News has surfaced from various outlets that Amazon plans to expand its reach to the Middle East. According to these sources, the e-commerce giant plans to continue to grow and develop in the region, including to the United Arab Emirates (UAE).
Amazon moves forward with an eye towards growth
The company has achieved its top sales to date through Amazon marketplaces in Great Britain, Germany and Japan. The relevant question is how growth can be stretched even further to emerging markets in the Mideast.
According to American business news broadcaster, CNBC, the new platform will be largely similar to Amazon’s other international platforms, with only subtle differences, such as on amazon.co.uk, or amazon.de. Generally this will mean maintaining a uniform appearance and Amazon’s consistent branding in the region.
For instance, Vendor and Seller Central are expected to have essentially the same user interface as in the US. Amazon’s Middle East marketplace would also most likely utilise the exact same storage and shipping capacities (i.e. Fulfillment by Amazon) as in other global regions.
The Middle East as a new point of sale?
Amazon’s market entry in the Middle East raises the question of Souq.com. Two years ago, Amazon first bought the Dubai-based online retailer for 580 million (USD) – the company’s most expensive international acquisition ever. The acquisition helped Amazon gain a foothold quickly in the region.
Souq.com’s high sales, for instance on White Friday, an e-commerce holiday in the MENA area, have made it already one of the largest online retailers in the Middle East. Souq.com first brought White Friday to the United Arab Emirates in 2014. Since then, thousands of deals have been offered every year during the five-day event in November, also to fuel Christmas sales.
Reports suggest Amazon has advised certain major third-party vendors not to sign to place their products for sale on Souq. The parties in question were told about an upcoming opportunity to sell their merchandise to the UAE, and later to Saudi Arabia. Inventory distribution would take place on Amazon’s own website. This scenario was described to CNBC by several vendors with a request not to be named, as talks were still ongoing privately with Amazon. An Amazon spokesman refused to comment.
Market intereset in the MENA region
A marketplace launch in the Middle East stands to be both incredibly, potentially lucrative and would offer Amazon significant benefits. Many millionaires and capital influencers live in the region. In addition, most transactions are conducted in English making it straightforward for US and UK-based sellers to expand.
However, the risks of such a move ought not to be ignored, such as MENA’s dependency on oil. Saudi Arabia’s economy is based heavily on oil prices, which last year contracted for the first time in nearly a decade, fueling fears of a global market slowdown.
The future of Souq & Co.
What happens to Souq.com if a new Amazon marketplace opens? There is at least one precedent that may be of interest. In 2010, Amazon acquired Quidsi for $545 million. Two years ago, Amazon ultimately shut down the company, previously the parent company of Diapers.com and Soap.com. Everything pointed to facing losses in profit as a result of the closure. Amazon had little need for Quidsi however, as the same products were already being distributed via Amazon.com.
Currently, Souq.com has posted vacancies on its website for a Vendor Manager and an Account Manager. An initial clue that the new marketplace might be gaining momentum?