Amazon.com to buy Dubai-based internet retailer Souq.com
Amazon.com to buy Dubai-based internet retailer Souq.com

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 revealed.

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.

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.

Jacobson said, "Mobile device penetration is quite high" in the Middle East, particularly for smartphones.

He added, "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."

One of the sources close to the deal said it gave Amazon a foothold in the region without having to deal with bureaucratic hurdles such as getting regulatory approvals from each country and signing up vendors and suppliers.

Guru Hariharan, a former Amazon  manager, who currently is the chief executive of retail technology company Boomerang Commerce, said, "Western products and brands which are big in the United States and the UK sell really well.

Shoppers "are ready to pay a 50 percent to 100 percent premium on an average basis (particularly) for the high-end brands," he said.

In a note, Colin Sebastian, Research Analyst, Baird Equity, said, "Amazon acquired the Chinese e-commerce company ‪joyo.com to establish a beachhead in China in the early days of online shopping, and we believe can take lessons from that experience to better manage the growth opportunity in the Middle East. Amazon is clearly interested in tapping into growth in emerging markets."

 
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