Noon (noon.com) is an e-commerce platform launched in the United Arab Emirates in 2017. E-commerce (electronic commerce) is defined as transactions, be it buying or selling, being made through the Internet. It involves the sale of goods and services, the exchange of data, and the transfer of funds. Noon is a joint venture between the Public Investment Fund of Saudi Arabia and Mohammed Alabbar, an Emirati businessman and global entrepreneur. Mohammed Alabbar is known for large-scale, trailblazing projects in the Gulf Cooperation Council (GCC) such as Emaar Properties, one of the largest real-estate developers in the United Arab Emirates. In his speech on the launch of Noon in the UAE, Alabbar showed his commitment to building the first e-commerce platform in the Arab world. The founder added that digital technologies cause disruptions in many economic sectors. For this reason, the UAE needs to pick up the pace and gain a competitive advantage by supporting its brick-and-mortar retailers with a digital platform.
At present, Noon maintains partnerships with local vendors and provides the region’s customers with a wide choice of products. Namely, Noon offers electronics, fashion, beauty, baby, homeware, and groceries. The e-commerce platform specifically targets millennials by having a rich assortment of cutting-edge gadgets. Lastly, the platform is appreciated by book lovers, travelers, and adventurers. At the moment of its launch in the UAE in 2017, Noon was valued at about $1 billion (Nanji, 2017). The question arises as to whether the platform will continue passing more milestones and thriving in the years to come or defeated by new entrants. This paper provides an economic analysis of Noon’s business activities, assesses its standing on the market, and outlines the potential prospects of its development.
Noon and Market Types
In a free-market economy, there are four key types of competition: perfect competition, monopolistic competition, oligopoly, and monopoly (Eicher, 2019). In perfect competition, there are many small companies none of which have the upper hand in the race. Monopoly lies at the opposite end of the spectrum: under this type of competition, there is only one seller on the market. Monopolistic competition is different from monopoly as it allows the presence of several companies that sell products that serve the same purpose but are differentiated in one way or another. Lastly, in oligopoly, large companies dominate the sector, but they do not exclude minor companies.
In 2019, the UAE received the title of the second-largest economy in the MENA (the Middle East and North Africa) region. Despite being second to Turkey size-wise, in 2019, the UAE managed to maintain its top spot as the most competitive economy in the region for the fourth time in a row. According to the data provided by the World Economic Forum, the UAE was able to improve its scores across eight out of twelve categories (The UAE Embassy, 2015a). Namely, the country demonstrated macroeconomic stability as well as positive changes in infrastructure, technology, and business dynamism. Today’s UAE metrics put it on par with highly competitive, diversified markets such as Singapore.
It is true that the United Arab Emirates’ market is still characterised by homogeneity. Some sectors can be classified as Perfect Competition while others qualify for Monopolistic Competition, Oligopoly, and Monopoly. However, in recent years, as the country intensifies its efforts to diversify the economy, the market shies away from monopoly. The UAE Embassy (2015b) reports that under 30% of the country’s GDP comes from the oil sector that is mainly controlled by the state (monopoly). The rest of the market, however, is characterised by the presence of multiple players. Drawing on the definitions provided at the beginning of this section, it is safe to assume that Noon operates under oligopoly. Today, it is the largest e-commerce platform in the GCC, and it dominates the sector; however, the market is still open to new entrants.
Price Elasticity of Demand for Noon’s Goods and Services
Price elasticity of demand is defined as a relationship between the quantity of a demanded or purchased product and its price change. In other words, price elasticity is a useful economic measure that helps to understand how responsive demand is to increases or decreases in price. If the demand for a product exhibits more significant changes in response to changes in price, then such a product can be classified as elastic (EIcher, 2019). Typically, price elasticity is normal for products that have plenty of substitutes on the market. In this case, customers are aware of low switching costs and can easily choose an alternative the moment they find themselves dissatisfied with the new pricing policies.
The second type of elasticity is unitary: it occurs when the change in the quantity of demanded or purchased product is proportional to the change in price. Lastly, a product is considered inelastic if changes in price do not correlate with the demand for it. Inelastic price elasticity is normal under monopolies and monopolistic competition. For instance, car users typically have to accept rising gas prices as they still need to cover their needs for transportation and they do not have any more favorable options at their disposal.
