Amazon’s Souq acquires delivery startup (AMZN)
BI Intelligence
This story was delivered to BI Intelligence "E-Commerce Briefing" subscribers. To learn more and subscribe, please click here.
Souq, the Dubai-based e-commerce company acquired by Amazon for $580 million earlier this year, is purchasing Wing, a United Arab Emirates (UAE) startup building out a same- and next-day delivery network, TechCrunch reports.
The startup already has close ties to Souq, which previously made a strategic investment in Wing and has helped it grow. Wing has worked with multiple businesses in the UAE, and said it will continue to support them following this acquisition.
Same- and next-day delivery could help Souq build on its lead in the Middle East and North Africa (MENA) region. Souq is already the market leader in the region, with 45 million site visits per month and millions of product offerings, but improving its fulfillment capabilities could allow it to grow further. Fast delivery is becoming the norm in many e-commerce markets, so Souq could benefit greatly from being at the forefront of speedy delivery in MENA, especially as the region’s e-commerce market is expected to reach $6.7 billion in 2017, up from $4.8 billion last year.
This is also an opportunity for Amazon to mimic its logistical prowess in the US, which has been a major part of its success. Amazon made a critical advantage out of quick delivery in its home market, with its free two-day Prime delivery and same- and next-day delivery program,Prime Now. While there are many factors in Amazon’s success in the US, free and quick shipping are a big part of why nearly half of all US households now have a Prime account. Amazon, through Souq, is likely hoping that the acquisition of Wing will allow it to offer inexpensive and fast delivery options to draw more consumers and find similar success in the MENA region.
Success in MENA is critical for Amazon as it looks to improve its international business. Amazon has struggled overseas, and its Prime subscription has had slow adoption internationally, hurting the e-commerce titan’s ability to replicate its dominance in the US. Its bet on Souq is part of a much wider effort to grow its revenue internationally, which may also be helped by its decision toexpand Prime Now to Canada to try to attract additional Prime subscribers. For Amazon, this is critical to its ongoing growth, as 67% of the company's revenue still comes from its home market.
To receive stories like this one directly to your inbox every morning, sign up for the E-Commerce Briefing newsletter. Click here to learn more about how you can gain risk-free access today.