There is more money here, and that's why everyone wants to come here

Leonid Dovbenko, co-founder of the famous fast delivery service YallaMarket, has been living in Dubai for a long time. His company transports tomatoes by plane and successfully competes in the international market.

Recently, he launched a new — Yallahub. The company helps entrepreneurs enter the UAE market with the help of ready-made infrastructure and expertise of YallaMarket. RB.RU met with a businessman to find out how everything works and what is missing in e-commerce in the Persian Gulf.

Leonid Dovbenko develops FoodTech businesses. Founded the first company in Dubai with Russian roots for fast food delivery YallaMarket. In 2022, the business turnover amounted, according to its own data, to 1.5 million US dollars, this year the company plans to reach a turnover of 10 million US dollars.

Leonid went from being a waiter at the Hermitage restaurant to (2003) to the owner of successful international companies. Together with the team, he launched the restaurant automation service Syrve Middle East (formerly iiko), Tawreed, and the restaurant community UAE Restaurant Community in the Emirates. Manages YallaMarket, YallaHub, DocsInBox, Syrve Middle East. Leads the YouTube channel "Digitalizer's Diary" (20.8 thousand subscribers). 

— You are a serial entrepreneur with 15 different projects under your belt. We recently learned about the launch of a new company with IT services for the restaurant industry. What do you think is your superpower as an entrepreneur?

— I almost always manage to kindle a fire from a spark and first interest. That is, to do something that customers pay for and where employees want to work. Usually it takes a little time from an idea to the first step: I quickly recognize whether there is something interesting in the project or not.

— In one of your speeches, I overheard a curious phrase: "Start a startup as if you know what it will be after the tenth pivot." Isn't that the main superpower?

— There is probably something to this too. Starting a startup, I understand very well that my thoughts and stories about it have nothing to do with reality.

The world is designed in such a way that people want reliability, so project founders need to say something with a confident look. But in fact, any business at the start looks like this: “We will do something like this around here, but this is not accurate. We will definitely make money, everything will be fine, but what and where will we do — we will understand the process». 

Who lives well in Dubai

— You moved to Dubai in 2018. Can you tell us what has changed since then?

— Significant and profound changes are taking place in every sector, in every direction. Dubai is powerfully rushing forward. During this time, everything has become much easier with entrepreneurship, accelerators, investments, opening a bank account. 

Over the past five years that I have spent in Dubai, the life of visitors has improved significantly. It's not just about household items. For example, Ramadan — the main problem for all expats, — becomes less noticeable every year. Let me give you an example: if before you did something not in Ramadan style, for example, walked down the street with a bottle of water, then you were ashamed. And now it seems to the locals that they are uncomfortable that Ramadan is taking place here. They deviate from many principles in order to provide a comfortable life for all residents.

— Recently, a large flow of Russian-speaking entrepreneurs has been coming to Dubai. When you are asked to tell about the region, what do you say? Talking out of moving?

— I say Dubai — it's not a market. This is a great place to live as a founder. Here you can launch a pilot and get test sales, but the main market — it's all around Dubai. Pakistan, Bangladesh, India, Saudi Arabia, Egypt, Algeria, Africa. This is very important to understand.

Everyone perceives the idea of moving to Dubai as follows: you need to completely copy-paste your Russian business. But it doesn't work. I say: come here, bring your passion, your expertise. And further from what you know how, there will be a new unique pattern — what, to whom and why to sell.

The UAE is going to transform from a local company into a global one: it is important to understand the market and customers in other countries.

 — How did you end up in Dubai? If you lived somewhere in Singapore, in Hong Kong, USA, do you think it would be possible to build YallaMarket, launch YallaHub? Or is it still the magic of the place?

— It would work for sure. The question is the ratio of resources and profits. I came to Dubai with Syrve Middle East restaurant automation business. By that time, we had here, one might say, crazy clients. Conventionally, the restaurateur left Russia, opened an institution and, by inertia, continued to use what he was used to. There was no systematic work, but we arrived, adapted the product, made the translation. Now in Dubai, more than a thousand restaurants are connected to it, and around the world — about 50 thousand establishments.

