Amazon deal for Souq.com is back on
Amazon’s interest in making an investment in regional online retailer Souq.com is back on. Speculation about a potential sale of Souq to the US ecommerce firm had circulated for months but the deal was thought to have floundered in January over the valuation.
Souq.com had been valued at US$1 billion in a $275 million funding round in February last year.
It is understood that a full acquisition of Souq.com by Amazon has now been agreed.
Both Amazon or Souq.com are yet to respond to requests for comment.
The Dubai company currently commands 78 per cent of all e-commerce traffic in the Mena region and with online purchases accounting for only 1 to 2 per cent of regional retail sales there is a huge opportunity for growth.
Souq.com offers 8.4 million products on its site, having recently begun selling books and groceries. Amazon offers an estimated 40 million products.
Smaller online regional players believe any deal with Amazon could be a pivotal moment for the region’s e-commerce ecosystem.
“This will expand the market penetration exponentially,” said Ulugbek Yuldashev, the founder of Awok.com, an online electronics retailer. “We have seen Asian e-commerce markets expand for all the players as Amazon moves into the geography. I do not see it as a threat because it has a different business model to ours. Our product lines and pricing are totally different. Amazon’s operational costs are huge compared to ours so we can offer better prices.”
Amazon’s likely move into the region sets up a battle of two online titans. Noon.com, the Mohamed Alabbar-backed $1bn shopping platform, missed its January launch date but promises a 20 million product portal when it arrives.
In the softening retail environment the region’s ecommerce sector has shown huge growth, with Souq.com selling 1.2 million products over the White Friday weekend last November, when many products are discounted. That sales figures was twice as many as were sold a year previously.
The looming presence of Amazon in the region underlines the potential of e-commerce.
Souq.com started in 2005 as an internet auction site linked to the Arabic-language portal Maktoob. It changed tack in 2011 to become a retailer and marketplace for third-party vendors. Today 60 per cent of its business is through third-party vendors.
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