Amazon isn’t commenting publicly on its reported buyout bid for Souq.com, but if the deal goes through – and there’s good reason to believe it could – it would be welcome news for UAE residents in more ways than one.
News of the potential acquisition broke last weekend, with Bloomberg reporting the Seattle-based online retailer was offering US$1 billion for Souq.com.
The Dubai-based portal is essentially the Amazon of the Middle East, offering a catalogue of 1.5 million products to customers in the UAE, Egypt and Saudi Arabia.
While UAE residents can buy goods from Amazon’s US or UK sites, shipments take a while to arrive since the company doesn’t yet have full local operations.
Souq had appointed Goldman Sachs to find a buyer for a 30 per cent stake. Amazon is instead interested in acquiring the whole company to expand its footprint in the high-growth Middle East market, according to Bloomberg.
Last month, Souq.com's chief executive, Ronaldo Mouchawar, had responded to The National's queries about the sale rumours by saying "there is always talk about Souq.com".
The acquisition would make a lot of sense for Amazon considering another imminent expansion – that of its Prime Video streaming service. Currently available in only five countries – the US, UK, Germany, Austria and Japan – the service is about to go live in more than 200 territories, according to several reports.
The beans were spilt two weeks ago on Twitter by the British television personality Jeremy Clarkson, who promised that his new Amazon exclusive show, The Grand Tour, would be available worldwide.
Amazon has yet to confirm that this would include its entire Prime Video library – with award-winning series such as Transparent, The Man in the High Castle and Mozart in the Jungle – but the streaming service appears to have already soft-launched outside its five official territories.
Subscribers to Amazon’s $99-a-year Prime service – where the main benefit is expedited product shipping – are already able to access much of the company’s video offering in Australia and Canada by, for example, using a backdoor route through its US and UK websites.
An official expansion is seen as inevitable, possibly even by today, considering that Amazon is spending about $3bn this year on original programming.
Netflix, the company’s main competitor in video streaming, has expanded its service to 190 countries to justify the $5bn it is spending this year on content. Netflix is increasing its expenditure to $6bn next year and Amazon is expected to follow suit.
The video service expansion goes beyond just competing with Netflix, though. As Jeff Bezos, Amazon’s chief executive, explained at a conference in June, Amazon’s unique video-and-shipping proposition is quickly forming a core pillar of its future business.
“We get to monetise [our subscription video] in a very unusual way,” he said.
“When we win a Golden Globe [television award], it helps us sell more shoes.”
Amazon Prime, which has about 63 million subscriptions in 10 countries, has indeed proven to be a bonanza for the company.
US subscribers spent an average of about $1,200 with Amazon last year, according to a study by tracking company Consumer Intelligence Research, compared to non-members who spent only $500.
Bundling the video streaming makes the shipping service more sticky with customers. The shipping in turn gets customers to spend more, which means the two prongs work hand-in-hand to expand Amazon’s fortunes.
“A lot of their behaviours change in ways that are very attractive to us as a business,” Mr Bezos said. “And the customers utilise more of our services.”
Considering those facts, Amazon’s interest in Souq.com makes all kinds of sense.
Acquiring the company in conjunction with launching a video-streaming service in the Middle East would boost its retail business and give it a swath of new Prime shipping subscribers in the region.
The deal would be a win for UAE residents too, since they would also gain the benefit of faster Amazon shipping, not to mention an entirely new video-streaming service to rival Netflix, OSN Go, Starz Play Arabia and icflix.
On the retail side of its business, Amazon routinely tops customer satisfaction lists. The quality of its streaming content, meanwhile, is rapidly improving – it now rates even with Netflix in US surveys.
These are proven, high-quality services that will deliver benefits to online shoppers and video-streaming fans alike. For anyone who happens to be both, it’s a bonus.
The tech week’s winner and loser
Winner of the Week: E-commerce. Online sales from the key US market exploded this year over the country's Thanksgiving holiday. Black Friday sales reached about US$3.4 billion, up by 21.6 per cent from last year, while Cyber Monday sales hit $3.3bn, up by 10.2 per cent.
Loser of the Week: Net neutrality. US telecom company AT&T is now allowing customers to stream its DirecTV service without content counting against data usage caps. The company has probably been emboldened by president-elect Donald Trump, who has stated that he opposes net neutrality principles.
Peter Nowak is a veteran technology writer and the author of Humans 3.0: The Upgrading of the Species.
business@thenational.ae
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