The low adoption of e-commerce services in the Middle East has often been a source of confusion to those outside the region, especially when it comes to the UAE. Aside from a strong economy and a predilection among residents for ever fancier shopping experiences, the country’s smartphone penetration surely suggests perfect conditions for online retail.
Yesterday’s completion of Amazon.com’s US$680 million acquisition of Dubai-based Souq.com is the latest indication that the situation is about to change. Amazon’s huge investment in Souq, which complements its existing – albeit small scale – operations in the UAE, Saudi Arabia and Egypt, is proof for many that e-commerce’s Middle East lift off is imminent.
Such a sense is not limited to e-retailers; the Amazon deal came four months after Mohamed Alabbar, Dubai’s mall builder par excellence, unveiled noon.com, an ambitious e-commerce venture that promises to offer 20 million products at launch. Mr Alabbar’s commitment to online retailing was confirmed in May, with the acquisition of a majority stake in fashion retailer Namshi for $151m.
Such acquisitions closely mirror global e-commerce trends, with physical and online retailers increasingly encroaching on each other’s territory. After tentative moves into physical grocery stores late last year, Amazon last month announced a deal to acquire organic food retailer Whole Foods Market for a staggering $13.7 billion, setting its sights on US grocery stalwarts such as Walmart and Kroger.
Walmart, the world’s largest bricks and mortar retailer, is aggressively targeting a slice of Amazon’s business. The company acquired Amazon competitor Jet.com last year for $3.3bn, and has gone on to snap up women’s fashion online retailer ModCloth, outdoor clothing seller MooseJaw, and online shoe retailer ShoeBuy.
Back in the Middle East, much of the euphoria over e-commerce in 2017 is still to materialise; while Souq users can now use their Amazon IDs to login to the site, the range of products available on the ground remains largely the same. Noon.com meanwhile has no confirmed launch date, with regional e-commerce veteran Omar Kassim resigning in May after only a few weeks at the company.
Nevertheless, the completion of Amazon's Souq acquisition is still a milestone worth marking for regional e-commerce, with the retailer's technology and expertise sure to have a positive impact on the sector.
“It is an exhilarating time for the e-commerce industry in the region,” commented Souq founder Ronaldo Mouchawar. While customers will have to wait a little longer to see the benefits, it is hard to disagree with his sentiment.