When it comes to e-commerce, there are two approaches to assessing the price elasticity of a platform. On the one hand, a platform such as Noon “houses” hundreds of individual sellers and vendors, many of which sell identical or similar products. On its official website, Noon states that it does not impose any centralised pricing policies (“Popular questions,” 2020). Sellers are allowed to list their offer against a certain product, which keeps the prices competitive. Noon keeps pricing transparent: a list of offers can be seen below each product so that customers can select a vendor whose offer best suits their needs (“Popular questions,” 2020). Therefore, it is safe to say that Noon creates perfect competition, which is a prerequisite for high price elasticity. Customers are able to compare prices and switch immediately and with convenience to the next best offer.
On the other hand, the price elasticity of demand for e-commerce businesses should be assessed in a larger context. At the moment, Noon is one of the largest e-commerce platforms in the UAE and the largest Arab e-commerce platform in the world. However, not only oligopoly makes it inelastic: over the past few years, Noon has improved its services to meet its customers’ most sophisticated needs. Noon Express is a subscription-based program that processes items faster (“Popular questions,” 2020). Apart from instant shipping and fast delivery, Noon also ensures that the desired items are always in stock, and customers are informed about promotions (“Popular questions,” 2020). Market domination, favorable terms of service, and trustworthiness due to the Arab origins of the platform make Noon resilient to price changes.
Competitors and Substitutes
While the UAE e-commerce market is not oversaturated yet, Noon still has to face serious competition. Probably, the main competitor of Noon is the e-commerce platform known as Souq.com in Egypt and the Kingdom of Saudi Arabia and Amazon.ae in the UAE. It is an English-Arabic platform owned by Amazon, Inc., that since its foundation in 2005, has come to be the largest e-commerce platform in the Arab World. Originally, Souq.com was created as a site for a consumer to consumer auction and a part of the Maktoob group. Ten years after its launch, Souq.com was having ten million visitors per month, coming second only to Digikala. Around that time, other large corporations started looking into buying the platform. Souq.com received two attractive offers – from Emaar Malls, the operator of the UAE’s biggest mall, and Amazon, a US-based e-commerce giant. Eventually, Souq.com was sold to Amazon for an unknown value, changed the name to Amazon.ae, and became the corporation’s arm in the Middle East.
In 2019, Amazon.ae made Amazon Prime available in the Emirates (Cherian, 2019). Amazon Prime is probably the most successful product that Amazon has ever developed. It is a subscription-based premium plan that offers customers plenty of advantages on the e-commerce website. Namely, Amazon Prime membership allows free shipping, free-of-charge next-day delivery, and discounts that are otherwise non-available. Other touted benefits of Amazon Prime subscription is access to entertainment services such as Amazon Prime Video and Twitch Prime (for gamers) (Cherian, 2019). Amazon Prime is an arguably more established service than Noon Express. It is widely recognisable and known for its advantages. Prime membership is complementary to Noon Express in some aspects and superior in others. For instance, as of now, the shipping at Noon costs 5Dh for any product. Amazon Prime, on the other hand, offers free services for a fixed monthly pay (16Dh or 140Dh for a yearly plan as of 2020 ) (Cherian, 2019).
Another serious competitor that Noon has to face is the French multinational giant Carrefour. Founded in 1958, Carrefour has developed multiple products such as Cash & Carry, warehouse clubs, discount stores, and supermarkets and expanded into more than twenty countries. The second-largest retailer in the world, Carrefour is successfully conquering the online world with its digital platform. In the UAE, Carrefour is franchised to Majid Al Futtaim Group, an Emirates-based holding company that operates shopping malls, retail, and leisure establishments in the MENA region. In 2020, Carrefour upgraded its UAE online portal into a full-fledged marketplace whose assortment expands beyond food and daily consumer goods. As reported by Nair (2020), for the time of the COVID-19 pandemic, Carrefour allows commission-free transactions and last-mile free delivery. The main competitive advantage of the French giant on the UAE market lies in its ability to buy goods in bulks and keep the prices as low as possible, therefore, sustaining price leadership in the region.
