Acquisition: Is it a way to eliminate promising competition?

Madiha Yusuf

An excerpt from Shakespeare’s play Pericles, “Master, I marvel how the fishes live in the sea.’ ‘Why, as men do on a-land—the great ones eat up the little ones.” The following exchange occurred between the two fishermen.

The above is in the context of one of the most pretentious deals signed in the first quarter of 2017, Amazon took over Souq.com – a very predictable acquisition, and finally, the big Amazon nibbled the small Souq.com!

The deal was in the air for a few months amongst a number of strong acquirers like Amazon and Emaar, finally got settled on March 28th, 2017 and the fate resolved in Amazon’s win.

The Middle Eastern Unicorn – Souq.com, evaluated at a market price of US $ 1 billion is bought by Amazon at a lot lesser. There is no clue on why Souq.com is paid less in comparison to its evaluation. However, no authoritative figure has surfaced yet but according to multiple sources, Amazon inked deal to buy Souq.com for nearly or above the US $ 650 million.

Souq.com’s acquisition gave Amazon a huge foot in the door in the region. Now the question is; should acquisitions be celebrated when the fact is that it kills the growing competition? Especially, when there is no sign of market saturation. In fact, the UAE’s e-commerce market hasn’t reached maturity and hardly have enough e-commerce competitors.

Taking a step back to understand closely, Amazon is an e-commerce giant, leading globally and has its name encrypted on every business shelf. On the other hand, Souq.com – an Emirati Company has a strong presence in the Middle East, spreading into neighbouring Bahrain, Oman, Kuwait and Egypt, kicked off in the recent years. Both, as separate entities were high-end performers and were doing well in the e-commerce industry in different regions, so wouldn’t the audience had loved the fierce competition, if Amazon had stepped in the Middle East as a separate entity?

According to a report from McKinsey, only around 2 percent of retail transactions take place online today. The UAE market is too young for e-commerce; offers ample space for new start-ups to come and flourish in the thriving e-commerce environment.

Unfortunately, celebrating acquisitions have set a benchmark for young starters and continue to reinforce that startups are meant to be acquired or invested at some point in time. Not disagreeing with the startup eco-system or how businesses grow when rightly seeded, but if this galloping remains constant, where do we see any competition? Where is that obsession of topping the leaders fading out? Why wealth, power and authority are deliberately being centralised? What’s a great deal in galloping every next competition in the emerging markets? How will fresher grow when there is no competition around? Does this regimented attitude show that either one sells or dies?

It is undeniable that mergers or acquisitions are sometimes important for a company to grow or sustain but if acquisitions are stacking in any one particular giant’s closet, it’s threatening. This power centralization is scary! Some of the famous e-commerce companies in the UAE like Namshi, Letstango, MarkaVIP, Whoopey and many others were playing hard to hit above Souq.com, and suddenly they are pinned down by a giant over their heads. Now, all these players have less time up their sleeves to not just buckle up but to experiment new waters.

For the following competitors, suddenly having amazon in the UAE market is no less than getting their blue oceans ripped off. With no footprint in the Middle Eastern e-Commerce industry until March 28th, Amazon not just capped off the game, but all set to head the biggest e-commerce platform with 45 million users in the Middle East in just a blink of an eye!

Last but not least, if acquisitions become the driving force, start-ups may lose their objectives of aiming high of being second to none, but to be good for acquisition, in fact; will add on the gap between giants and startups.

However, the good news is that Emaar has announced another e-commerce platform Noon.com and people expect good competition in the market.

It’s time to buckle up for a cutthroat e-Commerce battle in the Middle East. Where do you see it going in the next 5 years? If you have anything to add to the above? Please share in the comments below.

(The opinions expressed in this article are the author’s own and do not reflect the view of the GCCStartup.News or TMA Worldwide & images have republished with the author’s permission)

About the author
Madiha Yusuf is a Entrepreneur – Magazine Contributor – Copywriter – Mentor – Digital Strategist. She is a part of WomenX by World Bank and Studied ‘Entrepreneurial Leadership and Management’ from the Institute of Business Administration, Karachi, Pakistan.

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