While traditional industries are taking a backseat due to low oil prices, potential slowdown in construction and eroding margins in telecom and banking- online businesses continue to thrive, thanks to high demand and adoption of transactional services, said an industry expert.

The telecom Internet service providers of Mena have had 15 years of nonstop growth, bringing faster and cheaper Internet access to users who are migrating from desktop computers to smartphone access, explained Khaldoon Tabaza, founder and managing director of iMena Group, a leading telecom company.

“Founders from Mena that have begun to create disruptive business models driven by 175 million Mena Internet users who are willing to pay for the increased comfort and convenience the Internet brings to their lives,” he said.

The largest industries in Mena are already being disrupted, he added.

This includes the Media industry, where consumption of content on smartphones and computers has already exceeded that of traditional media; the Food and Beverage sector, where users are moving to online food ordering and restaurant reservations; Transportation and Travel sector, where mobile taxi ordering, online ticketing and hotel reservations are becoming the standard tool for users to fulfil their needs; and the automotive industry, which is becoming increasingly reliant on online services for selling and buying pre-owned cars.

“More recently, a new wave of founders is venturing into disrupt new industries such as education and local services like cleaning, laundry and plumbing which are destined to move online due to existing inefficient and opaque business models that are perfect for the Internet to transform,” Tabaza said.

In retail, pure-play online retailers are continuing to grow rapidly. However, with the commoditization of online retail’s full value-chain, this sector of the online industry is beginning to resemble traditional traders and retailers rather than online businesses.

The reason for this is that cost and delivery time are offline and non-scalable components of the business model, in contrast to the models outlined above which possess an inherent online advantage.

Consequently, the e-retail business model has narrow margins and very high capital requirements, which oppose the typical features of online business models.

“That’s why the winners of e-retail are expected to be traditional retailers who are fast becoming multichannel retailers, and the providers of enablement services for those players –hence the tremendous growth being witnessed in online payment services, online advertising service providers, and the providers of professional services for those companies such as strategy and technical development,” Tabaza pointed out.

In terms of markets, Saudi Arabia and the United Arab Emirates remain the “crown jewels” and must-win online markets for most business models. If an online business wins Saudi Arabia, it tends to have a strong spillover effect not only in other GCC markets, but also in markets such as Jordan and the rest of the Levant.

The dark horse of online regional markets is Egypt, with a growing absolute number of users, though penetration remains low. Morocco is split between Mena and francophone online services, waiting for a more aggressive expansion strategy by GCC-based online services in order to make it a core market in Mena alongside Saudi, UAE, and Egypt.

Day by day, winners are emerging in Mena’s online business landscape, though size and scalability pose significant challenges, thus lending an advantage to online business platforms that operate diversified but synergistic models and that can leverage economies of scale in terms of shared services, knowledge, and pools of capital.

“In the next 12-18 months, big winners will emerge, and billion dollar businesses will be created in the online industry faster than any other industry in the history of business in the Mena region. The market will not wait for the laggards,” Tabaza concluded. – TradeArabia News Service