Price leadership is a strategy whose maintenance requires significant resources. Some companies that also compete with Noon for customers’ attention choose a different approach. The founder of LetsTango Alex Tchablakian, a rising star of the UAE e-commerce scene, admits that in his work, he prioritises personal relationships with the customer (Sharma, 2019). Tchablakian explains that the name of the platform refers to his personal belief that “it takes two to tango (Sharma, 2019).” It is a metaphor for a relationship between a business and its customers. No matter how revolutionary a business idea is, it is nothing unless it is embodied in a product that the market accepts, recognises, and appreciates.
LetsTango is a user-friendly website: as of now, it offers support via live chat and digital shopping assistance. Despite the rapid growth, LetsTango still finds time to send customers handwritten notes and personalise their shopping experience through surprise discounts and additional services. Tchablakian himself admits that LetsTango will probably not reach the level of giants such as Souq and Noon. However, Noon can learn valuable lessons from a smaller company that seems to have found its own market nice. The press around Noon primarily focuses on its growth plans and revenue goals, which admittedly, is what every business cares about. At the same time, it narrows the mission of the company to financial pursuit. To outdo LetsTango, Noon could concentrate on improving the user-friendliness of its services and making its business more human.
Noon keeps its goods diversified: in an attempt to meet all customers’ needs, it offers food, electronics, beauty products, homeware, and more. On the one hand, this approach is reasonable: a customer can enjoy a wide choice of products on one website without having to turn to any other platform. On the other hand, since Noon does not specialise in any of the categories presented on the platform, it might not be reaching out to distinct market segments. For instance, while Noon caters to mothers and babies, websites such as Mumzworld that targets this segment exclusively potentially offer a more sophisticated assortment. Haine (2017) reports that the history of Mumzworld started in 2011 when it had only four employees and 15,000 products. Six years later, the website already had 140 employees and ten times as many products. According to Haine (2017), Mumzworld is one of the fastest developing e-commerce platforms in the Arab world, doubling its growth rate every year. If the tendency persists, the specialised website can outshine Noon in the category of products for mothers and children under twelve years old.
Demand for the Product
Globally, electronic commerce is the engine behind retail growth. Statistics clearly demonstrate that e-commerce is expanding and becoming a part of consumer experience across the globe. Today, online shopping has grown to be not merely an alternative to but a serious contender of traditional retail. According to Bain and Company (2018), this year, 15.5% of all purchases will be made online, which shows a 100% growth from 2015. What is interesting, even when doing traditional shopping, two-thirds of customers still check prices and offers online to make sure that they are making the right choice (Bain and Company, 2018). Among the top reasons to switch to online shopping, as told by customers themselves, is the ability to shop at any time of the day (Bain and Company, 2018). Apart from that, consumers enjoy the ability to compare prices to pick the best offer as well as a wider variety of goods and services (Bain and Company, 2018). Lastly, online shoppers appreciate that they no longer need to spend grudging hours at a mall and stand in lines.
Currently, in the MENA (the Middle East and North Africa) region, the e-commerce market penetration stands at 1.7%. The United Arab Emirates is a major outlier: the second-largest economy of the MENA region, the UAE is the most advanced e-commerce market of the Arab world. Today, e-commerce penetration in the country has amounted to 4.2%, which is more than two times higher than the region’s average. As reported by the Global Media Insight (2018), between 2014 and 2018, the UAE e-commerce market has seen unprecedented growth from $2.5 billion to $10 billion.
The market is likely to continue its rapid growth as there are several powerful factors that propel its development. According to the Global Media Insight (2018), the UAE has been extremely accepting of digital technologies whose proliferation is contributing to the growth of the e-commerce industry in the country. Moreover, the Emirates are characterised by the outstanding ease of doing business. Year after year, the comprehensive ranking Doing Business that analyzes the business environment in more than 160 countries of the world recognises the Emirates’ efforts to improve its market conditions. In 2019, the UAE ranked 11th, which is significant progress from the 21st spot in 2018, and the best result in the MENA region (Gibbon, 2019). Djankov and Pohl, the experts behind the Doing Business rating, pointed out the efficiency of the UAE judicial system as one of the key markers (Gibbon, 2019). Apart from that, the UAE was singled out for smart services and near-perfect access to electricity.
