Amazon.com Inc has agreed in principle to buy 100 percent of Dubai-based online retailer Souq.com from its shareholders, sources familiar with the deal said on Wednesday to Reuters.
Souq.com currently controls around 78% of all e-commerce traffic in the MENA region and had been valued at US$1 billion in a $275 million funding round in February last year.
As of now, Souq has 8.4 million products on offer, after adding books and groceries on to its marketplace. Upon usurping Souq, Amazon now faces the most formidable threat from noon.com – which is also worth $1 billion, and was set to launch in January housing 20 million products, but has faltered on its timeline and is yet to go live.
Both Amazon declined to comment and a spokesperson for Souq.com did not immediately respond to a request for comment.
The Dubai company currently commands online purchases accounting for only 1 to 2 per cent of regional retail sales there is a huge opportunity for growth. Souq.com had according to media reports been valued at $1 billion at the time of a funding round last year, but the sources say that valuation has since dropped.
According to Reuters, one of the sources close to the deal said it gave Amazon a presence in the region without having to deal with bureaucratic hurdles such as getting regulatory approvals from each region and signing up vendors and suppliers.
“Amazon acquires business that they see as tangential to the core e-commerce marketplace, and in this case, I assume what they gain with Souq.com is a strong local brand, an early leadership position in the Mid-East e-commerce market, and a team with plenty of local expertise,” Baird Equity Research analyst Colin Sebastian said via email.
Souq.com launched in 2005 as an Internet auction site and has developed into a retailer and marketplace for third-party vendors, serving a number of markets in the region, including UAE, Egypt, Saudi Arabia, Kuwait, Bahrain, Oman and Qatar.
A difficult year was forecast for Souq as a result of the establishment of noon.com, a $1bn rival platform, funded by Emirati billionaire Mohamed Alabbar and the Saudi Public Investment Fund.