Amazon to buy Souq.com

DUBAI: Amazon.com Inc has agreed in principle to buy Dubai-based Internet retailer Souq.com, one of the best-known names in the Middle East’s online shopping market, sources familiar with the deal said.

Souq.com, which sells consumer electronics, fashion, household items and other goods, lays claim on its website to being the largest e-commerce site in the Arab world.

For Amazon, Souq.com offers expertise and a foothold in a region where e-commerce is expanding quickly thanks to a young and tech-savvy population. Kuwait, Saudi Arabia and the United Arab Emirates are among the top markets worldwide for mobile phone penetration.

Amazon declined to comment, and a spokesperson for Souq.com did not immediately respond to a request for comment.

Sources did not disclose the price of the deal. The company has raised US$425mil since its founding in 2005, according to CrunchBase. It was reported to be valued at US$1bil at the time of its latest funding round last year, but sources said the deal was worth less than that.

Still, the deal is large for Amazon, a company that has preferred building its own operations to making acquisitions.

Its largest deal was for live-streaming gaming network Twitch, which it acquired for US$970mil 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.” — Reuters