Jeddah – Negotiations had ended for Amazon to buy Souq.com in a deal worth more than $650 million that will shake up Middle East’s electronic trade by taking 78% of the regional sale.
Middle Eastern online retailer Souq.com had been valued at $1 billion in its last round of funding a year ago, when it raised $275 million. And at the end of last year, Souq was actually in talks to sell a 30 percent stake to Amazon in a deal that would have also valued it at $1 billion.
By buying Souq, Amazon provides it with an existing customer base and the infrastructure to store and deliver products.
Electronic trade reached $20 billion in 2016 which has the potential to grow especially with the increase in numbers of smart phones users.
Last year, Amazon hired 100,000 employees which reflect the progressive trading mentality of the company that could reflected on the region after the deal is completed.
Local merchants and traders can now promote and sell their products around the world and not just in the Arab region.
Souq was founded in 2005 as an auction site and shifted in 2011 to a marketplace model similar to Amazon. It is one of Middle East’s most recognized online brands as its largest digital sales portal. Souq delivers to the six Gulf Arab states and Egypt and sells electronic products, like OnePlus exclusively, books, toys, beauty products and much more.
Interest is growing in the region’s e-commerce market, estimated to be worth $20 billion in 2016.
Souq also held acquisition talks with eBay and Emirati retail group Majid Al Futtaim last year and had spent 2017 to date thrashing out a deal that jumped between $500 million and $700 million. Eventually, the two parties settled on $650 million.
There had been rumors about the launch of an e-commerce venture called Noon.com, backed by $1 billion in capital from Saudi Arabia’s Public Investment Fund and Dubai real estate tycoon Mohamed. Noon was never completed nor launched.
E-commerce in the Middle East is expanding quickly due to the region’s young and tech-savvy population. The introduction of portable devices into the market changed the habits and made it easier and quicker with users accessing from anywhere.
New techniques can analyze and compare the websites which the user had visited as well the products he viewed and those he kept in his shopping cart before leaving the store.
E-commerce relies on analyzing the habits of buying of users in order to show products that are suitable to his taste.
Kuwait, Saudi Arabia and the United Arab Emirates are among the top worldwide for mobile phone penetration.
About 85% of merchandize are bought on e-shops worldwide in comparison to personal computers, whereas it was 38.8% during the third quarter of 2015 in Saudi Arabia.
Souq is the first e-shop in the Arab region that launched its own shipping application. Its popularity exceeds international shops because of its interest in the local market as well as finding solutions for buy and sell problems such as pay-on delivery and inaccurate addresses.