The Global Media Insight (2018) names existing strong retail and business setups as one of the factors behind e-commerce growth. The business environment in the UAE enjoys modern infrastructural and technical implementations that enable efficient trade. Technology-driven enterprises rely on the advanced logistics and trading establishments that the UAE seeks to offer to all newcomers. The UAE investment climate is as favorable: in 2017, Amazon bought Souq.com and Emaar Properties invested in the launch of Noon, a venture valued at $1 billion.
According to the source, the trends in the UAE e-commerce market are similar to those that are taking place internationally. The most popular goods bought online remain electronics and software: this category accounts for more than two-thirds of online purchases. Clothing and accessories come second: these two categories account for 17% and 14% of all purchases respectively. Based on these statistics, it is safe to assume that Noon offers goods that are in high demand. Moreover, both most popular categories are represented on the same platform, meaning that users do not have to make a switch between websites if after shopping for gadgets they decide to choose some clothes.
Apart from that, based on the latest statistics, the Emirates has a near-complete Internet penetration standing at 99%, meaning that almost the entire population has access to the online world. Therefore, when assessing the size of the e-commerce market in the UAE, one needs to consider that 99 out of 100 Emiratis are existing or potential buyers. Besides, as reported by Bain and Company (2018), the average screen time in the UAE is 7 hours 39 minutes. In the MENA region, this result comes second only to Egypt whose residents spend up to 8 hours 15 minutes online on a daily basis. 66% of Emiratis own smartphones and 99% use social media (Bain and Company, 2018). The latter is a minor but significant source of traffic for Noon. In a traffic overview provided by Similar Web (2020), social media accounted for 5% of Noon website traffic with the largest number of users coming from YouTube, Instagram, and Twitter.
Out of the total number of internet users in the Emirates, as many as 85% have searched for a product or a service online at least once (Global Media Insight, 2018). Nine out of ten users have visited an e-commerce platform in the last month, and six out of ten have actually shopped online (Global Media Insight, 2018). Global Media Insight (2018) reports that mobile and desktop users are equally contributing to the growth of the sector. This trend puts Noon in an advantageous position as the company has both a desktop platform and a mobile application. In summation, Noon emerged in the right time and in the right place. The MENA region is adopting technology en masse and acquires new shopping habits that largely rely on online platforms. In turn, the UAE provides a favorable business environment that fosters and propels Noon’s growth.
Increasing Productivity Through Labor Force
At present, there is not enough information available regarding work conditions at noon. Scarce reviews on websites targeted at job seekers such as Indeed and Glassdoor suggest that Noon is a good employment opportunity with the possibility to grow professionally, take initiative, and make fulfilling personal contributions. Waxin et al. (2018) address human resources management problems that stand true for all businesses based in the UAE. Namely, Waxin et al. (2018) point out that problems such as recruitment, employee retention, talent management, and the lack of continuing education in the workplace plague the business environment. Apart from that, the UAE has long been enforcing its policy of Emiratisation. This government initiative obliges organisations in the private and public sectors to employ Emiratis. For Noon, it means that if it lacks qualified cadres and there are foreign candidates available, it will still have to maintain the quota established by the government. It is difficult to tell which of the problems pointed out by Waxin et al. (2018) apply to Noon. Yet, investing in talent management is always an excellent decision that can benefit the company in the long run.
At the moment, Noon has a lot of business processes automated. Its Noon Express program makes sure that the delivery is fast and the needed goods are always in stock. However, the company might not be using its human resources’ potential to the fullest. E-commerce businesses increase their profit when they convince customers that their deal is the best they can find and help them resolve any hesitation. Noon might want to learn from Letstango and train its employees to assist customers more. It will help to improve sales numbers and avert reimbursements as customers will be making fewer purchases that they have not thought through.
