Overview of the Retail Market in Egypt
Egypt is one of the largest markets in the Middle East. A population of more than 86 million makes it an attractively profitable market in the Arab World. The youth population and its continuous exposure to social media is driving the economy; they are educated, open minded and technologically savvy. The obvious social shift has a significantly positive effect on Egypt’s economy. Social changes besides to the emergence of a more financially-comfortable middle class have caused intense shopping behavior. Moreover, “by 2018, more than 72% of households are expected to be in this middle-income bracket”, which represents the key demographic for increased future household spending (Invest in Egypt)
When we look at the different markets in Egypt; automotive, real estate, healthcare, media, telecommunications, etc, we find that by far, the retail market is the most increasingly growing market in Egypt. The retailing sales have reached “a CAGR of 14.2% between 2007 and 2011, reaching USD 103 billion. In fact, Egypt comes the 13th as the most attractive retail market worldwide (Retail Trade, 2013). The retail industry has changed dramatically over the past 10 years. Back when I still went to school, I could only go shopping when I travelled abroad. I remember I had to wait till my summer vacation so I travel with my family and do the shopping for the season, if not for the entire year. Another alternative was to go to “open days” where someone (most likely in the same social network) would travel, and come back with lots of shopping to present them for sale at an open day. Today, the situation has entirely changed. With the opening of City Stars, Mall of Arabia, Cairo Festival City and many other shopping outlets, the International brands are all brought to Egypt with their latest fashionable items.
According to an interview with Ahmed El Naggar, the Vice Chairman and CEO of The Nile Projects & Trading Co, a leading player in the fashion retail industry in Egypt, the retail industry has tremendously revived over the past 10 years. He explained that between 2004 and 2007, rent rates in shopping malls doubled due to higher demand and due to the fact that retail infrastructure at the time was very limited; there were more brands than there was retail space. He explained that later on with the opening of more shopping malls, the competition has become severe and prices went down. He expects them to further decline to reach $400 – $500 per sqm per year (same rates in 2004) in the coming two years and stabilize onward.
Another interesting insight is the emergence of E-commerce with the evolution of smartphones and internet literacy especially after the 2011 revolution. The main factor that led to that was the social media. If we look at the number of Egyptian users of Facebook for instance, we find that it increased by 41% from 2012 to 2013 (Farid Doaa, 2013). Not only did it cause a significant social shift, but it also familiarized Egyptians with the idea of E-commerce. Nowadays, people start up their businesses entirely through online platforms, Facebook, Instagram or websites. They upload pictures of their products, take orders and sell through those social media platforms. All of the above are factors that explain growth phenomenon in Egypt’s retail industry.
In spite of the political instability in the Egyptian market in the past 3 years, the retail sector has managed to maintain positive growth. In fact, 2013 recorded an improvement in Egypt’s retailing performance and the retail sector is seeing a growth. If we look at the franchising sector’s evolution for instance, we will find that it perfect supports the growth phenomenon. “The number of international brands went up from just 25 in 1999 to 360 brands in 2010, and in the face of political and economic upheaval following the 2011 revolution, it reached 430 in 2012” (Retail Trade, 2013). Another example that supports the growth of the retail industry despite the political situation is that Majid Al Futtaim, a leading player in the fashion retail industry, reported an increase of 44% in tenant sales in Egypt in 2012 (Majid Al Futtaim Hld Press Release). That definitely had a positive impact on the Egyptian Economy. The first six months of 2013 witnessed relative political stability, which encouraged consumers to resume their usual shopping habits, undisturbed by government-imposed curfews (Retail Trade, 2013).
Grocery represents an important sector of the retail industry as well.In 2013, the grocery retailing showed return of confidence in the market, and it increased by 9%; an improvement on the 7% growth in 2012 (Grocery Retailers in Egypt, 2014).
To round off, Amr Adib, an Egyptian television host with one of the highest number of viewers in Egypt states that businessmen, politicians are highly optimistic about the future political and economic state in Egypt. Mass grocery retail sales are expected to grow by two and a half-fold by 2015 and overall retail sales are forecasted to increase at a CAGR of 16.8% through 2016. The new government is expected to bring stability to the country, which will eventually be reflected in consumer spending and confidence (Retail Trade, 2013).
Dalia Abdellatif, Analyst, Infomineo
GAFI (General Authority for Investment)
American Chamber of Commerce in Egypt