Can Amazon conquer the Middle East?

Internet giant Amazon has snapped up the largest online retailer in the Middle East, Souq.com.

Dubai-based Souq.com was started 12 years ago by a Syrian businessman and, at the time, Goldman Sachs called it “the biggest-ever technology M&A transaction in the Arab world”.

The move will give Amazon access to customers in Egypt, the UAE and Saudi Arabia.

But compared with other regions, online retail shopping has yet to truly take off in the Middle East.

Andrew Kitson, a senior analyst with London-based BMI Research, says Amazon’s decision signals it’s ambition to move very quickly into the Middle East market rather than having to build up its presence from scratch.

“Although it [Amazon] doesn’t already have a direct presence in the Middle East, it is one of the most searched for terms in connection with online shopping. So, it’s imperative that it moves into the market now,” said Kitson.

“Souq.com is an existing player which has a huge addressable market and a huge, loyal customer base. It works with many large and small retailers from the traditional mould.”

Currently, the Middle Eastern e-commerce market is estimated to be worth around $24bn, but is expected to rise to $44bn by 2020.

“With Souq.com being one of the largest players in the market, this represents a huge opportunity for Amazon,” said Kitson before adding that even with the presence of other players in the market, “not all of them are as large or dynamic or far-reaching, so this is a good acquisition for Amazon”.

Logistical challenges in the Middle East have not hindered Amazon in breaking into new markets because it can rely on third parties to deliver packages.

Kitson suspects Amazon will be “investing in their own fleets, building up warehouses, and looking to partnership with other companies in the logistics space”.

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