Since its foundation three years ago, Noon has been enjoying a steadily increasing revenue. As of now, there is not enough official information regarding Noon’s financial performance. One source suggests that the e-commerce platform’s annual revenue amounts to $151 million. For comparison, Souq.com makes around $500 million per year. Based on the available data, Noon is a profitable business. Yet, the logical question arises as to whether it will be able to keep its status as one of the best UAE e-commerce platforms.
Whether Noon will be able to sustain its profitability largely relies on its ability to successfully withstand competition with its most serious contender, Souq.com, or Amazon.ae in the UAE. As Laubscher (2018) points out, both companies have a lot at stake: a market that is growing at 23% per year and is valued at $69 billion in 2020. Back in 2017, Emaar Malls made an offer worth $800 million to Souq.com, but Amazon proved to be more convincing in its negotiations and bought the e-commerce platform at a lower price.
Noon was Emaar Malls’ solution to solve the problem with the shrinking traffic to physical malls as increasingly more customers were choosing online shopping. Laubscher (2018) writes that so far, Alabbar, the founder of Noon, has been acquiring and investing to counter its disappointment with Amazon’s purchase of Souq. As of now, Alabbar has made a few decisions that will potentially boost Noon’s profitability in the long-term. Logistics is the key to the success of any e-commerce platform, and this is what attracted MENA customers in Souq. The platform allowed them to purchase goods without cross-border e-commerce (Laubscher, 2018). Therefore, to counter Souq’s rise to popularity aided by Amazon, it is only reasonable for Noon to invest more in logistics. So far, Alabbar has purchased a Dubai-based courier Aramex, the dominant logistics business in the Middle East. In the future, logistics will need to be refined further to be able to compete with Amazon Prime.
Another way to keep Noon’s position at the top in the e-commerce sector is to enter strategic partnerships with competitors. For instance, trying to outdo the Chinese e-commerce giant eBay would probably be a waste of resources and an overall unsustainable decision. In 2018, Alabbar chose a different strategy and partnered with eBay. Now customers in the UAE and Saudi Arabia are able to order products from the US and other countries with more ease. As a young business, Noon may not be able to face Amazon right now, but partnering with its contenders may be a wise solution that will yield many benefits in the long-run.
Apart from financial decisions and commercially incentivised partnerships, it is critical for Noon to turn its attention to the corporate social responsibility aspect of its operations. Corporate social responsibility (CSR) is a business model that emphasises businesses’ obligation to be socially responsible and to give back to the community. The concept especially applies to large corporations: as they grow and expand, they accumulate a great deal of power that, depending on its use, can be restorative or detrimental.
While in the short-term, being socially responsible can result in unwanted expenses, such a strategy is likely to yield benefits in the long run. Shaverien (2018) explains that today, customers’ expectations are changing: they are becoming more into conscious consumption, for which it is critical to check a company’s background and practices. As reported by Shaverien (2018), as many as 71% of young customers say that they would stop using a company’s products or services if they found out about a scandal or a controversy. If Noon focuses on being a charitable, ethical company, it might as well outshine Amazon that has been in the center of one scandal after another since a few years ago. The Seattle-based company has been criticised for many things starting from promoting only the goods that benefit Amazon to the mistreatment of warehouse workers. So far, Noon has not been accused of any such violations, which allows it to build a socially responsible image and gain yet another competitive advantage.
Noon is a Dubai-based e-commerce platform launched in 2017 and valued at $1 billion upon its creation. The company was started by Alabbar, the founder of Emaar Properties, in response to Amazon aggressively expanding into the Middle East by buying Souq.com. Noon functions under oligopoly: alongside other large corporations, it dominates the market but still allows minor companies to have their share. The price elasticity for demand is far from elastic: as a major player, Noon makes attractive offers and as a homegrown company, is seen as reputable and trustworthy. Its main competitors are e-commerce giants such as Amazon and smaller but more specialised businesses such as Mumzworld. The demand for Noon’s services is likely to increase as the e-commerce market in the MENA region shows rapid growth. As of now, Noon is a fairly profitable company but yet to reach Souq’s numbers. The platform’s profitability is contingent on its ability to face fierce competition and retain a good reputation. One of the growth areas for Noon is labor force training in a way that customers could enjoy a better experience and polite and helpful assistance.
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