BUSINESS

Amazon sale is a disappointment or celebration?

 When Souq.com first started in 2005, it had five employees. Fast-forward 10 years and it was valued at $1 billion as it received the largest e-commerce funding in the region’s history.

One year later, Dubai-based Emaar and US-based Amazon put forward bids to acquire the company, and the latter won.

Neither party has disclosed the actual size of the deal, but public reaction has definitely been to throw a party. Over the region, entrepreneurs, start-ups, and the tech industry are celebrating this sale and considering it an achievement. A select few are questioning the decision to sell Souq.com to Amazon, instead of keeping the company’s home where it belongs: the Middle East.

Ultimately, Souq had the option of rejecting both offers and continuing to trade as a private company, all the while benefiting from the exponential growth that e-commerce is predicted to go through over the next few years. Yet Souq decided to sell to Amazon. It is important to treat this deal as a sale, and not as Souq selling-out.

Despite the political and economic unrest that the region is facing, it seems that the consumerist and materialistic society is continuing to attract foreign investment.

The political volatility has not yet met the e-commerce industry, and it is unlikely to catch up with the industry any time soon. The very interest shown by a world-class heavyweight in e-commerce such as Amazon demonstrates an enormous amount of recognition for the region’s first unicorn. The fact that the sale went through gives great confidence in the industry’s growth over the coming years.

E-commerce is booming – why sell now?

In 2010, the e-commerce industry was worth a measly $3.5 billion. The e-commerce industry in the GCC is currently valued at $15 billion, but has the potential to grow by a further 30 percent to $20 billion by 2020. It is clear e-commerce is the Mo Farah of industries in the Middle East.

The rapid growth rate that e-commerce enjoys raises the obvious question: why sell a company when it is only expected to continue growing? A fair comparison would be if an individual was to own shares in a company that is seeing year-on-year increase in dividends and market value – would they sell, or would they continue to invest their own money?

There’s no doubt that the sale of Souq.com to Amazon requires throwing a party, as it is a net-win to all parties involved. The liquidity that this has generated will allow further investment in other tech-startups, therefore passing the benefit on to other entrepreneurs and further developing the region.

Yara al-Wazir

The sale of Souq generates almost immediate liquidity, which allows the current owners to further invest in the region. This absolute long-term thinking is the reason that Souq was successful in the first place.

Samih Toukan, one of the original founders of Souq, has previously sold Maktoob to Yahoo! Inc. He used the money from the deal to found Jabaar Internet Group and invest in other entrepreneurs in the region.

In the long term, this opened up dozens of doors to technology entrepreneurs in the region, and allowed Toukan to focus on developing Souq.com, only to repeat the cycle.

Customer comes first

Putting aside the personal biases of the powers that run Souq.com, the real value of this sale will be experienced by the customer.

Bringing a massive heavyweight gives Souq.com further credibility and recognition, which can entice retailers to enter the world of online sales. This in turn will bring more products to the fingertips of the online customer.

Bringing Amazon’s experience and motivations into Souq.com also means that the company will be able to further develop the technology infrastructure that is required for continuous growth. Experience in logistics would help further Souq’s delivery network, which it has been extensively trying to develop through the launch of Q-express, a Souq-exclusive ‘spin-off’ Logistics Company dedicated to delivering customers’ orders.

There’s no doubt that the sale of Souq.com to Amazon requires throwing a party, as it is a net-win to all parties involved. The liquidity that this has generated will allow further investment in other tech-startups, therefore passing the benefit on to other entrepreneurs and further developing the region. Customers will see a wider range of products, great deals, and an improved logistics network. Amazon will tap into the rich Middle-Eastern market through an already developed company.

As for Emaar – the company can focus on doing what it does best: real estate, and not technology.

_________________________________
Yara al Wazir is a humanitarian activist. She is the founder of The Green Initiative ME and a developing partner of Sharek Stories. She can be followed and contacted on twitter @YaraWazir.

SHOW MORE
Last Update: Thursday, 6 April 2017 KSA 12:27 - GMT 09:27
Disclaimer: Views expressed by writers in this section are their own and do not reflect Al Arabiya English's point-of-view.
Top
BREAKING NEWS

Send to a friend

Close
Amazon sale is a disappointment or celebration?
Friend's name:
Friend's Email:
Sender's name:
Sender's Email:
Captcha Code
How are we doing?
X

How are we doing?

Name Name *
Email Email *
Country Country
Message Message *
Maximum 550 words allowed