According to many news outlets, Ecommerce giant Amazon has agreed to buy the most recognised local online marketplace – Souq.com. The deal is rumoured to be worth more than $650m.
The speculation around Amazon moving into the Middle East has been underway for some time with some suggesting that they would enter the market alone, setting up their own warehouses and offices. The acquisition of Souq would give Amazon an head-start on some of this infrastructure in the UAE, Saudi Arabia, Egypt and other GCC markets, but given the sophistication of the Amazon platform, it’s yet to be seen how much of the Souq software would be used.
The timing of the deal coincides with the planned launch of a local Ecommerce ‘Super-site’ – Noon.
In the minds of local customers, the ability to shop from Amazon is not new. The ‘Shop and Ship‘ service from Aramex allows customers around the GCC to shop from Amazon.com or Amazon.co.uk as if it was based locally. Shipping can take as little as 5 days from the USA.
Savvy E-commerce retailers like Amazon constantly monitor where their customers are shopping from, and the Souq acquisition deal may signal that the threshold has been reached where it makes sense for Amazon to be local. It has made a similar decision to enter Australia.
Local retailers who have ignored online shopping in favour of investments in malls and brick-and-mortar stores, will not have the same information that Amazon have about shoppers in the region. Some of the demographic numbers are startling with markets like Egypt and Saudi Arabia having 50% of the population under the age of 25.
These shoppers have never lived in a world without Internet and some can’t remember a world without mobile phones. These customers do not have the same loyalty to local brands. I’m not saying that the Mall culture will disappear overnight, or ever. Cinemas, food courts and other entertainment will continue to allow friends and family to congregate in these destinations, especially in the hot summer.
But again, Amazon would not take this decision unless the numbers showed that it is a a real opportunity. While it is off a low base, the growth of e-commerce in this region is reported at 30%. This move should give confidence to local merchants to invest in the online channel.
Local companies need to make some decisions. Do they adopt a model where they sell through the Amazon / Souq platform? Do they sign up to Noon? Or do they launch their own online offers? Will retailers have to have a presence on all these platforms to succeed?
Will the concept of the ‘Super Mall’ work for retailers in an online world or is it more cost effective for them to build their own store and generate their own traffic? Brands with stores in Malls do have an advantage over Amazon if they can create a truly Omnichannel offer.
Will the arrival of Amazon cause other disruption and allow new businesses to compete against slower moving companies?
The arrival of Amazon would change the game. No longer will payment gateways and supposed delivery problems be able to be used as excuses.
The deal is yet to be confirmed by Souq or Amazon, but there is no doubt that Ecommerce is on the agenda.
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