Why Amazon Acquired Souq.com

Seeking global world domination in the eCommerce marketplace, yesterday Amazon acquired Souq.com, a similar company with Middle Eastern origins. Souq.com is credited for not just proving the viability of the eCommerce channel in the region, but also in developing best practices that drive conversion rate optimization. It branched out to neighboring Middle Eastern countries such as Bahrain, Oman, Kuwait, and Egypt as well.

While the acquisition in dollar format is well below the billion dollar mark that would grant permission for calling this a unicorn, it is the largest deal of its type in the Middle East and deserves due credit. The team at Centric DXB and I congratulate SOUQ.com CEO and Co-Founder Ronaldo Mouchawar on this achievement and welcome Amazon with open arms.

So why has Amazon acquired Souq.com instead of entering the region with full force on its own? Well, it turns out, and we know this first hand, that acquiring customers takes time, effort, investment, patience, and an incremental mindset to adapt strategies. And if the aftermath of Microsoft’s acquisition of LinkedIn teaches us anything, it’s that a go to market strategy partner is the most valuable and undervalued asset in the world. And so on face value, there’s acquisition for the sake of gaining customers, vendors, talent, and trust.

You may be wondering if there’s more to why Amazon acquired Souq.com and you would be right. Risk mitigation is the name of the game, and Amazon now has direct access to Souq.com’s 75,000 merchants, including the two million products across 30 categories. So that takes care of the demand and supply side of every eCommerce operation. The acquisition also gives Amazon access to a successful and refined fulfillment operation, an area Amazon prides itself in, as logistics is the key USP of the company. So that takes care of any concerns on whether orders can be met in time, saving Amazon to hassle of having to go through trial and error had they entered on their own. And finally, Amazon will access Souq.com’s Payfort, an online payment gateway that is popular in the region.

So it’s clear that the acquisition is grounded in reasoning with which Amazon acquired the business that qualified as its closest counterpart, executing on convenience, low prices, offering a large selection, and leveraging a digital strategy that enables infinite inventory, facilitates positive customer service, and optimizes business margins.

After the dust settles and a reformed Souq.com commences operations, we are excited to see how Amazon uses its new company as a sales channel to market it’s own products such as Kindle Oasis, Amazon Echo Dot, and Amazon Tap. The former will likely disrupt publishing by democratizing authorship in the region. The latter will possibly result in local advertisers and agencies finally making moves to invest in voice-based search (we’re way ahead), linking their clients & businesses ahead of time so the future users of Amazon’s voice offerings are able to book a Careem, order Zaroob, schedule news alerts from Khaleej Times, and check their credit balance from Emirates NBD. 

It will also be exciting to see how and when Amazon will leverage Souq.com to launch Prime and compete with Netflix in the Middle East. 

Amazon’s stock is currently trading at US$ 856 with a market capitalization of US$ 409.04 billion. Around the time the rumors started of Amazon’s interest in Souq.com just six months ago, it’s stock touched its first record high of US$ 837.31 and has improved phenomenally ever since.

We are excited, to say the least, as to how this story develops.

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Usman Khalid

About the Author Usman Khalid

Usman Khalid is the founder & CEO of Centric DXB. He excels in taking the point of view of both our clients and our internal teams - expressing those perspectives, concerns and requirements to the other side. Aspiring clients & partners can reach him on usman.khalid@centric.ae

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