Amazon and Ebay proxy war to commence in the Middle East?
On Tuesday June 12, Saudi-based online retailer noon announced that it is going into a partnership with eBay, bringing customers in the UAE and Saudi products from international markets that they couldn’t get a hold of before. This comes almost a year after Amazon had announced that it had bought Souq, noon’s competitor based in the UAE.
Now, it seems that eBay and Amazon are set to launch a proxy war in the region for a share of the online market.
Setting the chess pieces
Mohamed Alabbar, founder of noon, said: “noon is connecting the region with the global e-commerce market through our partnership with eBay. With this, we are offering our customers access to products that are not otherwise readily available in the region. Our partnership with eBay opens a whole new world of shopping experience.”
The company that comes closest to offering a similar service to ebay in the region is UAE’s dubizzle, now owned by international firm OLX.
In 2017, Amazon’s acquisition had put Souq at a value of $650 million, despite being valued at $1 billion in 2016.
“Joining the Amazon family enables Souq.com to continue to bring even more products and services to customers in the region and further expand ‘Fulfilled by Souq’ to empower sellers,” a joint statement by Amazon and Souq had explained, following the deal.
While the statement does highlight Souq as the greater benefactor to come out of this deal, the real winner remains Amazon, who in the long run will reap the larger rewards as e-commerce properly kicks off in the region.
Yet, is the Middle East online market worth all this trouble?
According to BMI Research, The Middle East’s e-commerce sector is growing faster than anywhere else in the world, with online sales expected to double to $48.8 billion by 2021. According to Reuters, online sales in Saudi Arabia are expected to surge to $13.9 billion by 2021 from a projected $8.7 billion this year.
On the other hand, global management consulting firm AT Kearney expects e-commerce in the UAE to grow at a compound annual growth rate for 25% per year up to 2020, with Frost and Sullivan estimating the market could be worth up to $10bn by next year.
Now, these two online giants are set to duke it out through their proxies. While both companies offer somewhat different services, each of their market shares’ will inevitably chip away at the other’s.
The battle for the Arab customer
What does this mean for the Arab consumer?
For starters, it means buyers in the region will have a larger selection of goods to choose from than ever before. eBay offers the chance for customers to get their hands on second-hand items that they won’t find elsewhere. This novelty is bound to prove quite profitable for the online seller as customers try to get their hands on items they wouldn’t be able to find locally. Unique dresses, exotic home paraphernalia, and exciting gadgets are among the draws of such a service.
The Souq/Amazon offering will be quite different, offering brand new, unique goods from larger retailers rather than second-hand sellers.
With the competition this rivalry entails, improvements and streamlining practices will hopefully be put in place to facilitate the e-commerce market in the region.
Quietly in the shadows, a new competitor awaits. A relatively new startup to hit the online retailer market comes in the form of Wish. Wish is a US e-commerce startup that specializes in selling highly discounted goods. It raked in $1 billion in sales in 2017, an astonishing number for a company that launched a mere 8 years ago.
The advent of such a young competitor chipping away at their market share is giving Amazon and eBay the jitters. In response, the two online giants launched their own discount sections: Amazon’s “$10 & Under” and Ebay’s “Under $10”.
With Amazon and eBay dueling for the Arab consumer, there is a chance Wish could arrive on the scene to try to carve out a market share of its own.