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 E-COMMERCE

5 Key Reasons Why E-commerce Is Set to Transform The Egyptian Market in 2020 and Beyond

May 13th, 2020 · 9 minute read

Youssef Rashad

Founder & CEO, KAII LAB

Introduction

Welcome to our second blog! In our Kaii Lab blogs you will read exciting and interesting articles related to design, technology and business with a primary focus on Egypt. Our topic for this article is the ever-growing and expanding e-commerce industry.

As you have probably realised, e-commerce is expanding rapidly in Egypt, as an unprecedented number of goods and services are being traded online daily. It has become evident that information technology has become vital for businesses and is considered the greatest force driving change both globally and locally. 

“Largest population of prospective e-commerce users in the Arab world.”

Before we dive deep into e-commerce in Egypt and how it is set to transform the Egyptian market this year and beyond, it is important for us to first define what e-commerce is.

E-commerce, also known as electronic commerce, refers to the buying and selling of goods or services using the internet. Yes, I know, you already knew that part – now what? One of the main attributes of e-commerce that people often do not think about is that for any transaction to occur successfully over the internet the transfer of data is mandatory between the seller and the buyer. Data is an extremely valuable asset for businesses. It helps businesses drastically improve their processes so they can best utilise their available resources and time – and that is truly invaluable (more about the importance of data below).

With the definitions and technicalities aside, we can now focus on the e-commerce potential in Egypt, its expected growth in 2020 and how it is predicted to change consumer and purchasing behaviour beyond that. I have compiled a list of the top 5 reasons why e-commerce is set to transform the Egyptian market in 2020 and beyond:

1) Effects of Covid-19

Initially when I started thinking about writing this blog article, the spread of coronavirus was still mainly concentrated in China and was at its beginnings globally. However, now in May, things have drastically changed, and the coronavirus pandemic has affected almost everyone’s life in Egypt in one way or another. No one can deny that the coronavirus pandemic is the most defining moment globally in 2020 and one of the most defining events in the past century. As such, it is not an understatement to state that the effects of Covid-19 and its implications on all our behaviours is quickly fuelling the way in which e-commerce is transforming the Egyptian market this year and beyond. As large parts of the world are facing a complete or partial lockdown, consumer behaviours are changing drastically. More people are turning to online shopping in Egypt than ever before. Research is showing that e-commerce in Egypt has witnessed a growth of 300 to 500 percent (reference linked here). This is unprecedented, and is statistical proof that e-commerce is rapidly transforming the Egyptian market, with a continuing expected growth over the next period.

Transformation is a big word, what does this actually mean? It means, more Egyptian consumers are going to be buying their necessities and non-essential goods online than ever before. With that, there is an increased expectation of improved customer experiences online. Businesses are expected to put more energy and intensity in ensuring that their e-commerce platforms are fast, safe, beautifully designed and are very easy for users to navigate. Think of Souq, a leading e-commerce platform in Egypt, it can take as little as 4 clicks for you to place an order and have it delivered to your house. Yes, just 4 clicks! That is what we call an outstanding customer experience online. To utilise this opportunity, online retailers are expected to test and enhance their supply chains, order management, fulfilment processes and deliveries to meet the growing demand and exceed customers’ expectations.

2) Young Population

Egypt has a population of more than 100 million people, around 60% of whom are younger than 30 years of age. With a median age of 25 years, internet is playing an important role in the day-to-day life of a large portion of the population. Increasingly, this young population is technologically and social media-savvy. This generation grew up with technology and social media and are thus proficient at using online tools to connect with friends, search for information and even buy products and services online. From food and clothes to FMCG (Fast-moving consumer goods) and books, a lot of products are now being sold online. Also, many of this young population use the internet to purchase a wide range of services. From house cleaning services, like Mermaid, to transportation services, like Uber and Careem, many industries in the services sector are also moving online. It is important to mention that there is an increasing confidence among Egyptians of buying online. With 72% of customers using cash for their online purchases, e-commerce platforms have accommodated this need by providing cash on delivery solutions (reference linked here).

Also, the FinTech sector in Egypt is witnessing an unprecedented growth, with companies like Fawry, Payfort and Accept paving the way for providing innovative solutions for e-commerce platforms and customers. It is predicted that e-commerce purchases this past period has exceeded Black Friday levels. This is definitely a testament to its growing adoption amongst the young Egyptian population. This is an amazing opportunity for businesses to be present where the youth are, and to leverage this large technologically savvy youth population to showcase their products and services to them.