When choosing where to open, I traveled to America, to England, to Australia. The whole English-speaking world went through! I looked at Singapore and Hong Kong. I'm sure the project would take off everywhere. But, for example, in Europe, state taxes will take all the money. In America, all competitors are 1000 times bigger than you, and they have disproportionately more budgets for development and competition.

In general, there are few restaurants in Singapore. This is an island that does not grow, the business has a ceiling there. To overcome it, one would have to climb into the Chinese world, and it is rather incomprehensible and complex. The Chinese think differently than we do.

That's why I settled on Dubai and made the right decision: the Arab world turned out to be wonderful. Weak competition, a fairly large market, and peoples are similar in many mental attitudes. The market is growing, which means it is easier to attract customers. And accordingly, you have the maximum bonus: if you succeed, then all the money is yours.

Aggregator, not a marketplace

— Let's talk about YallaHub. Do I understand correctly that the project arose because in YallaMarket — express delivery of products — Do you compete with other services not only for the time and quality of the product, but also for the range? And with the help of a new business, do you plan to quickly expand it?

— We started with the classic model of super-fast delivery from dark stores. Unfortunately, this business model has big drawbacks. The whole world was under the delusion that it works great, but it doesn't. The fact that some of the companies managed to develop according to this model, — a mistake of nature or a miracle.

The model itself is not perfect in terms of unit economics. The fact is that in mass retail, most people are not ready to overpay for speed. Other things being equal, people would rather spend their time to get a lower price.

Plus there is a lot of retail work that is needed for the system to function. At «VkusVilla» its development took about ten years, "Auchan" spent 30 years. This is work to expand the range, launch brands, organize supply chains, and so on.

YallaMarket is quite difficult to do the same for even 10 years. We are originally from IT, not from retail, which makes immersion into the sphere slower. Therefore, we were looking for options on how to improve the classic model.

All other delivery companies have ignored the delivery problem with darkstores, flooding it with billions of dollars of investment. We were also going to do this, but, thank God, we almost didn’t have time — later began to invest and look for money. And then they clearly understood that it was important to look for some other way out.

— What problem did you start solving first of all?

— It was necessary to make sure that not only we, but thousands of entrepreneurs worked on the assortment. At the start of work with YallaMarket, we probably received requests dozens of times a month: “Guys, help us go to Dubai, take us to your place!”. At this point, we thought: “Let go, this week we are busy with croissants, and next — sausage".

But at some point we realized that we weren't taking these guys into account in vain. We have already spent money on building infrastructure: to recapture it, it is important to use our tools to the maximum.

Then we thought: okay, what if we are the engine for other brands that sell not only products, but anything? And so this story was born. And here — On December 1, we opened access to the infrastructure, and since then we have brought more than 45 brands to the market. We are currently receiving at least five inquiries per week. In general, we are moving quite briskly.

— Where are the requests coming from?

— Now for any Russian brand the issue of development, scaling and diversification is very acute. Approximately 60% of requests come from compatriots.

But we understand that the hype can pass. Therefore, part of the team deals only with the foreign market. Our client pool includes companies from America, Europe, as well as India, Sudan, Kuwait, Jordan.

The world is in recession, so everyone wants to sell to the Arabs — the richest population today, and they want dollar revenue in the Arab world. There is more money here, and that's why everyone wants to come here.

— What brands do you bring to the foreign market? Is it just food?

— Of course, food products are still in the lead: we have a strong expertise in this area, a large and loyal customer base. For example, when "VkusVill" appeared in our delivery, sales of their products went up in three minutes. And we didn’t even have time to start an advertising campaign. Just so organic.

There are a lot of cosmetic brands represented. This includes household chemicals and cosmetics. Now we are testing the jewelry hypothesis: can it be sold online here as in Russia. We are actively developing the pet food category, trying to sell underwear, sportswear. 

While we choose brands where there is no large size range, a choice of colors. Many big fashion companies want to go abroad, but we are still afraid and want to gain experience.

— If I want to expand to a new region with your help, and I'm selling goods not in the upper-middle class, can you still take me? Is it just that my products won't be featured on YallaMarket?

— Yes, that's right. Not all brands we sell at home. There are 72 marketplaces in the Persian Gulf region, the light has not converged on YallaMarket. Some items, for example, are sold on Amazon or Noon. The goal of YallaMarket — to be something like "Azbuka Vkusa"; and «Vkusvill» on delivery.

