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What does the Amazon Acquisition of Souq Mean?

Amazon has agreed to buy the Middle East’s version of Amazon – Souq.com – in a deal worth more than $650 million. Souq, based in Dubai, was established in 2005 as an online auction site but switched to a marketplace with fixed prices and retail website in 2011. It operates throughout the Middle East and into Egypt.

Amazon will now have access to a geographic region quite unlike that of the US or Europe. In fact, it is still a small e-commerce market representing 2% of total retail sales. But, the outlook is amazing, growing at an estimated 30% a year. With an estimated 5 million online buyers in the MENA (Middle East/North Africa) region, it is one that is tech-savvy, a quickly expanding population and one that is highly mobile.

Infrastructure in this region is a major drawback and as a result, much of the e-commerce growth has come from cross-border, often via by “The Big 3” – DHL, FedEx or UPS – and then last mile delivery performed by local providers. In addition, cash on delivery is still a major form of payment and lastly, a lack of addresses outside the larger cities such as Dubai.

Souq’s logistics subsidiary, Q-Express, addresses these issues and more. In terms of payments, it has created its own prepaid card while also handling cash on delivery. Last mile delivery remains a challenge just like other regions. It has its own delivery services and it also utilizes other courier services. Within its network of coverage, Souq offers same day and next day delivery services.  A bonus, however, is the fact that Souq also has a partnership with Wing.ae, an on-demand delivery and courier marketplace. The marketplace offers comparative pricing across major carriers helping courier companies, SMEs and customers choose the best, fastest and cheapest delivery gateway along with real-time order tracking.

Similar to Fulfillment by Amazon, Fulfillment by Souq service manages the fulfillment, logistics and delivery for third-party sellers.

Souq operates in the Gulf Cooperation Council (GCC) countries and Egypt and has over 6.2 million registered users. The company recently opened its first customer experience center in Dubai which serves as a place for customers to look and feel the products before buying them online; pick up or return orders; its Helpbit Service which offers small repair services; and also serves as an extension of Q-Express.

For Amazon, this acquisition provides it with not only an entrance into a dynamic emerging e-commerce market but also strong logistics capabilities that could possibly be extended beyond the region’s border. For example, by utilizing its leased airplanes, Amazon has the ability to take advantage of cross-border movements into the region with Souq managing the domestic logistics.

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