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How does Noon make money?

  • Noon is an eCommerce platform that was founded by Mohamed Alabbar in 2016 and is headquartered in Riyadh, Saudi Arabia. The company was founded to create a dynamic digital economy for consumers and businesses in the Middle Eastern market.
  • As an eCommerce retailer, Noon utilizes the marketplace business model like competitors such as Amazon. The company sells various private label brands for a profit and offers a full suite of tools to third-party sellers. Fees are charged for cancellation, storage, and fulfillment, among other scenarios.
  • Noon also charges money for its next-day and same-day delivery services. These services allow customers to have a range of fresh food items and other home essentials delivered straight to their door.

Origin story

Noon is an eCommerce platform that was founded by Mohamed Alabbar in 2016 and is headquartered in Riyadh, Saudi Arabia.

Noon was started with a vision to create a dynamic digital economy for consumers and businesses in the Middle Eastern eCommerce market.

The market, which encompasses the United Arab Emirates, Saudi Arabia, and Egypt, is home to around 440 million wealthy consumers with a high internet and smartphone penetration rate.

Despite the impressive size of the market, Middle Eastern consumers have been much slower to warm to eCommerce as a way to purchase goods and services.

Even with the pandemic moving more of them online, eCommerce only accounts for around 2.5% of all sales in the Middle East compared to around 22% in the USA, for example.

When Noon was launched in 2017, it encountered several unique obstacles. For one, Alabbar needed to build trust with consumers by creating a reliable, predictable, efficient online ordering experience.

Noon also had to make allowances for Saudi Arabia’s unreliable postal system, with many consumers not having a home address and instead collecting their mail from the post office.

Because of the unreliable postal system and future aspirations to scale more rapidly, Noon decided to keep its logistics and fulfillment services in-house.

Delivery vans and drivers are all Noon employees and each fulfillment center has a “sortation” area where orders are grouped by customer location before they are distributed.

In October 2021, Noon secured as much as $2 billion in financing from investors that included Saudi Arabia’s sovereign wealth fund.

The capital would be used to secure more of the Middle East eCommerce market and upgrade infrastructure to improve delivery times.

The company hopes to own 15% of the eCommerce market by 2026, or approximately $70 billion worth.

Noon revenue generation

As an eCommerce retailer, Noon utilizes the marketplace business model like competitors such as Amazon.

In addition to selling private label products for a profit, the company also makes money from numerous merchant fees and delivery fees.

Merchant fees

Merchant are charged a sales commission whenever they sell a product on the Noon platform.

The exact commission depends on the product category, with home appliances attracting a fee of 4.5% and footwear at 27%.

To increase revenue, merchants can utilize the company’s custom-built seller tools, support team, and end-to-end delivery system.

For those who desired more visibility, there are also various marketing and advertising tools.

Merchants can advertise on Noon using various banners and so-called “mega modules”, while there is also an opportunity to advertise via Noon’s Instagram stories. Prices for advertising services are available on request.

Shipping and handling fees are typically charged at 9% of the total order amount. There is also a storage fee which can be as much as around USD 1.40.

For items that sit in storage for more than 180 days, a long-term storage fee also applies. Larger items such as furniture that take up the most space attract the highest fees.

Lastly, a fee is charged for seller-initiated cancellations or those that arise because the product is faulty.

Like sales commission, footwear and apparel (27%) attract the highest fees, whilst audio and video (4%), video game consoles (5%), and car accessories (5%) attract the lowest.

Noon Daily

Noon Daily is a next-day grocery delivery service ideal for fresh foods, bread, dairy, meat, household essentials, and baby food.

Noon Daily delivery fees depend on the city, the total order amount, and whether or not the customer is a VIP member.

Now Now

Now Now is a similar delivery service to Noon Daily except the items are delivered in a matter of minutes.

The company partners with exclusive stores in a customer’s local neighborhood to ensure delivery occurs on time.

Delivery fees for this service are 6 Emirati Dirhams, equivalent to approximately $1.60.

Connected Business Frameworks, Concepts And Tools

Blitzscaling Canvas

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The Blitzscaling business model canvas is a model based on the concept of Blitzscaling, which is a particular process of massive growth under uncertainty, and that prioritizes speed over efficiency and focuses on market domination to create a first-scaler advantage in a scenario of uncertainty.

Business Analysis Framework

business-analysis
Business analysis is a research discipline that helps driving change within an organization by identifying the key elements and processes that drive value. Business analysis can also be used in Identifying new business opportunities or how to take advantage of existing business opportunities to grow your business in the marketplace.

