Amazon to buy online retailer Souq.com
Deal to give US e-commerce giant Middle East foothold
deal was for live-streaming gaming network Twitch, which it acquired for $970 million in cash in 2014.
Scott Jacobson, managing director of Madrona Venture Group and formerly a senior manager at Amazon, said Amazon did not have a lot of personnel or infrastructure in the Middle East to serve as the backbone of a retail operation, which could make an acquisition more appealing. That is in contrast to India, where Amazon already had offices and large teams of engineers prior to launching its e-commerce operations in that country.
“Mobile device penetration is quite high” in the Middle East, particularly for smartphones, Jacobson said. “Pair that with a significant population and healthy GDP per capita in countries like Saudi Arabia and in the UAE, and those factors make it an interesting market.”
Another benefit may be the high price of some of the imports sought by wealthy Middle Easterners.
“Western products and brands which are big in the United States and the UK sell really well,” said Guru Hariharan, a former Amazon manager and now chief executive of retail technology company Boomerang Commerce.
Shoppers “are ready to pay a 50 percent to 100 percent premium on an average basis (particularly) for the high-end brands,” he said.
Souq.com initially launched as an Internet auction site and has developed into a retailer and marketplace for third-party vendors.
Interest is growing in the region’s e-commerce market, estimated to be worth $20 billion in 2016. Last year Emirati businessman Mohamed Alabbar teamed up with Saudi Arabia’s Public Investment Fund (PIF) and other private investors to launch a $1 billion Middle East-focused e-commerce platform.