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Amazon bolsters Middle East presence with a new acquisition
(BI Intelligence)
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Amazon has reportedly agreed to purchase Souq.com, a Dubai-based e-commerce company, according to Reuters.
Although the acquisition price has not been confirmed, TechCrunch reports that Amazon will pay $650 million for Souq, which was previously valued at $1 billion after raising $275 million in funding last February. Amazon was in talks to acquire Souq last December, but a deal never closed.
Extending its reach in overseas markets has been a focus of the e-commerce giant for several years now. While Amazon hasn’t been successful as an e-commerce business in China, it's been developing a logistics business in the country. In fact, it recently expanded its freight-forwarding and logistics services to include air cargo services in addition to sea shipping — a move that could help it attract more merchants to its marketplace in China. Amazon also debuted its Prime subscription service in Mexico, aiming to grab market share by extending its efficient shipping and video streaming services in the country. Moreover, the e-commerce giant pledged to invest $5 billion in its Indian operations over the next few years.
This acquisition marks a departure from Amazon’s typical strategy to grow organically in a new market, but could allow for the e-commerce giant to rapidly expand in the Middle East. Souq is currently the market leader in the region, and receives more than 45 million site visits per month. As a result, Amazon wouldn't have to build a network of merchants and buyers, and it would gain brand recognition from Souq's popularity. Amazon would also be able to forgo the regulatory approvals needed to operate in the countries Souq sells in — United Arab Emirates, Egypt, Saudi Arabia, and Kuwait — facilitating cross-border sales.
The region’s e-commerce market is in infancy stages, but Amazon could face considerable competition from soon-to-launch Noon.com. Noon is backed by retail tycoon Mohamed Alabbar, and plans to launch with 20 million products. In China, Amazon struggled to gain market share from a well-established Alibaba, so it's likely looking to get a head start on Noon through the Souq acquisition.
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