It has its own assortment strategy and target audience: everything that does not fit into it cannot get into YallaMarket. But there is nothing wrong with that. We roll out sales, make a website, test hypotheses, the economy, find bloggers for advertising. We just understand how everything works here, we have warehouses, delivery and experience.

— That is, YallaHub — is this a marketplace?

— We are often confused with a marketplace. But we are not Wildberries, and I am not Leo Bakalchuk. Yallahub — is a marketplace aggregator and digital distributor. We just have our own niche shopping channel called YallaMarket: premium food delivery.

Our main idea is to add brands to the necessary trade channels from one place, one warehouse. Without us, the founders need to build agreements themselves, send a pallet to each channel for stock and give a bunch of documents. It's all time, money, mistakes.

You will also need to freeze money for goods in order to supply the required volume through all channels. When working with us, the client sends a small amount of goods to our stock, and his products are available in several channels at once. All orders flock to one place, and we deliver them quickly.

— Are you like a one stop shop for marketplaces?

— Right. There is a fairly developed market for marketplaces, there is no point in making the 73rd one. When we — aggregator — and we give cool brands from all over the world to marketplaces, we do not compete, but become friends. In general, we are not an incomprehensible lotion in the market, but a useful member of society who brings something new.

Ask Price

— How much does it cost to subscribe to the hub services?

— The price depends on the number of items of goods and the specifics of the business, it is an average of 100—500 US dollars per month. 

The package of services includes legal registration, logistics and customs clearance of goods, storage in warehouses with dry and cold rooms, marketing, support service, order assembly and fast delivery to the buyer. The service works on a monthly subscription, the size of the commission for management on marketplaces depends on the volume of trade, the number of trade units and their specifics.

— What is the minimum batch to submit for testing?

— It depends on the product: somewhere 100 units are enough, but somewhere we ask for a thousand. For cosmetics, we usually take a pallet: it contains about 300 to 2000 units, and an assortment of 10 products. In jewelry — 10 pieces of each product, we bring 100 units for testing for test sales. 

— If a Russian manufacturer wants to introduce its products to other markets on its own, how much will it cost?

— He will need to physically come here and register the — 20 thousand US dollars. To live here, you need about 10 thousand US dollars per person per month. And to open a bank account, you have to wait from 3–6 months. 

Next, it will be possible to register and certify the product — it's 1–3 months. Then make the first delivery — another month. You need to negotiate with marketplaces or enter the first trading network. In total, 9 months have passed, the person spent 200 & ndash; 300 thousand US dollars — and finally made the first beautiful, clear transaction — first sale.

We compress costs and time by 10 times. For example, you do not need to open a legal entity in Dubai: you can work using our — with weekly payments. You can get your first earnings in a week. And the budgets of the first tests are usually from 5 to 20 thousand US dollars — this is the total cost of the entire experiment with the cost of the goods. 

It's okay when the founder is experienced and the company is rich, — she can afford the big expenses. But we have many very different partners. For example, we are working with an entrepreneur from Sudan who simply does not have the money to come to Dubai.

Or with a guy from an Indian village who sells clothes. One day of life in Dubai — this is the monthly budget of his family, he himself could not run a business here.

In general, we are greatly lowering the barrier, and Dubai becomes accessible to people who could not dream of it before. I gave real examples.

Tomato for investors

— Let's return to YallaMarket. I heard that most often they order tomatoes from you. Moreover, thanks to them you attract investors. Is it true?

— In Dubai they sell cheap but very tasteless tomatoes. The most expensive tomatoes here are probably ours: now they cost 500 rubles per 600 grams. Even comparing with Moscow prices in elite stores, I would not say that this is space.

We were able to reduce the price by 20% due to well-established logistics: before that, a package of quality tomatoes cost 700-800 rubles. We carry them from Tashkent by plane twice a week. We manually sort each shipment as it arrives.

Case «you will now deliver me quickly and tasty tomatoes — and I'm investing in you" — this is not an isolated case. We agreed with investors about ten times, probably.

— How it works?

— The biggest problem with pitching — explain what you are doing. Thank God, we have a very simple business.

