Six Lessons To Learn From Souq's Acquisition

Souq.com’s acquisition has been the biggest headline for weeks now in all global media. It’s the first move for Amazon to serve millions of customers in the Middle East, it’s also worth mentioning that the US company is expanding globally to new markets like India, and Singapore will come later this year.

So, this acquisition has a lot to tell and teach young Arab entrepreneurs, here are some of the lessons that should be learned:

1. Being on top is vital to your success

Amazon's acquisition of Souq is a big move for the US company to serve millions of customers in the region. While there are a handful of competitors in the e-Commerce sector in the region, Souq is the best e-Commerce company with the largest customer base.

Amazon acquired Souq so it can hit the ground running in Middle East with already large and established operations instead of starting off from the ground. Of course Souq being the leading e-Commerce company in the Middle East played a key role in the decision made by the US giant.

In addition, Souq serves more than 50 million customers in several countries and more than 75,000 seller in the region with a total number of 2 million products across 30 categories.

2. Owning the market is more powerful than you think

The acquisition of Souq is the latest move from Amazon to expand in the general region. Many of its moves have been organic - that is, Amazon building its international operations from the ground up rather than acquisition. On top of its moves is India, where Amazon has invested billions to build out its business in the country. There, the main competition comes from FlipKart and Snapdeal, e-Commerce companies, which Amazon chose to compete because none of them owned the market and there is room for another rival, so the US giant wouldn’t miss the chance. In the Middle East, it was easier to reach an agreement with the market owner ‘Souq’ than to build a business from the ground up to compete it.

photo Source: aimgroup.com

“SOUQ.com pioneered e-Commerce in the Middle East, creating a great shopping experience for their customers. We’re looking forward to both learning from and supporting them with Amazon technology and global resources. And together, we’ll work hard to provide the best possible service for millions of customers in the Middle East.” said Russ Grandinetti, Amazon Senior Vice President.

3. Build integrated services

But the marketplace is not all what Amazon is getting, Souq’s business also includes a fulfillment operation, which is a logistics and fulfillment service provided by Souq to the sellers (Logistics and fulfillment are key parts of how Amazon expands elsewhere). Also, the deal includes Souq’s online payment gateway, PayFort, which means Amazon will get localized payment technologies and expertise. This combination of integrated services played a key role in how Amazon decided to acquire Souq.com.

4. Be determined but flexible

Souq had been valued at $1 billion in its last round of funding a year ago when it raised $275 million. At the end of 2016, Souq was actually in talks with Amazon to sell a 30% stake at the same $1 billion value. A couple of other giants jumped on the negotiations table afterwards, including eBay. Eventually, Amazon and Souq agreed on a deal on $650 million.

We could all wonder what would have happened if they didn’t get together...

Would Amazon delay its expansion to the Middle East or would it start a separate business to compete with Souq.com?

5. Competition is not as bad as you think

In the back scene, an ambitious new e-Commerce venture called Noon.com is in the making. It’s backed by $1 billion in capital from Saudi Arabia’s Public Investment Fund and Dubai real estate tycoon Mohamed Alabbar, whose firm owns The Dubai Mall and the Burj Khalifa. It’s reportedly that, this new e-commerce venture in the making played a big role in Souq and Amazon coming together.

But did Souq accept the acquisition in a lower value than the expected $1 billion because of the fears of the new rival?

6. Branding matters

Souq.com was already being described by the crowd as the Amazon of the Middle East. In more details, Souq was always driven by smart technology and customer needs. It pioneered e-Commerce in the region and since then, it’s seeking better experience for the sellers and customers, and so does Amazon.
“Amazon and SOUQ.com share the same DNA – we’re both driven by customers, invention, and long-term thinking,” said Russ Grandinetti, Amazon Senior Vice President.

Picture from Google Plus

Amazon entering the Middle East is good news for lots of retailers, merchants, and customers, yet, it’s a nightmare for anyone planning to launch an e-commerce company in the region.

Photo Credit: the-digital-reader.com