connecting people with products using technology, and creating better opportunities for people around us. I think the opportunity part of it always was a huge motivator, because I have seen how our team, our people, our sellers, our customers, have grown around us."
On a more macro level, as a citizen of the Arab world, Mouchawar is keen on seeing change come to this region, and he believes the tech sector –and entrepreneurship per se- can be key to realizing this. "If you think about it, this region needs these kind of companies and jobs more than other types of jobs, because, we have human capital as a main resource, and getting them into this type of entrepreneurship, tech careers would do wonders for this region." Mouchawar uses the example of India to illustrate his point. "If you look at India, 20 years ago, India was a big outsourcing center using technology for the West. Fast forward 10 years, there are a lot of entrepreneurs [there] who have learned to scale with the global players, and became local entrepreneurs, and changed, I think, the way India is perceived globally as a tech hub. Today, many, many of the tech companies are there, local companies have scaled, [and] some of them hopefully will go global. So you see how opportunity it created. We feel the same could happen in Egypt, in Jordan, and other parts of the Arab world." Mouchawar is also hopeful that Souq's acquisition by Amazon will have a knock-on effect for the region's entrepreneurial ecosystem. "This will not be the first and last global investment in the region," he predicts. "These things usually propagate, and we'll see more of them… I think, having global players set up in the region, at this level of technology, and availing that stack to so many people in the region, it will definitely change the way the region works. When the Maktoob-Yahoo deal took place, Souq was an outcome; that's where some of the investment went, and that initial investment, that phase was so critical, when we raised that first US$5-6 million… But that came out of one exit, and now, you know, we'll have more to come. A lot of our investors will invest more, because they get encouraged, because [they see] you can do exits out of this part of the world."
But for the entrepreneurs in the region, Mouchawar advises against building a business with the sole purpose of engineering an exit. "Before exits, build businesses that do scale using tech," he says. "I think that's the key, regardless of how the exits pan out." According to Mouchawar, the past few years have seen the ecosystem in this region develop and grow to such an extent that it's become relatively easier for people to set up businesses here, but one should remain prepared for hurdles that are inherent to this part of the world. "I think the challenge will remain always that not everyone can scale," he says. "You need to find niches that make money. Not everyone can be a huge company, but all can be successful." When I broach the topic of funding in this region, Mouchawar declares: "Good ideas get funded." He says that while all of us want to see more startups get funded, investors need to be given their time to spot the ones that they want to invest in. "It's upon us as entrepreneurs to get the investors to be comfortable [with us], because it's their funds that they are investing. They need to also see and understand the entrepreneur, and be able to trust the ecosystem." Mouchawar believes the landscape has changed quite a lot in this respect, with a lot of seed money coming into the ecosystemthe growth funds are still lacking, sure, but that's a scenario that could change soon as well. At the end of the day, Mouchawar says entrepreneurs need to stay true to the goals they lay out for their enterprises. "You have to believe in your mission," he says. "But sometimes it's not the initial idea that you had that would work out. So you have to be stubborn, but flexible in how you execute." As for whether the troubles the Arab world is currently seeing should be seen as a deterrent for entrepreneurs, Mouchawar, who hails from the now-destroyed Syrian city of Aleppo, chooses to remain positive. "It's painful, for sure," he says. "You want to focus on developing the region and the human capital, so all this instability creates setbacks for a lot of people, which is very unfortunate, and for me, personally, weights heavily on me, because I am from Syria… But we have also learnt that we have potential in the region, and we just got to grab these opportunities, and you can make a difference. And the region needs us… We know the risk of the region, we are from the region, but, you know, this is our region." And that sense of ownership for the region is motivation enough for Mouchawar to keep plowing ahead- and the rest of us shouldn't think twice about following suit.