Rapid adoption of E-commerce in Egypt’s food, retail sector

Online shopping penetration in Egypt is on the rise attracting investments from e-commerce majors such as Amazon and Jumia. Backed by greater internet penetration, a heavy presence of e-commerce players, and supportive government policies, the sector can only move upwards, creating more opportunities for retailers and greater convenience for consumers.

As lockdowns became the new normal across the World, businesses and consumers increasingly “went digital”, providing and purchasing more goods and services online.

Egypt is Africa’s third largest country in terms of population with over 102 million people. Online commerce growth is skyrocketing in the North African country, as more and more customers adopt new ways to access their shopping needs in a changing environment.

According to Wamda and MIT’s Legatum Center for Development and Entrepreneurship, the value of the Middle East & Northern Africa (MENA) region’s e-commerce sector surged 52% to reach US$22 billion by the end of 2020, 80% of which came from Egypt, Saudi Arabia and the UAE, with Egypt setting itself as a strong contender in the digital driven revolution as it boasts of having the largest population of internet users in the region.

A recent report from DataReportal, puts Internet penetration in Egypt at 57.3% of the population in January 2021, with almost 92% of those users connecting to the Internet via mobile. In the third quarter of 2020, 56.6 percent of internet users in the country purchased something online. Although these figures are below the global average, which stood at roughly 77%, online shopping penetration in Egypt is on the rise.

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In alignment with Egypt’s Vision 2030, the government is embarking on a digital transformation strategy, with the goal to transition the nation to a knowledge economy characterized by a highly skilled workforce and the creation of intellectual property, goods and services based on information-intensive activities under three main pillars: digital transformation, digital skills and jobs, and digital innovation.

Amazon and Jumia set base

On this backdrop, global players such as Amazon who had been operating in the local market since 2017 via its acquisition of regional e-commerce player Souq.com, recently availed a new website Amazon.eg, featuring millions of items from both local and international brands. This is Amazon’s first operation in an African state, with investments worth nearly US$63.6m. Egypt is also the third country in the Arab world that the American ecommerce giant has tapped into after the UAE and Saudi Arabia, where Souq became amazon.ae in 2019 and amazon.sa in 2020, respectively.

Meanwhile, in pursuit for a larger market share, Africa’s leading online shopping platform, Jumia launched its flagship tech centre in Cairo. The tech center aims to adapt technology to be available for all users as a contribution to achieve Egypt’s Vision 2030.

“Egyptian efforts are the main reason for this investment. From the first day of laying the foundation of the technology center, Jumia has established Egypt as a center for launching entrepreneurship in the electronic payment and digital technology fields in Africa.

“Therefore, expertise will be shared among the rest of the surrounding countries, in addition to electronic payment methods that customers can use easily, conveniently and safely, as Jumia works side by side with the vision and direction of the Egyptian state that maximize the importance of digital transformation and financial inclusion,” Eng. Hesham Safwat, CEO of Jumia Egypt, said.

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Food and grocery delivery changes

One of the key drivers of e-commerce in Egypt is the food and grocery delivery segment, which is projected to reach US$85m in 2021, according to Statista.

This is further expected to show an annual growth rate (CAGR 2021-2025) of 4.9%, resulting in a projected market volume of US$102m by 2025, with the largest segment Restaurant-to-Consumer Delivery projected to grow from market volume of US$62m in 2021 to US$75m by 2025, with a CAGR of 4.72%.

This arena has been graced by players such as Ordera, an e-commerce startup that allows users to order food online and then pick up from restaurants and cafes, without having to wait in any queue, fostering a convenient and fast process. The food ordering platform recently secured a six-figure US dollar investment in a seed funding round.

Positioning itself as one of the fastest growing food delivery platforms in the country is Elmenus, which recently raised US$10 million in pre-Series C funding round lead by Egyptian payments firm Fawry. This came after it had clinched US$1.5 million Series A investment in 2017, and US$8 million Series B funding round in 2020. The company helps people discover and order food from over 12,000 restaurants in the country. Its unique offering captured the attention of former Chief Executive Officer of Just Eat, David Buttress who invested in the company in early 2021.

In alignment with Egypt's vision 2030, the government is embarking on a digital transformation strategy, with the goal to transition the nation to a knowledge economy .

Spoilt for choice, the Egyptian market is also served by Talabat, one of the leading food and grocery delivery apps in the Middle East. Showcasing the future of online food and grocery delivery and smart mobility, Talabat in partnership with China’s Terminus Group, piloted the use of robots to deliver food to customers at the Expo 2020 Dubai, seeking to provide sustainable last-mile delivery in all the markets it operates in, including Egypt.

