As part of an effort to expand its influence in the Middle East, Amazon announced on Tuesday that it has acquired Souq.com, the largest online marketplace site in the region, beating out a last-minute bid from one of the sheikhdom's favored business magnates.
The deal – the value and terms of which were not disclosed – will enable the online retail giant to absorb Souq.com’s existing operations and dive into the emerging e-commerce markets of the Arab world.
“Amazon and souq.com share the same DNA – we’re both driven by customers, invention, and long-term thinking,” Russ Grandinetti, Amazon senior vice president for international consumer, said in a statement. “And together, we’ll work hard to provide the best possible service for millions of customers in the Middle East."
Launched 12 years ago, souq.com currently attracts over 45 million visits per month. According to its website, the Dubai-based company offers more than 8.4 million products in 31 categories, including consumer electronics, fashion, and household goods, and also has local operations in Egypt and Saudi Arabia.
"This is a milestone for the online shopping space in the region," Souq.com co-founder and CEO Ronaldo Mouchawar said in a statement.
“Joining the Amazon family will enable us to drive further growth, benefit from their technological investment, offer an even wider product selection through worldwide sourcing, deliver an enhanced customer service experience, as well as continue Amazon's great track record of empowering sellers locally and globally,” he added.
Although Souq.com has yet to go public, the website raised more than $275 million in a round of financing last year. Its private status will also allow Amazon to run a fully foreign-owned operation.
“[The deal showcased Dubai] as a regional and global hub for the world’s biggest and leading organizations,” said Dubai’s Crown Prince Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum, according to Reuters. The city state’s government has increased its investment in technology and retail in recent years.
The new agreement, according to Reuters, thwarted an $800-million counteroffer from state-backed firm Emaar Malls, which is owned by Dubai billionaire Mohamed Alabbar. Losing out on the Souq.com bid to Amazon is unlikely to curb his ambition, however. Instead, the two companies will likely find themselves in a head-to-head competition in the near future.
Mr. Alabbar, who made his name as the developer of the Burj Khalifa, the world’s tallest building, is preparing to launch his own retail website. That e-commerce venture, Noon, received a $1-billion investment from the Saudi government’s Public Investment Fund last year. Alabbar also holds stakes in delivery company Aramex.
His Emaar Malls, which operates Dubai Mall – the luxury mall that accounts for about half of Dubai's luxury goods spending and is one of the Middle East’s largest shopping centers – said the bid was made “in line with the strategy to align e-commerce with physical shopping,” according to the Associated Press.
While online sales currently account for only approximately two percent of retail sales in the Middle East, according to Goldman Sachs, the e-commerce market there is expected to grow exponentially.
Currently, the UAE has one of the highest numbers of shops per capita in the world. But sales figures show that consumers are shifting from luxury malls to online shopping. While the total value of e-commerce in the UAE stood at only $2.5 billion in 2014, analysts project it will reach $10 billion in 2018, Forbes reported in November.
This report includes material from Reuters and the Associated Press.