After an extended period of instability, Egypt’s economy is beginning to strengthen once again. This is due in part to a series of bold economic reforms on the part of the Egyptian government, including measures to induce investment and spur private-sector job creation, the introduction of a value-added tax (VAT), and a reform of fuel subsidies. These reforms have inspired praise from the International Monetary Fund (IMF) and has helped earn the country a $12bn loan.
Any large influx of money into a market is bound to catch the eye of investors, and rightly so! The loan and the economic reforms have improved Egypt’s public finances and strengthened social programs, stabilizing the economy. This in turn puts more disposable income into the pockets of Egyptian consumers.
With money to spend and the recession now firmly in the rear-view mirror, today’s consumers in Egypt are turning to e-commerce to get their shopping fix. If you are an e-commerce merchant looking to expand your reach to Egypt, here are some important points to consider:
Unless otherwise noted, figures in this article are sourced from:
- Total population: 92 million
- Internet users: 48 million
- Online shoppers: 8 million
- E-commerce sales: $5 billion USD
- E-commerce annual growth: 22%
As with any newly-affluent demographic, Egypt’s growth potential is great and, for now, the consumer demand for e-commerce merchandise is far greater than the supply. However, Souq.com, the biggest domestic player and the largest online shopping portal in the Middle East and North Africa region (MENA), was purchased by Amazon early this year. Around the same time, Souq’s biggest competitor Jumia also invested $20 million into Egypt. The success of Jumia and other new online sellers in recent years proves that the Egyptian market is still hungry for more e-commerce options.
Egypt is home to the highest number of internet users of any MENA country, with more than half of the country’s population online. However, the proportion of the online population that participates in e-commerce remains extremely low, with only 1 out of 6 people using the internet to shop. That number is expected to rise rapidly though, as the wealth of the nation grows.
Currently, most online sales to Egyptian consumers fall under the categories of electronics, entertainment, airline tickets, and fashion.
Drivers and Barriers
Driver: Rapid Economic Recovery
The political and economic turmoil of recent years has prevented Egypt from fully modernizing its economy and its e-commerce sector in particular. As we’ve seen in many other countries, such as Spain and Ukraine, this state of affairs is almost always followed by a massive explosion of growth in infrastructure, internet connectivity and e-commerce penetration. The investments being made by the local government and the IMF have created a period where the demand for e-commerce options far outstrips the supply, so it is an ideal time for retailers to find their audience.
Barrier: Cash Dependency
Payment card penetration is low in Egypt, with only around 10 million credit or debit card holders in the country, representing a little more than 10% of the population. That number is slightly higher if we look solely at Egypt’s online population, but roughly 80% of e-commerce purchases are still paid for by cash-on-delivery. Credit card issuance is growing by 40% yearly, so cash dependency will decrease over time, but it is very beneficial to offer alternative payment options when selling to Egyptian customers.
Driver: Localized Services
Prior to Amazon’s $580 million purchase of Souq.com, the American e-commerce platform had spent years competing with the Egyptian company throughout MENA, failing to oust the incumbent platform due to poor or nonexistent language and currency support. Consumers in Egypt place a great value on localized services, so retailers who offer Arabic-language websites and support the Egyptian pound currency (EGP) have a competitive advantage over other cross-border sellers.
Barrier: Market Control
Key among the government initiatives to stabilize the Egyptian economy was the introduction of a VAT rate, which currently stands at 14%, along with restrictions on foreign investments in several sectors of the economy. Though designed to create the conditions which allow business and innovation to flourish, these controls also give domestic businesses a competitive advantage over cross-border retailers.
Egyptian E-Commerce Facts
- Largest online population in the MENA region.
- Egyptian consumers spent an average of $641 USD online in 2015.
- The demographic that spends the most online is urban, well-educated people aged 26-35.
- The most popular payment method is cash-on-delivery.
- The most popular product categories for online shoppers are electronics, entertainment, airline tickets, and fashion.
- According to Payfort’s State of Payments in the Arab World, Egypt’s e-commerce market is expected to reach a value of $2.7bn by 2020, a growth of 100% over 5 years.
Despite Egypt’s ongoing concerns, the country’s growth potential is unmatched in the region. Egyptian consumers are hungry for independent retailers, with numerous underserved market segments and little access to cross-border merchandise. The challenge with the Egyptian market is that after so many years of economic instability, it’s hard to quantify the market’s risk factor. At the same time, that’s also what makes the potential reward so great. E-commerce businesses have the opportunity to gain significant traction in a rapidly maturing market by expanding their reach into Egypt.
Expanding into a new cross-border market is always a challenge but can be very rewarding if done right. For the latest news and information about how to scale up your e-commerce enterprise into an international success, subscribe to the Payza Blog and follow us on Facebook and Twitter.