The company has announced the expansion of its outsourcing services in the North African country with a regional customer service center located in Cairo. “Egypt was our first choice to establish Talabat’s regional service center given its large pool of young talents with mastery of different languages and eagerness to build their capacities as we train our employees on the latest and best technologies.

“Additionally, the presence of a solid infrastructure allows Egypt to manage the largest workload possible, as being positioned in the middle of the world offers a decent time lag that gives good access to most global communications lines,” said Hadeer Shalaby, Managing Director of Talabat Egypt.

Africa’s ecommerce giant Jumia has also not been left behind, as it tapped into Egypt’s food delivery market with launch of Jumia Foods in the first quarter of 2021. That was a strategic move for Jumia following the cessation of Uber Eats services in the North African country in May 2020. However, all will not be rosy as it will face stiff competition from the likes of Talabat and Elmenus.

Other than the players partnering with restaurants, the sector has expanded its breath to enable Egyptians’ relish on home-made meals, delivered by food-tech start-up, Mumm.

Shifting focus to grocery delivery, GoodsMart has perfectly put into perspective the true definition of safe and convenient mode of shopping. The company may look like any other grocery delivery start-up, but the overall user experience and operating model is completely different. Its grocery delivery service is contactless as the users receive their orders in pre-installed GoodsMart box outside their homes, which the company sets up after the user signs up on the platform. All the orders are delivered between midnight and 6am so the users find the groceries in the box when they wake up in the morning. How cool?

GoodsMart operates alongside players such as Appetito and fresh bread and groceries delivery start-up, Breadfast.

Retailers join the digitization bandwagon

The e-commerce space in Egypt is also attracting several local start-ups in the retail sector, with the supermarket operators looking at shopping experience through a new lens of providing their customers with an additional online retail platform to augment their revenues.

For instance, Carrefour and Lulu Group, two of the largest retailers in the Middle East have launched online shopping portals. According to Oxford Business Group, Egypt’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 US$3 billion by 2022.

“We’re witnessing a great shift in where consumers are spending, with a dramatic shift towards eCommerce. We can say that eCommerce sales have doubled for Egyptian merchants since March 11; the day the World Health Organization announced that COVID-19 is a global pandemic,” Said Ahmed Nagy, the managing director of eMarketing Egypt, the leading digital consulting agency in the Middle East.

New markets are also emerging, and existing markets also have the potential for further development. The suppliers to the informal retailers have caught up with the ecommerce trend. Most of Egyptian consumers buy staples from small grocery stores and mom-and-pop retailers found in every neighbourhood.

Sighting a lucrative business venture, MaxAB is one of the start-ups targeting the country’s promising US$45 billion FMCG market. It is deemed to be the first company to develop a B2B ecommerce platform in the country, managing procurement and delivery to the traditional shops.

To accelerate its growth, MaxAB has acquired Moroccan counterpart WaystoCap. The company also received an additional US$15 million investment from existing investors, as it closed its Series A funding round, bringing the total capital raised by the ecommerce leader to more than US$60 million.

The launch of MaxAB in the country paved way for players such as Cartona, Fatura, Teegara.com, Capiter, Talabeyah, among others. These verticals have gotten support from both local and international players.

“Egypt has more than 5,000 wholesalers, investing heavily to build another one will not solve the existing inefficiencies at scale. Alternatively, we are on a mission to digitally transform the way they work and enable them to collectively lead the FMCG distribution business nationally. The digital B2B players in the FMCG space capture less than five per cent of the market, thus there is a long way to go,” said Hossam Ali, Fatura’s co-founder and CEO.

Other than digitizing the informal retail stores, the platforms offer working capital to retailers. The B2B ecommerce players use data from the transaction history to get a better grasp of the behaviour of retailers and the extent to which they are suitable and eligible to receive financial credit. Also, execution using data and analytics, FMCGs and suppliers can optimize their go-to-market.

Cartona tops it off by providing embedded finance and access to credit to retailers and suppliers. The start-up provides small and medium enterprises (SMEs) with a single platform that allows retailers to order a wide range of inventory, obtain delivery, and access financing. Using machine learning, the apps help manufacturers gain critical insights into the markets they serve, the products they sell and how they fare with competition

This feature appeared in the Sep/Oct 2021 issue of Food Business Africa. You can read this and the entire magazine HERE

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