When Sultan Alasmi co-founded Zid, an e-commerce enablement platform based in Saudi Arabia back in 2017, he was repeatedly met with rejections. At the time, few retailers in the country were interested in selling online and Alasmi’s offering was, to them, uneccessary. He and his co-founder Mazen AlDarrab launched Zid with just six companies, setting up their online stores and integrating them with payment, warehousing and delivery providers.

But now after a year of lockdowns, a pandemic and a fundamental shift in consumer shopping habits, the company is grappling with a waiting list of more than 50 companies, keen to go online and make use of its platform.

“We had a very hard time explaining the obvious,” says Alasmi. “Back in 2017 online payment wasn’t welcomed, everyone preferred cash on delivery and payment gateways were difficult to get. In 2019, only 4 per cent of retail businesses were online (in Saudi Arabia) and 96 per cent of retail transactions were conducted offline.”

Thanks to the pandemic and the subsequent boom in e-commerce, the situation for Zid has changed dramatically. The startup recently raised a $7 million Series A round and is now expanding outside of Saudi Arabia.

“The pandemic helped raise awareness, we see the demand in the region, people are calling us and emailing us to operate in other countries,” he says.

Demand for online shopping has rocketed across the Middle East and North Africa and is expected to grow a further 30 per cent this year to reach $30 billion according to RedSeer Consulting. The ripple effect has so far been vast, impacting the logistics and delivery sector, as well as fintech. But amid this surge, the pandemic unearthed the woes of a largely unorganised retail sector, forcing businesses of all sizes to digitise, improve their business cycles and become resilient in the face of uncertainty. This is when the ripple effect touched business-to-business (B2B) e-commerce space. Whether they sell services and goods directly to businesses, offer solutions to automate the entire fulfilment process, address last-mile logistics bottlenecks, or help retailers build their own online stores and adapt to e-commerce and online selling, B2B tech continues to shape up as an important segment of the overall e-commerce sector and attractive space for investors.

A recent whitepaper from international courier firm DHL suggests the global B2B e-commerce market size will grow by 70 per cent to reach $20.9 trillion by 2027, up from $12.2 trillion in 2019. By 2025, 80 per cent of all B2B sales interactions between suppliers and business buyers will take place online.

So far this year, e-commerce startups in the B2B space in Mena have raised $30 million across 13 deals. Most of this investment has gone to startups in Saudi Arabia (six) and Egypt (four), reflecting both market’s growing online retail sector. Saudi Arabia-based Azom raised the largest ticket with $9.5 million in its Series A.

Much of this growth was pushed by the fast-moving consumer products (FMCG) sector. When the lockdown came into force in early March last year, the online demand for consumer goods rose considerably, adding more pressure on all stakeholders across the entire supply chain.

"Suddenly organisations - irrespective of their size - were looking for a digital solution. Everybody now realises the benefits of having an e-commerce platform,” says Adnan Zubairi, CEO and founder of UAE-based DXBUY, an online platform connecting small businesses in the food and beverage, grocery and retail sectors with manufacturers, distributors and wholesalers.

During its beta phase, the DXBUY was accessed by 2000 users, a few months after its launch in May 2020, it managed to onboard 5000 clients.

According to Zubari, the B2B e-commerce space presents numerous opportunities for growth and profitability - unlike the B2C tech scene which has become saturated and played out.

“The reason why we went after the [B2B] market is that the B2C e-commerce market in the Middle East, particularly in the UAE has reached its years of maturity with so many big players being in it, but the space for B2B still small with no single player focusing specifically on consumers,” says Zubari. “While in other parts of the world it was already a successful business model which is doing very well. In fact, it's doing better than the B2C e-commerce marketplaces.”

Sensing the opportunity, Saudi Arabia-based supply chain digitisation startup Sary pivoted to become a B2B marketplace after operating initially as a B2C platform. According to Mohammed Aldossary, Sary’s co-founder and CEO, the B2B sector heralds more growth in the long run, especially with the ever-growing demand for tech-enabled solutions in the e-commerce and online selling space.

