Why Local Partnerships Will Be Key To Turbocharging Amazon's Rollout In The MENA Region

The MENA region makes a lot of sense for Amazon, and Amazon also makes a lot of sense for the MENA region.

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This article was co-written with Yasmine Abdel Karim, co-founder of Yalla Fel Sekka.

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For the last five years, Amazon has been slowly dipping its toes into the MENA region. It began in 2017 when it acquired regional online retail giant Souq.com, which rebranded as amazon.eg in Egypt just last year. It also recently launched a delivery service partner program in Saudi Arabia, with plans to expand it across the MENA. It wouldn't be too far a stretch to assume that this is likely going to serve as a pilot program before Amazon is operating in more of MENA and Sub-Saharan Africa.

Historically, the MENA region has been a challenge for businesses outside of it. Like many emerging markets, there are obstacles such as unstable currencies, import duties and taxes, and issues with regulations, local infrastructure, and logistics. Although Amazon has yet to totally crack the code, successfully adding the MENA to its roster of profitable markets will surely fuel even more growth- and prepare it for further expansion in other emerging markets.

The MENA region makes a lot of sense for Amazon, and Amazon also makes a lot of sense for the MENA region. For one, with strong global ambitions, it can't afford to leave out 1.5 billion consumers, if you include Sub-Saharan Africa. Additionally, there are factors such as high mobile penetration, a vibrant e-commerce economy, and a young and fast-growing population. This could be a powerful and enduring match. To achieve this vision, however, Amazon will have to make strategic partnerships on the ground with local companies.

The MENA Region: A Prime Landing Pad (And A Prime Launching Pad Too!)

It's no coincidence that the year Amazon acquired Souq was the same year that the MENA e-commerce market reached a value of US$8.3 billion. Since then, the region has seen a 25% average annual growth rate in e-commerce- higher than the global average.

This high growth rate can be attributed to the groundwork laid by Souq as well as another local e-commerce platform that has a history in Egypt: Jumia. The irony, of course, is that both Jumia and Souq were essentially Amazon copycats. They replicated what Amazon was doing abroad with modifications that were more suited to their local markets- for example, cash on demand payments.

With this road paved by predecessors turned competitors, Egypt will make a great training ground for Amazon if it does intend to tackle more markets across the continent. While Egypt does have one of the stronger e-commerce ecosystems in the region, it also experiences many of the same challenges. The Egyptian pound is prone to volatility, there is a lack of zip codes, logistics can be difficult, and duties and regulatory frameworks can be tough to navigate.

Assuming Amazon is able to capitalize on its technology and experience, however, the lessons it learns in Egypt will serve it well if it expands. And it's likely the multinational is already eyeing large markets in both the MENA and sub-Saharan Africa.

Nigeria, for example, is a large market for Jumia and Konga, similar e-commerce competitors. Kenya has Kilimall. By 2025, it's been projected that the e-commerce industry in Africa will generate an annual revenue of $46.1 billion. This is bolstered by the deep mobile penetration across the continent- Africa's mobile internet usage is 13% above the global average.

Additionally, if we look at Europe, Australia, North America, and Southeast Asia (where Amazon has a presence), their populations trend much older than the populations in MENA and Sub-Saharan Africa. Younger demographics point to more sustained consumption- families where parents create lifelong customers in their children.

Local Business, Global Platform: Turbocharging Sales For Neighborhood SMEs

It's easy to see what Amazon stands to gain when they expand their territory. What is less obvious, is how that expansion may benefit the local communities. First and foremost, local SMEs are going to amplify their addressable markets. Even if they are already vendors on Jumia, selling on Amazon will both extend their reach and generate competition, pushing up quality across the board.

Amazon is also going to up the game productivity wise. It has a technologically advanced foundation that, while it will have to adapt to the idiosyncrasies of emerging markets, will inevitably make all of these systems more efficient. Access to Amazon's infrastructure will help local businesses grow their sales.

These improvements in overall infrastructure and efficiency will also likely shift purchasing patterns in the MENA region. Even though consumers in the UAE and Saudi Arabia on average spend $150 when they make online purchases, they're only shopping online 2-4 times a year. This has been negatively influenced by lack of product selection and inconsistent delivery satisfaction. An increase in product availability and improved delivery will make for happier (and more frequent) consumers.

Global Platform, Local Partnerships: Turbocharging Amazon's Rollout

Despite all the benefits of Amazon expanding further across the MENA and likely sub-Saharan Africa, there will be speed bumps. We've been looking at this through sweeping regional eyes, but in reality, we're talking about 65 different countries with their own labor laws, currencies, and regulations.

The best thing to do when entering a new market, especially an emerging market, is to partner with local businesses who can show you the ropes. SMEs in these markets have inbuilt resilience to some of the unique conditions that are going to be tricky for Amazon to accommodate.

For instance, how do you deliver to a home with no zip code? How do you manage payments when 62% of MENA shoppers prefer paying in cash? How do you develop trust and loyalty among your new customer base?

Local businesses have these answers, so partnering with them will offer a strategic advantage to Amazon. Not only will Amazon be able to deploy faster with partners, it will, in turn, be able to scale faster for less capital and with shared risk. It's much more of a win-win than going into a new region and starting from scratch.

It will be interesting to see what the future holds for Amazon and the MENA region. What's clear to us, however, is that the future looks bright and promising.

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