Amazon has expanded its international presence into the Middle East through the acquisition of Dubai-based online marketplace Souq.com. Amazon did not disclose the terms of the deal, although this was valued at around USD650mn (EUR598.4mn) according to Bloomberg. In a statement the two companies pointed to their complementary operations, saying that they “shared the same DNA” with a focus on customers and innovation.
The largest online retail and marketplace platform in the Arab world, Souq.com features more than 8.4 million products across 31 categories such as consumer electronics, fashion, health & beauty, household goods and baby. Souq.com attracts more than 45 million visits per month and has localised operations in the UAE, Saudi Arabia and Egypt.
Not only is Amazon getting serious about online grocery, testing cashless stores, drones and numerous other innovations, it is also making time for new market entries – and this is the first in quite some time for Amazon. The move will certainly give Amazon a solid start to its launch into a new geography and some wealthy online shoppers.
Amazon has held a long-term goal of generating more than 50% of revenue from its overseas markets, yet 66% of its retail turnover for 2016 was generated in North America. This compares to 61.4% in 2014 and demonstrates how highly dependent the company remains on its domestic market – and the importance of internationalisation.
The e-commerce market in the Middle East is growing rapidly and set to reach up to USD10 bn by 2018 in the UAE, according to the Dubai Chamber. There will be cultural differences to negotiate and this has sometimes proven a challenge in markets such as China, where Amazon chose to go it alone against market leading giants such as Alibaba. However, by acquiring an already established retailer Amazon is buying itself a headstart and local expertise to help it grow faster. Over time we can expect to see Amazon selling direct to customers and bringing its innovations to an entirely new geography. This move appears to be a positive one for both retailers.