Digital Marketing Circle

digital-marketing-channels
digital channel is a marketing channel, part of a distribution strategy, helping an organization to reach its potential customers via electronic means. There are several digital marketing channels, usually divided into organic and paid channels. Some organic channels are SEO, SMO, email marketing. And some paid channels comprise SEM, SMM, and display advertising.

North Star Metric

north-star-metric
A north star metric (NSM) is any metric a company focuses on to achieve growth. A north star metric is usually a key component of an effective growth hacking strategy, as it simplifies the whole strategy, making it simpler to execute at high speed. Usually, when picking up a North Start Metric, it’s critical to avoid vanity metrics (those who do not really impact the business) and instead find a metric that really matters for the business growth.

Virtuous Cycle

virtuous-cycle
The virtuous cycle is a positive loop or a set of positive loops that trigger a non-linear growth. Indeed, in the context of digital platforms, virtuous cycles – also defined as flywheel models – help companies capture more market shares by accelerating growth. The classic example is Amazon’s lower prices driving more consumers, driving more sellers, thus improving variety and convenience, thus accelerating growth.

Freemium Business Model

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The freemium – unless the whole organization is aligned around it – is a growth strategy rather than a business model. A free service is provided to a majority of users, while a small percentage of those users convert into paying customers through the sales funnel. Free users will help spread the brand through word of mouth.

Growth Matrix

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In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).

Asymmetric Business Models

asymmetric-business-models
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus have a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility.

Attention Merchant Business Model

attention-business-models-compared
In an asymmetric business model, the organization doesn’t monetize the user directly, but it leverages the data users provide coupled with technology, thus having a key customer pay to sustain the core asset. For example, Google makes money by leveraging users’ data, combined with its algorithms sold to advertisers for visibility. This is how attention merchants make monetize their business models.

Marketplace Business Models

marketplace-business-models
A marketplace is a platform where buyers and sellers interact and transact. The platform acts as a marketplace that will generate revenues in fees from one or all the parties involved in the transaction. Usually, marketplaces can be classified in several ways, like those selling services vs. products or those connecting buyers and sellers at B2B, B2C, or C2C level. And those marketplaces connecting two core players, or more.

Wholesale Business Model

wholesale-business-model
The wholesale model is a selling model where wholesalers sell their products in bulk to a retailer at a discounted price. The retailer then on-sells the products to consumers at a higher price. In the wholesale model, a wholesaler sells products in bulk to retail outlets for onward sale. Occasionally, the wholesaler sells direct to the consumer, with supermarket giant Costco the most obvious example.

Retail Business Model

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A retail business model follows a direct-to-consumer approach, also called B2C, where the company sells directly to final customers a processed/finished product. This implies a business model that is mostly local-based, it carries higher margins, but also higher costs and distribution risks.

B2B2C

b2b2c
A B2B2C is a particular kind of business model where a company, rather than accessing the consumer market directly, it does that via another business. Yet the final consumers will recognize the brand or the service provided by the B2B2C. The company offering the service might gain direct access to consumers over time.

Crowdsourcing Business Model

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The term “crowdsourcing” was first coined by Wired Magazine editor Jeff Howe in a 2006 article titled Rise of Crowdsourcing. Though the practice has existed in some form or another for centuries, it rose to prominence when eCommerce, social media, and smartphone culture began to emerge. Crowdsourcing is the act of obtaining knowledge, goods, services, or opinions from a group of people. These people submit information via social media, smartphone apps, or dedicated crowdsourcing platforms.

Open-Core Business Model

open-core
While the term has been coined by Andrew Lampitt, open-core is an evolution of open-source. Where a core part of the software/platform is offered for free, while on top of it are built premium features or add-ons, which get monetized by the corporation who developed the software/platform. An example of the GitLab open core model, where the hosted service is free and open, while the software is closed.

Open Source vs. Freemium

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Open source is licensed and usually developed and maintained by a community of independent developers. While the freemium is developed in-house. Thus the freemium give the company that developed it, full control over its distribution. In an open-source model, the for-profit company has to distribute its premium version per its open-source licensing model.

Freeterprise Business Model

freeterprise-business-model
A freeterprise is a combination of free and enterprise where free professional accounts are driven into the funnel through the free product. As the opportunity is identified the company assigns the free account to a salesperson within the organization (inside sales or fields sales) to convert that into a B2B/enterprise account.

Franchising Business Model

franchained-business-model
In a franchained business model (a short-term chain, long-term franchise) model, the company deliberately launched its operations by keeping tight ownership on the main assets, while those are established, thus choosing a chain model. Once operations are running and established, the company divests its ownership and opts instead for a franchising model.

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