REUTERS SUMMIT-'Iran's Amazon' disregards post-sanctions competition, looks to expand

* For other news from Reuters Middle East Investment Summit, clickhere

* Digikala grew as sanctions barred foreign firms

* Lifting of sanctions could mean more competition

* Foreigners may choose partnerships, joint ventures

* Company hopes to expand beyond Iran

By Bozorgmehr Sharafedin

Oct 28 (Reuters) - Iranian twins Hamid and Saeed Mohammadi created online retailer Digikala after struggling to buy a digital camera and ending up with a counterfeit. Eight years later “Iran’s Amazon” says it employs 900 people and processes 10,000 orders a day.

With the prospect of sanctions over the country’s disputed nuclear programme being lifted early next year, Iran’s biggest online retailer faces potential competition from the real Amazon and others, but the 36-year-old brothers are sanguine.

“Sanctions create both threats and opportunities. Digikala developed fast because major international competitors were not present in the country,” Hamid said in a telephone interview for the Reuters Middle East Investment Summit.

“But now we feel well-established enough to welcome the lifting of sanctions.”

They began by selling electronic devices while also writing product reviews of them - a way to build a customer base among Iranians who were unfamiliar with high-end electronics and had no experience of online shopping.

“It was a new business in Iran and you could hardly find anyone with related e-commerce or online marketing experience in the country. We had to train our own team,” Saeed, who has a degree in mechanical engineering, said.

From a tiny office the brothers, both graduates of Tehran’s prestigious Sharif University, personally delivered goods around the city.

The business - along with other start-ups such as ride-sharing service Taxi-yab and discount coupon service Takhfifan - developed as the country became increasingly isolated from the rest of the world.

Digikala branched out into selling sports and outdoor equipment, clothes, shoes and jewellery, beauty products, books and even video downloads to Iran’s population of nearly 80 million.

The company does not reveal its bottom line or the value of its revenue but says sales are growing 200 percent a year, and that it receives orders from even the remotest villages thanks to a government programme to extend the Internet countrywide.

It delivers orders in big cities with its own staff, and via national or private postal systems in remote areas.

Last month Iran Post Co Chief Executive Hossein Mehri said Iranians would soon be able to receive parcels from Ebay , Amazon and Alibaba.

The brothers are unperturbed.

“Amazon and Ebay are not necessarily a threat or even a competitor to Digikala, since these major online retailers have not shown much enthusiasm to conquer the Middle Eastern market,” Saeed said.

Foreign companies may also be reluctant to take on the legal, logistical and cultural challenges or political risks in Iran. Hamid, who trained as an industrial engineer, suggested foreigners could form alliances with local firms.

“We believe foreign investors have a higher chance of success if they follow joint venture models and create partnerships with local enterprises. Iran’s market is not as simple as it seems from outside,” he said.

For them, lifting the sanctions - which could bring a benign economic environment as well as access to foreign financing, markets and technology - could allow their company to expand beyond Iran’s borders. “Digikala has the potential to become the leading online retailer in the region,” Hamid said.

Saeed added: “E-commerce needs fund-raising and investment almost every year. We feel the time is ripe for Iran’s e-commerce sector to experience major foreign investment.”

Follow Reuters Summits on Twitter @Reuters_Summits (Writing by Andrew Torchia; editing by Susan Thomas)