Amazon eyes partnerships with Saudi SMEs, tech startups

Retail conglomerate launched a dedicated Saudi platform in June last year, and has seen double-digit growth

  
The Amazon logo is seen outside its JFK8 distribution center in Staten Island, New York, U.S. November 25, 2020. Image used for illustrative purpose

The Amazon logo is seen outside its JFK8 distribution center in Staten Island, New York, U.S. November 25, 2020. Image used for illustrative purpose

REUTERS/Brendan McDermid.
DUBAI: Global conglomerate Amazon is looking to partner with more entrepreneurs and technology startups in Saudi Arabia, as it aims to boost the dedicated Saudi retail site it launched a year ago and interact more with the local ecosystem.

The Global Entrepreneurship Monitor (GEM) annual report released this year found that entrepreneurial activity in the Kingdom increased by 24 percent year-on-year in 2020, while a third of Saudis surveyed said they were keen on launching a business within the next three years.

At the same time, research platform Magnitt reported that the value of investment deals in the technology startup sector in Saudi Arabia last year soared by 55 percent year-on-year to $152 million.

Amazon is aiming to capitalize on this fast-growing entrepreneurial ecosystem. “We’re working with the local entrepreneurs and we see a lot of those in the Kingdom. I think the space has changed drastically,” Ronaldo Mouchawar, vice president of Amazon Middle East and North Africa, told Arab News.

“You see a lot more venture capital, family offices investing in tech. So, we want to work with these companies and content developers and content owners,” he added.

The Syrian entrepreneur co-founded online retail platform Souq.com in 2005, which was then sold to Amazon in 2017. While direct acquisitions on that scale may not be on the cards, Mouchawar said the global giant was interested in working more closely with Saudi partners.

“If not totally invest, definitely a lot of partnerships, working to make sure that whatever innovation that’s working locally is available for our customers in the Kingdom,” he said.

On June 17 last year, Amazon launched its dedicated Saudi website Amazon.sa, rebranding the old Souq.com website.

“This was kind of the first Amazon Arabic site. We had to put the infrastructure in Saudi Arabia — 14, 15 stations. We had about 2,000 people and trained them on the systems,” Mouchawar said, adding that the site has performed well.

“We’re seeing high double-digit growth obviously in most of our locales. Very good growth. We don’t report growth by region, but overall the industry is growing and Amazon being newly launched is attracting a lot of customers.”

In its annual report for 2020, Amazon reported a 38 percent growth in net sales in North America and a 40 percent spike in sales internationally. While individual sales figures are not available for individual countries or regions, a review of Google search term trends shows that searches for the term Amazon in Saudi Arabia over the last five years peaked in mid-June last year and the volume of searches for the company has increased by 38 percent in the last 12 months.

A clear indication of the success of the site is the fact that Amazon announced plans in March to hire 1,500 new employees in Saudi Arabia and add 11 buildings to its network. The expansion will boost storage capacity in the Kingdom by 89 percent and its geographical delivery network by 58 percent.

FASTFACTS

• Amazon currently operates three warehouses — known as fulfillment centers — in Riyadh and Jeddah.

• It has 11 delivery stations and two sorting centers in the Kingdom.

• By the end of the year, Amazon will boost the numbers to six warehouses and 13 delivery stations.

• Eleven brand new buildings will be added to the network, while some older facilities will be closed or upgraded.

The global conglomerate currently operates three warehouses — known as fulfillment centers — in Riyadh and Jeddah, as well as 11 delivery stations and two sorting centers. By the end of the year, this will be increased to six warehouses and 13 delivery stations. Eleven brand new buildings will be added to the network, while some older facilities will be closed or upgraded.

By the end of 2021, Amazon’s fulfillment network will reach across a total floor area of over 867,000 square feet. The Seattle-based company is also partnering with Saudi Post and a network of 10 service partners.

According to figures by research firm Statista, e-commerce revenue in Saudi Arabia is set to reach $7.051 billion this year and grow at an annual rate of 5.38 percent to reach $8.697 billion by 2025. The largest segment for consumers is fashion and the average revenue per user is estimated at about $248.69.

Mouchawar said there are three main differences with the Saudi market, which they have adapted into their strategy in the Kingdom. “Obviously the language is one — we had to take care of the language to suit. It’s a very mobile-heavy user base: 80 percent of our customers are on mobile phones. So, as you market to these customers, we have to be aware of that. “The Saudi customer is fairly younger in demographic,” he added. “We had to make sure also the selection — the product offering — is catering to a younger audience and larger families. Consumables and groceries, for example, are important to us because of the family sizes and the consumption nature,” he said.

A lot of retailers, such as Carrefour, have been setting up their own fulfillment centers in the Kingdom, to cater to the demand in online sales. While some have been adopting artificial intelligence and robotics into their warehouses and are looking at driverless vehicles and drones for transport, Mouchawar believed manpower will still be the core focus of the workforce for some time to come.

“I know there are technologies such as drones and robotics — some help in improving the service and the quality, but also some things are still far away, like a drone delivery in the region requires a lot of different changes to different things,” he said.

As a result, he believes the continued growth of the site will present employment opportunities for young Saudis. “I think there’s a huge opportunity to add people from the region to the team. We’ve been doing that consistently in Saudi Arabia, Jordan and Egypt. I’m very excited about the opportunities that we are able to provide to young people, especially in this sector of content and tech,” he said.

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