Amazon.com Inc. AMZN recently completed the acquisition of a Dubai-based e-commerce giant, Souq.com. Although the terms of the deal have not been disclosed, Amazon has paid around $580 million as per the sec filing.

Reportedly, Amazon users can now log on to Souq.com using their Amazon credentials. Both the companies plan to come up with more products and offerings in the Middle East region.

Russ Grandinetti, Amazon senior vice president, International Consumer, said, “We are working to quickly integrate Souq.com and Amazon capabilities, in terms of both customer experience and fulfillment, to provide an ever-improving shopping experience for customers in the Middle East.”

In the last two years, shares of Amazon have steadily treaded higher. The stock has returned 114.8% compared with the Electronic Commerce industry’s gain of 65.6%.

 

Deal Rationale

Souq.com is a Dubai-based online retail service. It sells more than 8.4 million products across 31 categories in the United Arab Emirates, Egypt and Saudi Arabia. Moreover, the company says that it has over 45 million visitors per month.

Undoubtedly, the Souq.Comdeal will strengthen Amazon’s foothold in the Middle East. It will help Jeff Bezos and his company to establish a presence in key and emerging markets like Egypt, Saudi Arabia, and the UAE. Further, the deal will help the company multiply its revenues by several billion dollars a year.

International Expansion Continues

Amazon is leaving no stone unturned to expand its operations across the world. The company has already pumped $5 billion into its Indian operations. It launched Prime Video in India and Prime membership in Mexico. Recently, the company agreed to acquire a leading natural and organic foods supermarket, Whole Foods Market, Inc. WFM for $13.7 billion.

A closer look at these deals reflects that Amazon is making further efforts to grow and capture new markets instead of simply relying on developing and expanding its own business.

So, Amazon’s increasing transition from build-to-buy option is a clear indication of the company wanting to speed up its market penetration, expansion and competitive strategies.

Conclusion

Amazon is one of the largest online retailers in the world, with extensive operations in North America. Although the primary product line was books, the company has now diversified into a host of other product categories and therefore wants to spread across the world.

Though the company has been more or less successful in penetrating every region worldwide, it still has miles to go before gaining a strong foothold in the Middle East region and Africa. Its retail market share is relatively small in these markets, but the scene should change for the better in the next few years.