US Insights

Amazon Makes High Stakes Bet on Souq for the Middle East

Sara Al-Tukhaim

Director of Retail Insights

Retail 03.31.2017 / 12:00

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The benefits to both companies could be substantial

After an exciting play for Souq that began last year and included acquisition talks with eBay, Majid Al Futtaim and Emaar, Amazon emerged as the clear winner this Tuesday, March 28th.

While details behind the deal remain murky (including the final bid), we can shed light on the opportunities, implications and lingering questions this deal poses for both parties. See When Two Innovators Become One: Amazon Acquires Souq for our in-depth breakdown. Here are the highlights based on two key viewpoints.

The Amazon Perspective: What does this mean for Amazon?

Location, location, location (and Gulf money): Headquartered in Dubai, Souq’s markets (UAE, Egypt, Saudi, Kuwait, Bahrain, Oman and Qatar) yield significant retail opportunities at a time when local governments are looking to diversify beyond oil. Souq’s acquisition brings with it a strategic springboard to Africa and Asia, the local drive to support innovation, broad audience reach, spending power, access to a desirable consumer base and a large runway for online retail.

Key Numbers

  • $300 Billion Kantar Retail's estimate of 2017 retail sales in the region where Souq operates.

Leadership and expertise: CEO Ronald Mouchawar and his team are in tune with the tech-savvy Middle East consumer and the tech needs of the region. Through them, Souq has demonstrated its ability to work across a number of smaller markets while contending with the unique logistical issues of the region – vital skills for Amazon as it seeks to expand.

Localized audience and appeals:  Souq.com attracts over 45 million visits per month with strong penetration and includes a network of at least 75,000 traders. Doing this requires expertise in Arabic content, being attuned to local tastes and cultural sensitivities, and enabling localized payment options.

Omnichannel value proposition: As the Middle East’s largest online retail platform, Souq sells more than 8.4 million products across 31 categories. While the company has yet to formally expand into non-retail and cloud-based services like Amazon, it has grown its offer to include books, an online supermarket, and an innovative store-based Customer Experience Center format.

The Middle East Perspective: What does this mean for Souq?

Positioning ahead of Noon.com: With the pending launch of Saudi-based Noon.com, this positions Souq far better to compete with the powerful Gulf funding behind Noon and the 200 million products it claims it will offer.

Greater leverage to disrupt: Amazon’s operational prowess, long-term foresight, global reach, membership leverage, and convenience services like Prime Now will elevate Souq. Amazon is clearly willing to invest and partner, and that could lead to a higher level of innovation.

Potential arrival of Amazon membership programs. Given the success of Prime, and the recent rollout of a membership program on Zappos, watch for Souq to also launch its own membership program.  This will bring lots of data and targeted promotional opportunities.

Amazon’s global marketplace reach: This will be a two-way street, with Souq sellers gaining access to Amazon’s global reach and Amazon’s third-party sellers gaining visibility with a massive new audience.

Click here to see our interpretation and what we anticipate will happen next.

Source: Kantar Retail

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