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Can you make money out of Lebanese e-Commerce?

Entrepreneurs of the week: Natasawak

by Livia Murray

Natasawak in Arabic means “we shop,” explain Imad Karam and Rami Audi, co-founders of the Lebanon-based online shopping platform of the same name. Their challenge is to push Lebanon’s shopping trends online.

Lebanon’s e-commerce market is hardly mature. According to a recent Ipsos poll of the 1,700,000 internet users in the country, less than 1 percent make purchases online. Compare this with the United Arab Emirates – where that figure is over 7 percent – and it is clear Lebanon’s market is still in its infancy. Moreover the country’s regulatory framework makes for me challenges.

Let me be honest with you – Lebanon is not the best country to operate an e-commerce website from typically because you have high customs, and you have high delivery fees, and you have certain obstacles that are not present in the UAE,” says Karam.

This did not stop them from launching Natasawak in Lebanon in January this year and the men claim that, despite the hurdles, it has been a valuable learning experience. “You learn a lot trying to solve those problems,” says Audi, “and that’s why we think that starting a business in Lebanon, even though it might be difficult, gives lots of insights… and makes you ready to go and open it in another country.”

Natasawak brings together three different shopping platforms in one website. Unlike their competitors, who either use a model of online boutiques or flash sales, Natasawak has incorporated both of these alongside of a local designer section. The flash sales section offers certain items at a discounted price for a short amount of time. The online boutique section permits any store to open an online shop for free. Finally, the local designer stores features hand-made items from designers in Lebanon. Natasawak currently features eight to 10 new flash sales a week, 17 permanent boutique stores and 10 local designer stores.

This diversification has apparently had some success. Though they haven't computed the percentage yet, Karam estimates that 25 percent of people who bought from them on a flash sales offer came back and bought from another section of their website. “This decision was really a very successful strategy for us,” says Audi, “and also there was lots of added value in terms of providing something, in terms of being a one-spot shop, let’s say, for lots of people.”

According to Karam and Audi, they have made $25,000 in sales over the past seven months, which comprised of 200 different orders from 120 different users. They said that Natasawak brought in two to three sales a day in the month of August. Though they did not wish to share the exact margin of profit they made, they said they made an average of 25 to 50 percent cut of the sales thanks to agreements with the suppliers who are trying to liquidate their stock.

Like many startups in their early stages, the company is not yet profitable. They received a first round of funding of 75,000 from a Lebanese-American angel investor, which helped them launch the website and secure the operations of the company for one year. This included hiring staff, online advertising and closing agreements with Aramex, the company handling deliveries for the countries of the Gulf Cooperation Council.

Before breaking even, they are already looking at further rounds of funding in order to facilitate geographical expansion, particularly into the Gulf region where online retail is more established. “We’re looking at raising half a million dollars in order to take the business to the next level. We want to implant or establish an operation in the GCCs, mainly in the UAE in order to expand, first of all, our coverage, to improve our prices, and to improve our margins,” said Karam. “Expansion is our next natural evolution,” added Audi.

The dangers of competition loom, however. If Natasawak were to move into the UAE, their competitors would include the regional giants Souq.com, Cobone and MarkaVIP. How they would mark themselves out from the crowd remains a potential challenge.

Nataswak is the pair's second business venture together after co-founding the online advertising company Clouds Media. Since the launch they have acquired two other partners – who remain unnamed – as advisers. The first works in the luxury goods industry, and the second – the most recent addition – works for one of their competitors and has recently opened a branch of his e-commerce website in Dubai. They have one full-time employee who handles operations, as well as a driver who handles deliveries within Lebanon on a scooter.

For the creators of Natasawak, the most important factor determining expansion was controlling the costs of operations. “Once we felt that we can control costs, that’s where we felt that we can make it in other markets. Cause, you know, we can sell a lot. However if you sell a lot and you have a lot of costs you might stay negative. And you might stay negative for many years,” says Audi. They anticipate the site will be profitable within a year.

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Livia Murray

Livia covers business, finance and economic policy for Executive.

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