The world’s largest retailer, Amazon, is about to plunge into the Middle East with a US$ 700million appx purchase of Souq.com the Dubai based online retailer.
Though there are numerous other similar operators in the Middle East Souq has the widest geographical reach and its name is instantly recognisable so confusion as to purpose is removed, though possibly not with a similar ‘Brand’ awareness; Amazon surely will rebrand immediately. Most of the other online stores such as LuluWebStore.com are subsidiaries of Bricks & Mortar retailers with others such as Oman’s roumaan.com being country specific. Given that this negotiation between Amazon & Souq has been on/off for so long Amazon must have assessed recruitment and simple logistics long ago while assessing Government bureaucracy will have been an incremental process. So I guess it must have been Souq’s international reach that secured the deal as the sheer complexity of setting up business in the region would be frustrating for a US operator.
The move will immediately transform retailing in the region with 70% of MENA population being a mobile phone subscriber (Ericsson say 680million with 120million smart phone of a 760 population Statista.com estimate a 51% pmobile internet penetration by 2019) & The Gulf having close to 100% with for example Ooredoo Oman having 2.8 million customers and OmanTel also claiming 2.8 million by last quarter 2016. (many subscribers of course will have more than 1 subscription) of a total population well below 5million.
Although the region does have vast income differences, in general it suffers from high retail prices, poor customer service and a general disconnection between the driving force of marketing from major external markets such as USA, Europe and India. Amazon with competitive pricing, excellent service and probable high availability should be able to make immediate improvements on Souq’s competitiveness. Souq currently offers a ‘Cash on Delivery’ service and its difficult to believe that this brake on speed of delivery will last long. The very high disposable income throughout The Gulf should make the acquisition an immediate success and probably able to dominate non-personal purchasing very quickly.