“The B2B sector offers a slim profit margin yet a high average selling price,” he said during a webinar hosted by Saudi Arabia-based platform Jawla in December to discuss challenges faced by B2B businesses. According to Aldossary, the startup’s customer base has grown 27x as a result of the pandemic.

Another UAE-based B2B e-commerce platform posting substantial growth is Tradeling, founded and backed by the Dubai government’s DAFZA free zone.

Launched in April last year, Tradeling pitted itself as the “Alibaba of the Middle East”, providing businesses in the region with products directly from manufacturers. Today, the company claims to be onboarding hundreds of sellers a week from more than 25 countries with its gross merchandising value increasing 60 per cent month-on-month. It offers products across 13 categories including F&B, health and wellness and garden and furniture. Tradeling recently signed a partnership agreement with China’s JD.com to offer Mena business buyers access to China’s e-commerce market.

“The Covid-19 crisis has fundamentally altered how business will be done in the future,” says Marius Ciavola, CEO of Tradeling. “The unprecedented challenges brought on by the global pandemic has necessitates the drive to a new model of retail, one that is driven online. Demand from Asia, in particular from China, will increasingly move to the digital space. We believe that B2B e-commerce is one of the upcoming megatrends, and, Tradeling is a concept that has launched at the right time in a highly underserved region.”

Cutting out the middlemen

In an attempt to increase the supply chain efficiency, B2B marketplaces cut out the third-party intermediaries, middlemen from business transactions. This turn democratises cross-border trade; thereby helping small businesses access new global markets, according to Haisam Jamal, CEO and co-founder of Distichain, a UAE-based SaaS e-commerce solution provider for SMEs.

“There's a huge amount of the value chain in global trade that is eaten up by middlemen, by brokers, middlemen, or people that are just connecting the dots. And by using technology, you democratise trade - which means moving goods seamlessly across countries irrespective of geography or size," he says.

Amr Sharqawy, founder and CEO of e-commerce enablement platform ExpandCart further expects the future of retail is going to be predominantly digital. "Digital marketplaces will be the dominant business form for retailers in the next 10 years, while offline retail will be limited to hangouts and other social gatherings, but not for shopping for essentials."

Fatura’s Hossam Ali argues that tech adoption will accelerate the exit of middlemen who "don't provide value across the entire supply chain. The role of the middlemen is going to be rethought. They will either adjust and adapt to being in the marketplace or become a marketplace themselves”.

But large retailers and the manufacturing and logistics sector are known to be slow moving. While Covid-19 crisis served as a wake-up call for businesses of all types to accelerate their shift to the digital realm, up until recently, the B2B tech marketplaces were met with huge resistance from retailers. 

Zubairi explains that the company faced difficulties convincing retailers to switch over from the traditional purchase model of having to deal with salesmen or a third party to ordering through a mobile app.

"We've seen that the bigger the size of the organisation, the more difficult it was to go and convince them to come on board with this,” says Zubairi. "The shift is still happening. Things will eventually get better as we move forward."

Sharqawy faced a similar issue, adding that the company had to conduct door-to-door visits to retailers, trying to acquire them.

"It was a near-impossible mission to onboard retailers - especially big ones," he says. Now, they have become keener to try out solutions like ours and adopt them faster than anyone else," he says.

Meanwhile, Distichain’s Jamal argues that the reason why B2B has not taken a strong foothold in the past was the fact that B2B space was still in its infancy, which made it difficult for retailers to trust these solutions let alone adopt them, especially when it comes to payments. The B2B e-commerce startup sector is still nascent and has not yet matured. Investment ticket sizes are still on the smaller side.

“Investors need to see major startup success stories in this space that could be used as their benchmark to measure the success of other startups,” says Aldossary.

But given the continued growth of e-commerce, investor sentiment and outlook for B2B startups in this space is positive.

"The B2B startups are less risky than B2C, if they survive the first two years of operations with the good revenues and a good number of customers, so they will likely live longer,” says Massimo Cannizzo, CEO and co-founder of GELLIFY Middle East, a B2B-focused innovation platform and investor.  

For Cannizzo, B2B startups that sit in a specific niche and develop a complete and holistic understanding of its nuances are the ones that are likely to catch investor interest, unlike the horizontal B2B marketplaces.