Amazon acquiring Souq to accelerate Middle East expansion

Dive Brief:

Amazon on Tuesday announced that it will acquire Middle East e-commerce marketplace Souq for an undisclosed sum. The deal is expected to close this year.
The e-commerce giant won out over a competing $800 million bid from Dubai-based mall operator Emaar Malls, an offer reported by Reuters on Monday.
Dubai-based Souq operates in Egypt, Kuwait, United Arab Emirates and Saudi Arabia, and compares itself to Amazon explicitly and implicitly, using Amazon-like colors as well as program monikers like “Fulfillment by Souq.” Last month the site tapped global investment banking, securities and investment management firm Goldman Sachs Group to find prospective buyers for at least a stake in the company.

Dive Insight:

As China’s e-commerce market has matured, dominated by homegrown giant Alibaba and hampered by slowing growth, Amazon, Alibaba and other e-commerce companies are looking to other parts of the world — and several countries in the Middle East seem to offer opportunity.

The Middle East is home to not only a significant wealthy class but also a rising middle class, making it an increasingly important market for many global brands. Like India, the Middle East also includes many areas with young, educated and mobile-first populations, with an open mind toward e-commerce. Along with growing digital operations, brands are also catering to the unique tastes and needs of the region: Nike earlier this month announced that it has developed a performance hijab for Muslim women athletes, for example.

That all makes the Middle East an attractive area for Amazon’s ongoing global expansion efforts. The company has been experimenting with various omnichannel and delivery services in Europe, is a major player in India’s booming e-commerce sector and recently expanded its Prime membership to its Chinese customers, delivering a scaled-down version that doesn't include digital content streaming and offers free shipping only on foreign products that meet a certain price threshold.

Moody's Investors Service on Tuesday characterized it as a good move loaded with opportunity and little downside. “Amazon’s acquisition of Souq.com for undisclosed consideration is credit positive for the company,” Moody’s Lead Retail Analyst Charlie O’Shea said in a note emailed to Retail Dive. “The acquisition provides Amazon with what we believe to be an inexpensive and low-risk 'beachhead’ in the lucrative Middle Eastern market, which is under-penetrated by online retail.”

Souq seems like an ideal fit to boost Amazon's world domination plans. Souq (Arabic for "market") offers more than 1.5 million products to consumers in the United Arab Emirates, Egypt and Saudi Arabia. Tiger Global and Naspers, among others, boosted their own stakes in the company a year ago, which led to another $275 million from investors, and previously had expressed a willingness to sell their interest.

"Amazon and Souq.com share the same DNA — we’re both driven by customers, invention, and long-term thinking,” Amazon Senior Vice President, International Consumer Russ Grandinetti said in a statement. "Souq.com pioneered e-commerce in the Middle East, creating a great shopping experience for their customers. We're looking forward to both learning from and supporting them with Amazon technology and global resources. And together, we’ll work hard to provide the best possible service for millions of customers in the Middle East."