Amazon Snags Souq: The Lowdown
It has been an interesting few months in the Middle East for e-commerce to say the least. Rumors have been going around for days that Amazon acquired Souq.com for $650 million and no one was able to confirm the news. Next thing we know, Emaar Malls confirmed that they submitted a $800 million bid for Souq.
If you haven't been following the news, here's what you've missed: Talks originally begun in November that Amazon was considering acquring the Dubai based e-commerce marketplace for a whooping $1 billion. Less than 2 weeks before that, Mohamed Alabbar, Founder and Chairman of Emaar Properties, and Saudi Arabia’s Public Investment Fund (PIF) announced that they are teaming up to launch the region’s biggest e-commerce platform in January, Noon.com, at an initial investment of $1 billion (still not launched FYI). Then in January, Amazon walked away from the deal with Souq, apparently due to a disagreement over valuation. That followed with speculations that Majid Al Futtaim Holding were considering acquiring Souq.
The saga has come to an end today and we can now all officially congratulate Ronaldo Mouchawer, the CEO and Co-Founder of Souq, on the largest exit from the MENA region to date. Amazon has confirmed in a short statement that it has acquired Souq.com after successfully preventing the bid by Emaar Malls, its regional competitor. As part of the deal, Amazon has also agreed to acquire PayFort, an online payment platform for e-commerce platforms that has been Souq.com's payment platform since its inception. The amount of the deal has not been disclosed, but we are speculating that it was valued at around $650 million.
Early in 2016 Souq closed a funding round of $275 million from Tiger Global and Naspers, as well as some strategic investors, including Standard Chartered Private Equity, IFC (a member of the World Bank Group), Baillie Gifford, and “many reputable regional and tech-focused financial institutions." That round increased Souq's valuation to a $1 billion with a total of $425 million raised since it was founded in 2005. Considering all of that, a $650 million acquisition doesn't look so alluring however, it is significant and will shake up the region's growing e-commerce sector and the ecosystem's development.
Obviously, the acquisition of Souq gives Amazon a head start in the region rather than building from the ground up. Buying Souq provides Amazon with an existing customer base, access to regional merchants, and existing infrastructure. Souq currently sells over 2 million products in addition to the global bookstore introduced last month with over 6 million books accessible to their customers, and their online grocery platform which they introduced in November. Additionally, with PayFort, Amazon has also secured the payments infrastructure as well. With Amazon's global reach, track record, and technology, consumers are up for the win.
Once Noon.com is up and running, consumers will benefit from the rivalry amongst the giants. Let's not forget that Mohamed Alabbar bought stakes in Aramex, giving Noon a logistics advantage, and formed a $139 million joint venture with Italian online fashion retailer Yoox Net-a-Porter, and that Emaar Mall Group's flagship is the world's largest and most visited mall, The Dubai Mall.
I'm not sure about the rest of you, but I'm pretty excited to see how the e-commerce sector is going to play out during the next couple of years.