Amazon.com in the Middle East
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Case Code: BSTR528 Case Length: 13 Pages Period: 2010-2018 Pub Date: 2018 Teaching Note: Available |
Price: Rs.400 Organization : Amazon.com Inc. Industry :Retail Countries : Middle East Themes: International Management/Globalization/International Marketing |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
About Souq
Souq was founded in 2005 by Ronaldo Mouchawar, Samih Toukan, and Hussam Khoury in Dubai, UAE, and was referred to as “the Amazon of the Middle East” by analysts. It was launched in 2005 as an auction site linked to internet portal Yahoo! Maktoob . Souq had risen steeply by 1500% since 2007 due to the growth in young demographics with high disposable incomes and a high internet penetration rate. In 2011, Souq altered its model to an online shopping site akin to Amazon with a marketplace and retail items for sale on its platform. Souq facilitated the feasibility of ecommerce in the Middle East region. The company sold a range of goods from diapers to shoes to smartwatches to bordering Middle Eastern countries such as Bahrain, Oman, Kuwait, and Egypt. Souq featured more than 400,000 products from international and local brands and by 2014 and had established itself as one of the leading ecommerce players in the Middle East and North Africa (MENA) region both in terms of site traffic and market share (See Exhibit II). The site had localized operations in the UAE, Saudi Arabia, Kuwait, and Egypt, and shipped products to Bahrain, Oman, and Qatar. Reportedly, 78% of all online shopping in the Middle East and North Africa was on Souq...
E-commerce in Middle East
GCC was one of the world’s most mystifying platforms for e-commerce. GCC had the highest levels of GDP per capita, with most of the people having large disposable incomes. Average mobile penetration stood at more than 170% and smartphone penetration was at more than 65%. In addition, more than two-thirds of the population used the internet, with penetration in the UAE and Qatar exceeding 90% (including fixed and mobile phones). But the e-commerce market was limited. Notwithstanding its young, tech savvy population, shoppers in the Middle East still preferred to shop in stores. Online retail sales accounted for less than 1% of total sales in the region, according to market researcher Euromonitor International...
Amazon Enters Middle East
Amazon had a partnership with Jamalon.com (Jamalon), an online bookseller based in Amman, Jordan, that had been in business since 2010 and offered around 10 million titles in English and Arabic. Amazon directed Jamalon on logistics, while Jamalon provided Arabic titles to Amazon...
Challenges
Amazon had to overcome several challenges to succeed in the Middle East – consumer faith and responsiveness issues, customers’ lack of trust in online payments, distribution, and logistics infrastructure and emerging government policies. For instance, the sale of books was subjected to censorship for religious reasons, and selling the books across borders was a substantial challenge. Added to that, the lack of credit cards among customers and the lack of proper mailing addresses in many parts of the area, posed stiff challenges to Amazon...
Looking Ahead
Analysts felt that Amazon had a big responsibility to make the Souq acquisition work. Some experts suggested that Amazon could create a Kindle that would allow Arabic content, and Amazon Prime division that produces videos catering to the population there. It could also consider bringing in Kindle Oasis and Amazon Echo Dot . Experts opined that Kindle Oasis was likely to disrupt publishing in the Middle East region...
Exhibits
Exhibit I: Selected Consolidated Financial Data of Amazon.com Inc.
Exhibit II: Traffic Split and Market Share of Top e-commerce sites in MENA (2013)
Exhibit III: Middle East E-commerce Market
Exhibit IV: E-Commerce Spending in MENA Region
Exhibit V: E-commerce Sales by Region
Exhibit VI: Barriers to e-commerce Services in the Middle East
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