Emaar Malls’ “competitive” bid for UAE-based e-commerce retailer Souq.com could help the traditional retailer prevent Amazon’s immediate entry into the regional market, according to an analyst.
Dubai-listed Emaar Malls confirmed on Monday that it had submitted an $800m bid to acquire Souq.com. The bid has not yet been accepted.
The move is “in line with our strategy to align e-commerce with physical shopping,” Emaar Malls said.
Last week, it was reported that online shopping giant Amazon had agreed to fully acquire Souq.com after previously backing away from a deal. The news has not yet been confirmed.
“Emaar Malls’ bid for Souq.com makes sense,” said Paul Cuatrecasas, CEO of Aquaa Partners. “Souq is already an e-commerce giant in the region, and as a commercial property developer, Emaar Malls has seen the destructive effect e-commerce players have had on traditional retail profitability in the developing world.
“In the US, established retailers, like Walmart and Kroger, are fighting for their lives against competition from Amazon, who not only offers a wider range of products, but a better customer experience and faster delivery too. Walmart and Kroger have been caught on the backfoot, and they are now trying to catch up by investing in technology.
“Emaar Malls can’t afford to find itself in the same position in a few years’ time – it needs to limit Amazon’s growth at all costs. The best way to do this is to make sure that Amazon can’t get a significant foothold in the market in the first place,” he said.
Souq was valued at $1bn in its last funding round in which it raised $275m from investors including Standard Chartered.
Amazon is reported to be offering less than that valuation, with Bloomberg revealing the amount as around $650m.
“The competitive bid for Souq is a sensible way to keep Amazon out of the market, and if it means that Emaar Malls can help stave off potential competition that would lead to its death in five, 10, or even 20 years, as well as enhance the customer experience going forward, then $800m is a relatively cheap price to pay,” said Cuatrecasas.
“But the real genius of this bid is that it’s not only defensive – it’s offensive too. By putting itself in a powerful position to drive growth through e-commerce, Emaar Malls is ramping up competition with other established commercial developers in the market.
“It believes that the future of retail is online, or online combined with an enhanced offline shopping ‘experience’, and that Souq could also drive a new generation of growth for the company in the region.”
The GCC’s e-commerce market is expected to grow to $20bn by 2020 from $5.3bn in 2015, according to a report by consultancy AT Kearney.
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