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*Disruption has been a very fashionable word in the past years as a general way to call for transformation in many markets where digitalization has changed the rules of engagement. Retail has not been spared of course by the rise of e-commerce, and for the past decade, retail CEOs have scratched their heads on how to adapt their analogue and legacy organisations to the new world. Going beyond the fact that everybody in the industry acknowledges that changes are needed, how can these be carried out effectively?

Back in September 2020, Dr Christopher Knee tackled the topic in his article “Responding to Disruption.” In that article, he was reviewing Geoffrey Moore’s 2015 theory (explained in his book Zone to Win) that, to innovate, companies should create dedicated spaces with specific teams, in charge of leading changes. Of course, this raises many questions in terms of how to maintain a common culture, purpose and sense of equality in century-old organisations where the sense of belonging is key. In his article, Dr Knee reviewed many real-world business cases, from Rinascente to Galeries Lafayette or SKP, Neighborhood Goods and Showfields.

A recent trip to Dubai to attend a series of conferences was the opportunity for the IADS to listen to another interesting business case, from Al Tayer, on how they created their online activity from scratch back in 2016. It is remarkable for two reasons: the first one is that Al Tayer usually keeps its business initiatives private, but the second one is because the way they carried the changes within the company can be seen as a real-life application of what Dr Knee explored back in 2020.*

Presentation of Al Tayer Group

In a world where disruption is the new norm, businesses often face the daunting task of reinventing themselves before someone else does. This imperative holds for the luxury retail sector, where evolving customer preferences and emerging digital players are constantly reshaping the landscape, especially in the Middle East, as customers are overall younger and very tech-savvy.

Al Tayer is one of the leading retail companies in the Middle East, along with Chalhoub, an IADS member. While Chalhoub was founded in 1955 with a strong focus on luxury and lifestyle, Al Tayer is a much more recent company. It was founded in 1979 as a travel agency and soon expanded into fragrances and car distribution in the early 80s. Today, the group operates in retail, automotive, real estate and other ventures such as financial services and travel agencies.

When it comes to retail specifically, in addition to operating in various verticals alongside luxury, such as lifestyle (from F&B, leisure to apparel and accessories), Al Tayer is known for its Harvey Nichols franchised department store in Mall of the Emirates, opened in 2005, and its Bloomingdale’s in the Dubai Mall which opened in 2010 (we reviewed them in an IADS Exclusive from 2022). Interestingly, the whole industry recognizes that these franchised stores, smaller in size than the original ones, are also of much higher quality in terms of overall experience, and are now world-recognized luxury destinations in the Middle East.

Today, Al Tayer operates in all of the Gulf countries (namely Saudi Arabia, the UAE, Oman, Qatar, Bahrain and Kuweit), a 56 million-customer large market representing 3% of the global luxury consumption. In the retail division, department stores take a lion’s share of the activity, and are completed by joint-venture and franchised businesses as well as digital activities (local Gap, Bloomingdale’s and Mamas and Papas website), which include Ounass.com.

Ounass.com is a very recent creation, which was stirred by one single observation made by the top management at the time: while in 2016 Al Tayer was virtually non-existent in the e-commerce realm, it was increasingly clear that pure players were gaining strong positions in the Middle East, and fast. In addition, while Middle East customers represented a growing source of income for luxury brands, 50% of their purchases were made abroad, which suggested that there was an opportunity for a new player combining product curation, services and online convenience. This is why Al Tayer decided to disrupt themselves, before being disrupted and launched Ounass as a strategic reaction move.

Why Ounass.com was launched

Ounass (which means “a select group of people” in Arabic) was launched from scratch in 2016 and now represents 46% of the group’s digital activities revenue and claims to be the number one online luxury destination in the GCC. Average delivery time is 2h in Dubai and 3h in Riyadh, with the highest order to post-delivery satisfaction rate in the region, through personalization at scale (with dedicated and localized content in the Arabic language, sometimes even created independently from the brands’ worldwide campaigns).

In Khalid Al Tayer’s own words, however, “it was a very difficult journey”.

