Amazon is acquiring Dubai-based e-commerce marketplace Souq, giving it a foothold in the relatively untapped Middle East market.
The Middle Eastern region has a population of around 50 million consumers but according to McKinsey, only around 2% of its retail transactions currently take place online.
Souq reportedly attracts more than 45 million visits per month. Amazon did not disclose how much it is paying for the largest online platform in the Arab world but TechCrunch reported the deal is worth $650 million.
“Souq.com pioneered e-commerce in the Middle East, creating a great shopping experience for their customers,” Russ Grandinetti, Amazon senior vice president, said in a news release.
“Together, we’ll work hard to provide the best possible service for millions of customers in the Middle East,” he added.
TechCrunch said the deal gives Amazon “an immediate leg up rather than building a new service from the ground up.” Souq has both a payments and fulfillment infrastructure, along with a marketplace of some 4 million products, and works with thousands of merchants to help sell their goods online.
“Up to now, many of [Amazon’s] moves in neighboring markets have been organic,” TechCrunch noted.
The future of Souq, which was founded in 2005, had been the subject of speculation in recent months. Amazon had originally been in talks with the company to acquire a 30% stake that would have valued Souq at $1 billion.
“We are guided by many of the same principles as Amazon, and this acquisition is a critical next step in growing our e-commerce presence on behalf of customers across the region,” Souq CEO Ronaldo Mouchawar said. “By becoming part of the Amazon family, we’ll be able to vastly expand our delivery capabilities and customer selection much faster, as well as continue Amazon’s great track record of empowering sellers.”
Other e-commerce platforms in the Middle East include Wadi and Namshi. “One question now is whether this move is a one-off or whether Amazon is showing us that it now has the appetite to digest more regional giants,” TechCrunch said.