Amazon announced this week that it had acquired Souq.com, the major e-commerce website in the Middle East, in a deal that has long been speculated over and whose final value came in at US$650 million. While Amazon described both companies as “sharing the same DNA,” the question remains as to how the company’s foray into the region will affect consumers and the e-commerce market.
In its statement regarding the acquisition, Amazon said it plans to expand its product base, a development that many in Egypt that spoke with Mada Masr seem eager to welcome.
“Joining the Amazon family will enable Souq.com to continue growing while working with Amazon to bring even more products and offerings to customers worldwide. By becoming part of the Amazon family, we’ll be able to vastly expand our delivery capabilities and customer selection much faster, as well as continue Amazon’s great track record of empowering sellers,” Amazon stated.
Egypt is considered an important regional e-commerce player, boasting a market size of US$1.4 billion in 2015, according to a state of payment report issued by Payfort, an online payment solutions company that is based in the Middle East and owned by Souq.com. The Middle East’s total market size comes in at about $7 billion, according to the same report, with Egypt’s share coming third behind the United Arab Emirates and Saudi Arabia.
There are 15.2 million e-shoppers in Egypt, which is the highest in the region, the report adds. However, both the UAE and Kuwait have more buyers per capita and, according to the report, are “easier for e-commerce companies to penetrate than Egypt.”
Looking at the buying behaviors of Egyptians online, the 26- to 35-year-old demographic constitutes half of online buyers, with Egyptians going online mostly for electronics, fashion, airline tickets and hotel reservations. Signaling an impediment to e-commerce expansion, 72 percent of online buyers pay for products through cash-on-delivery mechanisms rather than credit cards.
There are 15.2 million e-shoppers in Egypt, the highest in the region
Mada Masr spoke to a number of online shoppers who have used Amazon, as well as specialists in the realm of digital markets about the possibilities of a new online shopping experience given the leading e-retailer’s acquisition of Souq.com.
Zeyad Salem, a journalist, explains that a major problem he faces while ordering from Amazon is the delivery options and the lack of a variety of products available for consumers in the Middle East. He usually orders products online and has them delivered in another market if he can find anyone that is abroad to carry them when they come to Cairo. For him, this is an easier option than dealing with customs or “having them go through my stuff and ask stupid questions.”
“It would be easier to receive products like this [directly], even if we have to order from Amazon UK or US. It happens all the time that I would want something that it is only available in the US store, but I can still get it through Amazon UK. So I hope it will be the case here,” he explains.
Digital marketing specialist Mai Gamal contends that the potential for Amazon’s operations in the region may be “game changing,” specifically referring to fast delivery operations and customer services. “With Amazon, you can return whatever product you don’t like without hassle, and you can communicate your complaints very easily, something we really lack in the region,” she says.
“The Egyptian market has very strict customs regulations, which will prevent these companies from getting a foothold”
In addition, she believes that Amazon’s venture would encourage more international brands to sell their products in the Middle East. “Amazon comes from the same multinational seller atmosphere,” she says, a fact that she takes to mean international companies in the electronics field will be encouraged to expand their online retail operations.
Engy Adham, an avid Amazon user, is hoping that Souq.com will open the door for a wider offering of products and services. She hopes that the new venture will bring new shopping cultures to the region, especially those focused on refurbished products. “My first encounter using refurbished goods was three years ago when I was studying in the States. As a student, I always looked for cheaper prices and offers, which were available on Amazon. No matter what the product I wanted to buy was, there was a long list of refurbished items that I could get and they were in perfect condition,” she says.
But despite having online marketplaces for refurbished products in Egypt, Adham usually doubts the quality.
“In Egypt, I never ever think of buying second hand items because I am almost sure their quality would have deteriorated or, if they are electronic items, they wouldn’t have a long long life because they may have already endured malfunctions. Amazon can introduce a culture that we lack in Egypt and the Arab world.”
For Marwan Imam, a video and animations creator, Amazon in the Middle East would mean more possibilities for people like him. Imam is particularly interested in Amazon Prime, a premium service that includes streaming media content. Through the service, viewers can access a variety of shows, including Amazon’s original series and content that the company has secured licenses for. In the past, Imam has resorted to the use of a VPN in order to watch his favorite shows in Egypt.
“What’s available for us is usually Bollywood stuff,” he says. “As a consumer and a creator who makes comics and video content, Amazon venturing here could be something for local creators to use, as well as something outside the traditional means that exist currently in the region.”
“The changes we are going to see will be on the operational and logistical side, meaning better delivery and customer care services”
Meanwhile, according to digital product specialist Ismail Zohdy, Amazon’s acquisition of Souq.com will introduce a marketplace culture to the region.
“An online retail store is a seller that buys products from different producers and sells them to customers, which requires a huge logistical and warehouse infrastructure. Amazon will have all of this under its control by acquiring Souq. Amazon, in turn, is a marketplace, which is a multi-seller store that enables users to choose from a variety of products and sellers,” says Zohdy, shedding light on the difference between a marketplace and an online retailer.
Although some speculate Amazon’s wide array of Chinese companies may enter the Middle East market, Zohdy notes that things in Egypt may differ.
“The Egyptian market is controlled by monopolies and has very strict customs regulations, which will prevent these companies from getting a foothold in Egypt. That’s why we should not expect cheaper prices or a diversity of products. The changes we are going to see in the medium term will be on the operational and logistical side, meaning better delivery and customer care services,” he contends.