While physical stores excel at providing a unique experience, Ounass sought to differentiate itself by offering luxury convenience, as they recognized that competing solely on price was not an option. For that reason, they decided to focus on assortment and service, and initially launched with a mere 250 brands, which was a critical mass just enough to grab customers’ attention (today they list 1,300 brands). To compensate for their initially limited size of assortment, they even allowed competition to list on their website, which contributed at the same time to reinforcing the luxury positioning but also to become the go-to digital platform in the GCC (for example Skims decided to launch in the region through an exclusive partnership with Ounass.com).

From the beginning, Khalid Al Tayer wanted Ounass.com to solve a few pain points for different stakeholders:

-    For customers: Ounass.com should reduce friction and solve their time issues, through easy-to-order and highly qualitative, fast delivery options.

-    For international brands: the website should be a profitable way for them to reach a customer base which complements, and does not overlap, their existing regional one,

-    For regional brands: Ounass.com should be a platform helping them to grow in scale and acquire international visibility faster,

-    For shareholders: Ounass.com should be profitable from day one.

To achieve these ambitious goals, Khalid Al Tayer, after attending the Singularity University in California back in 2016, inspired himself from the advice of Salim Ismail, Peter Diamandis and Michael Malone, co-authors of Exponential Organisations, and created Ounass as a new entity, partially separated from Al Tayer while sharing brands and infrastructure.

Ounass.com innovates through a series of structural specificities

The “key ingredients” as described by Khalid Al Tayer are doubly interesting, first because Al Tayer is a notoriously secretive company and does not usually communicate on its initiatives, and second because they suggest an alternative approach to internal innovation:

-    Vision: Their guiding principle was to "go build and disrupt," rather than to develop a traditional business plan. This helped also foster a sense of emergency and, as a consequence, the burgeoning of many new ideas from the whole team.

-    Separate Governance: A distinct board with a digital focus was created and coordinated with the group retail board. Both boards communicated between themselves, however, the need for a digitally native one was felt early in the project and is now seen as a key factor of success.

-    Tech Native Team: While buying and merchandising expertise was transferred from the parent company Al Tayer, the rest of the team consisted of fresh digital talent recruited from the outside. Khalid Al Tayer did not expand on how he maintained corporate cohesion between all team components (including, but not limited to, pay gaps).

-    Cultural Maintenance: Ounass worked diligently to maintain its unique culture throughout the transformation.

-    Tech Operating Model: A modern technological infrastructure was essential, suggesting heavy investments that were correlated with the following point.

-    VC Fiscal Model: Khalid Al Tayer made quarterly agreements with the board, implying that the company could be shut down and people let go if key performance indicators were not met. As a consequence, this acted both as a team-building tool and a strong element of motivation. This is probably the most striking: after each board, Khalid Al Tayer would go back to his team, share in full transparency the situation and objectives, and make clear that the whole project could be unplugged if they did not deliver collectively.

Key learnings

For Khalid Al Tayer, the main learning from this adventure is that he believes Ounass.com would not have succeeded had this been part of a broader venture, i.e. if the digital teams were not dedicated to digital only.

Looking forward, Khalid emphasized the importance of continued disruption and being “paranoid” about it. Ounass plans to expand its online presence further while also venturing into physical stores for the experiential aspect. They recognize that omnichannel retail is the future, combining the best of both worlds.

Interestingly, Khalid also candidly admitted that not all experiments yielded success. While Ounass thrived, Nisnass, a middle-market sibling, faced stiff competition even though they applied the same recipe. This serves as a reminder that even in disruption, there is no one-size-fits-all formula for success.

Conclusion: Ounass.com is a working example of innovation from the inside out.

Ounass.com's journey demonstrates that internal disruption can lead to success in the ever-changing retail industry, emphasizing the importance of a customer-centric approach applied to a specific service or market (in this case, luxury convenience). But the most important is probably how they managed to build a new entity within a traditional company while preserving its unique culture highlights the importance of a visionary leadership, separate governance, and a tech-native team in navigating the challenges of digital transformation.

One can say that they almost applied by the book Moore’s vision of a successful transition from “incubation zone” to “transformation zone”, and now, to “performance zone” even if, in this particular case, it is not clear to what extent Ounass.com has “contaminated” Al Tayer with a new mindset, or remains a separate entity that could be sold in the future without consequences for the group.

Credits: IADS (Selvane Mohandas du Ménil)