What do I usually say? We deliver tomatoes, but also iPhones, cosmetics, croissants and coffee. All this is very fast. It becomes clear to the investor how to "touch" and experience the business. When he, as a customer, quickly receives such delicious products, he just goes nuts. And he — both as a consumer and as an investor — immediately understands why the business is cool.

— If you return from investors to clients: do they stay with you not because you brought everything very quickly, but because, conditionally, your tomatoes are delicious? So they are ready to repeat the purchase?

— As I said, the fast delivery model is not perfect. In order for a person to be able to use an online store normally and give at least 70% of their budget for products to such a service, 15,000 SKUs (product units) are needed. And super-fast delivery is focused on 2-3 thousand products.

We came to the conclusion that it is necessary to expand the range and attract partners, since people buy specific products, and not just delivery. Delivery — this is the icing on the cake.

— What is included in a regular order? Please name the most popular positions.

— In the first place we have drinks, in the second — milk, on the third — ready-made food and coffee, on the fourth — fruits and vegetables, followed by the rest of the categories. The split is the same as any decent offline cooking network.

We're doing pretty well with prepared food. Cold for now, but hot will be added soon. It will be such a hybrid of the Scooter concepts. and "Kitchens in the area."

Narzan for the soul

— Let's talk about the Persian Gulf and the e-commerce market. I read that in the next few years the market should grow at least 10 times. What are these expectations?

— Firstly, it still has the lowest share of online e-commerce penetration in the world: less than 5-6%. We expect more people to become online shoppers.

Now in the countries of the Persian Gulf, the level of use of online delivery services — as in Russia in 2013, this is a fairly large lag. And the population will double due to expats, and they will come from countries where e-commerce is developed 10 times better. And they will strongly develop this story.

— Are niches and top destinations in the region different or similar to Russian ones?

— At the beginning, I told all our clients: guys, let's just not bring nonsense from China. However, when I saw that even a small $3 baby rattle from China could sell for millions of dollars at a good margin, I changed my mind. 

While it feels like you can stick any stick — she will bloom. It is clear that it is more difficult with electronics, because China is close, there is access to all world brands. But in other segments, everything is moving very well (for example, clothing and footwear, food, health, body care products).

— Is it true that there is a severe shortage of quality goods in the region?

— When you are a tourist, there is no problem. But when you live here, you are constantly faced with imperfection. This is a purely Dubai story, there are a lot of expats from different countries, everyone misses something and wants something specific.

We, for example, "Narzan" brought to Dubai. I spent all my childhood in Kislovodsk, I myself love narzan very much, I can say that I swam in it. How many times have we been thanked for this!

And if we talk about the Arab world, here in general they value high-quality and cool products. For foreign sellers, this is beneficial: goods in Dubai are 2-3 times more expensive than "at home". This gives an additional margin that can be spent to gain a foothold in the region.

— How is the e-commerce market divided?

— The two largest local sites have a total market share of — 5% in most niches. That is, before the moment when the market begins to divide, it seems to me that more years must pass.

That's why many sellers have a main channel, like in Russia in the 2010s, — landing and direct. The site is simple, one page, Google Adwords — and here are three bloggers pouring traffic there. That's enough.

— It turns out that now is the golden period in order to test and enter?

— Yes, and it seems to us that it will not be an exhibitor, but rather solid and confident growth. For us, this is a project for 10-15 years. To think that now you will go into some niche, in six months you will get rich and dump — probably not worth it. It's about building a long-term reputation.

— Thank you for the interview. Tell us what are your plans for this year?

— We expect 90% of the company's revenue by the end of the year to come from YallaHub. We want to end the year with 100 brands that are actively working with us and growing at 10% per month. And so far we are ahead of schedule: in March we already have 45 partners.

The main thing for us — this is a geographic expansion, because the first cohort of brands has already hooked on the Arab population. And now we need to scale further. Right now, we are going to launch in Saudi Arabia and Qatar with several brands.

In the end, it will be like this: the brand came out, worked in Dubai, learned how to sell to the Arabs, and then it is already sold throughout the Arab world. In other words, we want to reach a point where companies can scale across the entire region through us. Here is our main focus.

We don't know what we're going to encounter when scaling. Looming on the horizon is the idea of financing brands that come out here — because if a brand has taken off, it needs to raise money for development. We are good at raising money from investors. I think that part of the funds will be directed to this — and maybe we will buy someone for speed.