3) Internet Penetration

Mobile penetration in Egypt stands at 110% and the latest statistics show that Egypt’s internet penetration has exceeded 50%, including in rural areas, forming a considerable market size (reference linked here). The number of internet users in Egypt recorded an annual growth of 22%, which is approximately an increase of 9.8 million people. This ranks Egypt as the eighth highest year-on-year percentage change in the number of internet users in the world. When we look at statistics related to time as an indication of how prevalent the internet is in Egyptian’s day-to-day life, we find that on average Egyptians spend 7 hours and 21 minutes per day online. This ranks Egypt as the 13th in the world in terms of the time spent online per day.  So, what does all these statistics mean? It means that the internet is not only widely penetrated amongst all parts of the country, but also that it is growing – and not just any growth but a year-on-year increase that is affecting millions of people across Egypt. If we now turn our eyes back to the e-commerce industry, this growth in internet penetration is paralleled with a rapid growth in the B2B (business-to-business) and B2C (business-to-consumer) online platforms. In a country with one of the largest populations of prospective e-commerce users in the Arabic-speaking world, businesses in Egypt must ask themselves: have we really leveraged this opportunity to showcase what we have to offer?

4) Geographical location

Egypt’s geographical location makes it an attractive hub that is ripe for continuing e-commerce growth. Egypt is located at the crossroads of Africa, the Middle East, the Mediterranean and Europe. This allows Egypt to act as a strategic global trading and logistics hub. You are probably thinking, well this is interesting, but how does that link to the growth of e-commerce in Egypt? A well-positioned geographical location enables Egypt to build up its logistical capacity and infrastructure to support the rapidly growing e-commerce culture. One of Egypt’s proposed national strategy, developed in cooperation between UNCTAD and the Ministry for Communication and Information Technology, is ‘boosting growth in the logistics sector and make Egypt into a Regional logistics hub’. This is leading to a quickly developing infrastructure in Egypt, ranging from ports to the construction of multiple new city-wide road networks. As a result, goods are being delivered quicker and safer to people’s homes and businesses. Beyond 2020, we are expected to witness an even greater efficiency in e-commerce deliveries –with fast deliveries being available to any location in Egypt, including remote governorates.

5) Era of Data

Data is vital, it is at the cornerstone of every business decision. More than ever, businesses in Egypt are understanding and recognising the importance of data. Before we dig deep into why data is important for your business and why an e-commerce platform can support you in collecting valuable information there is an interesting fact that I would like to share with you. Forbes says there are 2.5 quintillion (1 quintillion = 1000000000000000000, that is 18 zeros if you are counting) bytes of data created each day, data shows (is there really data on data? Yes, there is!) that only 0.5% of those generated are being analysed! What does this mean for you? It means that there is a lot of untapped potential to better understand your overall business performance and the true needs and wants of your customers. Most businesses in Egypt that operate without an online presence are limited in terms of the resources they have to collect valuable data.

One way many offline businesses collect data and insights from their customers is verbally, but this raises a very important question: How much of this data is actually stored? This is why a website, and specifically an e-commerce website, is the 21st century answer to collecting and storing valuable data that can drive true insights about your business and your customers. A website can collect data on a wide range of important areas. These include: customer personas, user habits, web traffic, demographics, and much more. All this data received is filled with a lot of potential that businesses can truly learn and benefit from. As of 2020, more organisations in Egypt are collecting data and are harnessing its potential to make informed decisions. This rise in data collection, and the predicted increase in data collection and data science in Egypt over the next period, will not only transform traditional business models but will also drive growth in established industries in new and innovative ways.

Conclusion

We are, all of us, currently living in uncertain times.

Customers, businesses, and markets alike are adapting to this unusual period in different ways. Behaviours are shifting quickly, and industries and sectors are evolving in new ways. Yet, with the spread of coronavirus, we were able to see, much faster than what was predicted, that e-commerce platforms have become essential for the growth of many businesses.

Egypt is expected to continue to witness a month on month growth in the e-commerce industry, and a year on year exponential rise in the adoption of e-commerce platforms. So, if the question is, can businesses thrive during this crisis. The answer is yes!

The e-commerce industry will play an increasingly important role in people’s day to day life and will shape the Egyptian market this year and beyond. It is only fair for the following to be the concluding statement. The conditions are all ripe for a big and growing future of e-commerce in Egypt, it is only a matter of time for us to see this in fruition.

If you have any comments or questions I can be reached at yabdelfattah@kaiilab.com

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