Souq by Amazon – A case study of a successful startup

 

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 In the Beginning

 

Souq, a word that came from the Arabic name for “market”, was first created in 2005 by Ronaldo Mouchawar, a CEO in Dubai, United Arab Emirates. At that time people did not think that the Middle East would be the place to launch an e-commerce business. However, since the creation of Souq, it has become very popular and grew to become the biggest and fastest-growing e-commerce website in the Arab world. After the launch of Souq in 2005, Mouchawar arranged for offices in Dubai. The domain name Souq.com was bought in the year 2006 by Mouchawar. Currently, Souq functions in 7 countries, which contain over 135 million people. Moreover, Souq’s staff has increased from 5 workers to over 3000 workers ranging from digital marketers, software engineers, delivery personnel, and customer service center personnel. One of the great achievements of Souq is that it has helped many small traders that sell on its website to increase their sales from less than a dozen items per week to more than millions of products every year.

Origin

The concept of Souq first started when Mouchawar joined the first prosperous Middle Eastern online portal, Maktoob. Maktoob was an online portal that did not need consumers to be fluent in English, unlike the other portals that were available at that time. During that period, many popular portals in the United States such as Yahoo were successfully working with e-commerce. Therefore, Mouchawar and Maktoob trusted that the concept of e-commerce could be repeated in the Middle Eastern region. This motivated them to search for methods to utilize Maktoob’s increasing fame to help develop an online commercial business. However, they decided to create an e-commerce entity separate from that of Maktoob’s since its customers only came for communication or receiving information and did not come often to buy.

 

Growth

Souq was initially created as a website for auctions, similar to eBay. They then expanded by adding categories for selling vehicles and property. The e-commerce site then became popular very quickly and this helped Souq’s operations to extend to Saudi Arabia. Because of the rapid growth of the website, by the end of the year 2009, Souq became an independent entity separate from Maktoob. The auction operations made were estimated to have a value of over 3 million dirhams per month which was almost about 1 million dollars. Today, Souq receives about 39 million visits per month.

Because the demand for mobile smartphones had started to increase at that time, this meant that fewer people were using their personal laptops and more starting to use their mobile phones. This meant that Souq needed to expand its online platform from using websites only to also making use of mobile applications. Although shopping through mobile applications is common today, back in 2010, it was seen as a new approach. The mobile application for Souq was finally created in the year 2012. Currently, over 70 percent of the purchases made on Souq are through the mobile application. In 2010, after Wisam Daoud joined Souq as Chief Technology Officer (CTO) from eBay, Souq became a business-to-consumer company. It then stated that they would stop running auctions and at the end of the year 2012, Asif Keshodia joined Souq as Chief Financial Officer (CFO).

Payment Methods

Souq’s main payment method in the UAE was through credit cards, which was not an issue as the use of credit cards online there was common. For Souq to extend to other countries such as Saudi Arabia and Egypt, it had to make other payment methods available such as cash on delivery. Even though Saudi Arabia created credit cards that offered interest that is sharia-compliant, credit cards were not commonly used there when making online purchases. In addition, Egypt was seen as an additional big opportunity for Souq to expand. However, very few people were able to meet the deposit requirements needed for them to receive a credit card. Therefore, allowing only credit card payments would decrease the number of potential users in Egypt.

Amazon’s Acquisition

As a result of Souq’s successful online presence, Amazon, a multinational technology company, bought it.

So how much did Amazon pay for souq and when did amazon buy souq!

Souq sold it for 580 million dollars in cash on March 28, 2017. Souq’s success in spreading across Arab countries and attracting the attention of a huge international company like Amazon proves that it is one of the most successful online marketing endeavors in the Middle East.

why did amazon buy souq

Acquiring customers takes time, effort, investment, patience so Amzon decided to acquire the main player at the Middle East to get Souq clients in short time.

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References:

https://www.cmswire.com/digital-experience/why-amazon-acquired-souqcom/

https://hbr.org/2017/09/souq-coms-ceo-on-building-an-e-commerce-powerhouse-in-the-middle-east