As with other markets around the world, Egypt’s retail and real estate sector is preparing for further disruption caused by the e-commerce segment. Brick-and-mortar stores without an online presence have had to rapidly expand their leisure and entertainment offerings to offer customers enriched in-person experiences.
The country’s e-commerce penetration of total retail sales is 2.5% and the segment is expected to grow at a rate of 33% annually, to approximately $3bn by 2022. The largest categories are electronics and beauty, and groceries are growing at the fastest pace. With the unfolding Covid-19 pandemic and social-distancing directives from governments worldwide, more consumers are turning to online shopping for their purchases, presenting a significant opportunity for the e-commerce space.
One of the key drivers of e-commerce in Egypt is the fast-moving consumer goods (FMCG) and groceries segment. Customers have increasingly turned to online platforms – such as Egypt-based grocery start-up GoodsMart – to get their groceries delivered while social-distancing measures are in place and the opening hours of many stores are reduced. In March 2020 Amr Fawzi, founder and CEO of Goodsmart, told local media that the company’s orders had tripled in the wake of the pandemic. Start-ups in the country are working to meet consumer demand in the space – including mobile platforms, as many consumers prefer to shop online. For example, in October 2019 Jumia – a Nigeria-based e-commerce platform that is a major player in the Egyptian market – announced plans to build a technology centre in Egypt to support its online payment service, JumiaPay. The centre will support training and employment in the sector. With the Covid-19 pandemic causing a number of retail stores to close their physical locations in the short term, retailers are increasingly turning to e-commerce to cater to this new reality. Jumia reported receiving an overflow of applications as vendors look for ways to boost their businesses.
Other e-commerce platforms are leveraging consumer trends during Covid-19 and appealing to the Egyptian government to support e-commerce growth. In April 2020 Mostafa Hendawy, general manager for Egypt at Saudi Arabia’s Noon, told local media that the sector helps improve digital connectivity and financial inclusion. He added that e-commerce provides a space for small and medium-sized enterprises to remain solvent when the impact of the Covid-19 pandemic may otherwise cause them to close down. Noon has one customer fulfilment centre in Cairo and has plans for five more centres to streamline services in the country.
The e-commerce space in Egypt is also attracting a number of local start-ups. In mid-2019 Trolley – a Cairo-based grocery delivery web and mobile platform – announced $200,000 in seed funding. The start-up operates with a warehouse of groceries as well as partnerships with local chains to offer two-hour delivery in Cairo and Giza. According to Trolley, it fulfils more than 400 orders per month – approximately 30% of which came from its own warehouse. The company plans to expand to three more governorates in the near future.
MaxAB is another Egyptian start-up targeting the country’s promising $45bn FMCG market. The company aims to connect local informal food and grocery retailers to brands and suppliers. The platform features more than 600 products, and leverages data and analytics to help companies in the sector understand consumer preferences and behaviour. In September 2019 MaxAB closed a $6.2m seed round – one of the largest ever by an Egyptian start-up. With goods shortages and supply chain disruptions due to Covid-19, local start-ups like MaxAB are able to step in to fill some of the demand and expand their footprint in the market. The number of customers using the company’s app has doubled since the onset of the pandemic, whereas previously many preferred to place orders on the phone or directly through a company representative.
Challenges
Traditionally, consumer preference for cash on delivery has been a major challenge to e-commerce growth throughout Egypt and the Middle East. This preference has changed due to the spread of Covid-19, but it remains to be seen whether purchasing behaviours will be affected long term. Shipping times are also a challenge for the sector. At the end of 2019 Egypt Post signed an agreement with German company DHL Express to develop services to ensure faster, more efficient shipping from Egypt to the rest of the continent. The agreement is in line with the country’s goal to position itself as a leading logistics and e-commerce centre in Africa. Internet connectivity also remains a potential challenge to expansion, with penetration at around 48% as of March 2020.
Outlook
As smartphone and internet penetration continues to improve, e-commerce will likely remain on a path of strong, sustained growth. The gradual stabilisation of consumer purchasing power and development of logistics and payments infrastructure are also likely to contribute to this trend.
The global spread of the Covid-19 pandemic revealed a significant opportunity for Egypt to further develop its e-commerce sector, and improve its logistics and warehouse capacity. As growing numbers of customers shift their shopping habits and become increasingly accustomed to taking advantage of online retail options, this may present an insight into trends in a post-Covid-19 world.
