Opinion: Amazon’s possibilities in the Middle East

Photo credit: Alexas_Fotos.

The Middle East has been lagging behind the rest of the developed world in ecommerce for many years despite its high GDI (Gross Domestic Income). This will be a boon for the entire tech industry across GCC (Gulf Cooperation Council) region, and it’s long overdue.

The GCC countries always have a US leaning with American staples such as Ihop, Cheesecake Factory, Dodge, and Chevrolet found in abundance. But these brands typically operate on a franchise model where the ownership belongs to a powerful family office. Amazon is looking to skirt this protocol and go direct to the market.

What remains to be seen is how protectionist or free-market these incumbents can prove to be, and this will likely be an acid test for the market. Will we see a situation similar to Skype’s ban in Dubai or how Uber received a more relaxed treatment?

Anyone that assumes that Amazon will have a cakewalk in the Middle East is either naive or has a vested interest somewhere.

Protectionism already exists in GCC where core industries are threatened. Try living in the region and using Skype, or purchasing an iPhone, or placing a WhatsApp call. All VOIP and video call services are either entirely blocked (e.g. Facetime and WhatsApp Calls) or significantly restricted ( like Skype) in the UAE. These are for security reasons, of course, and not because the government owns both telco providers in a market.

We have yet to see how heavily the local retail players will leverage their hand. It would not be inconceivable, even predictable, that the local family shareholders would pressure Aramex, a local delivery company, to not fulfill orders for Amazon (much like WeChat failing to serve Uber in China). It is also possible that local family offices would prevent their franchised brand from being sold on Amazon. I can foresee both of these ideas playing out at some scale.

So far, the lack of trust in ecommerce and the established retail players have managed to stave off any meaningful attack by foreign players. Rocket Internet’s ecommerce play Namshi has failed to make any significant dent in the market.

Of course, the incumbents are trying to build against this Amazon encroachment. Emaar reportedly floated a bid of US$800 million for Souq.com (US$220 million higher than the Amazon offer). And Alabbar is launching Noon, an ecommerce platform styled on Souq.com/Amazon, with a billion-dollar war chest. There’s word on the streets of Media City that Noon has all the money and connections, but little in terms of the strategy and execution power to make itself work immediately.

The Middle East internet and tech scenes are about to get a lot more interesting. Beyond just the ecommerce scene, the trickle-down effects of the market will be a rising tide for all tech companies in the region. And so, this “Mother of all Battles” will put billions of dollars on the table over the next five years for a range of digital consultancy and advisory firms and experts.

In this new Gulf War, we are the arms dealers.

God Bless, Jeff Bezos.