Retail sector

An Expert's View about Retail Sales in Egypt

Posted on: 28 Sep 2012

The retail sector was affected by the high drop in tourism revenue after the revolution. Experts expect it will take approximately a year to recover providing the security environment remains stable.

The Retail sector in Egypt Egypt is a major trade destination strategically located at a crossroad between Europe, the Middle East, Africa and South Asia. With an area four times that of the UK; Egypt is a growing market with a multitude of business opportunities for UK Companies. Market overview Egypt is a very large market, with a population of nearly 84 million. 50% of the population are under 25 years of age and this size is expected to double in the next 25 years. Egypt is the fourth largest economy in the Arab world and has a good business environment with regards to infrastructure, climate, costs, language and geographical location. In May 2011, the UK government added Egypt to the list of top 20 key High Growth Markets in the new UKTI strategy. Recent events On 25 January 2011, Egypt was rocked by an unprecedented popular uprising, which ultimately toppled President Hosni Mubarak. Mubarak’s near 30-year rule was marked by political oppression, allegations of corruption and growing poverty. The Supreme Council of the Armed Forces assumed power for the interim period. The first democratically elected president for Egypt, Mohammed Mursi, took office on 1 July 2012. Events since the uprising have had a negative impact on the economy, as manufacturing declined, tourism collapsed and foreign investment dried up. The economy saw negative growth of 4% year-on-year in the first quarter of 2011. Growth in the FY that ended June 2011 was 1.8%, with a forecast of 2% in FY 2012. The retail sector was affected by the high drop in tourism revenue after the revolution. Experts expect it will take approximately a year to recover providing the security environment remains stable. For companies looking to invest in Egypt, now is a time for assessing, performing due diligence, and looking closely at market development in relation to your particular sector. The business to business trading relationship will be less affected by recent events and will continue. Instruments such as letters of credit will gain in importance as a higher risk profile is encountered in the market. Egypt will remain heavily import-dependent for the foreseeable future and Egypt-UK business relations are very healthy. ξ Egypt is signatory to many regional and international Free Trade agreements. These agreements give Egypt certain customs and access advantages to the surrounding markets, namely all Arab, EU, Mediterranean Sea and African countries. Egypt is also signatory to the main Intellectual Property Conventions (Rome, Paris, Berne & Washington). ξ Retail sales rose due to increase in the country’s population, an influx of international chains, a widening range of products on offer, an increase in the level of income and a sophisticated and efficient advertising industry. ξ The Kearney’s 2011 Global Retail Development Index ranked Egypt the 12th most popular market for expansion among international retailers. ξ With retail demand growing, there is also greater consumer interest in value-added services, quality products and international brands. These factors are merging in an environment of economic deregulation to create a sector ripe with opportunities for foreign investment. ξ To encourage foreign investment, Egypt is taking steps to improve the sector and ensure local suppliers implement international quality standards. The sector is expected to reach £27.9 billion by 2015, with long-term political stability and a vibrant tourism industry being the key factors. ξ Despite the increased competition, the market is far from saturated. Department stores currently target a small percentage of the market, consisting of wealthy consumers constituting around 4.9% of the total population. Currently, some major British retailers like Debenhams opened their first retail outlet in Alexandria, while Marks & Spencer’s first store in Egypt opened in December 2010 at Dandy Mall. ξ The sector is expected to grow from LE 164 billion in 2011 to LE 262 billion by 2015, with long-term political stability being the main issue. Key factors behind the expected growth are an extremely large and youthful population, emergence of more affluent middle class, vibrant tourism industry and increasing acceptance of modern retail concepts. ξ Vehicle sales expected to grow by 200%, as car ownership in Egypt is estimated at around 23 cars per 1,000 people. The Egyptian consumer electronics market is one of the largest in the Middle East and expected to increase by 50% by 2015. Key opportunities There is real scope for UK companies but they need to invest in research and cultivating relationships now. International firms should consider looking at Egypt, so they do not miss out on what appears to be a highly promising avenue for investment. The growth in the retail sector led to increasing customer awareness and demand for value added services, quality products and international standards. Also the success of the current international brands represented in Egypt represents strong evidence for the opportunities lying in the sector. The Egyptian government is encouraging FDI in the sector through promoting the establishment of new shopping centres, introducing modern grocery distribution and hyper markets, pushing local producers to meet the standards requested by the international market entrants. In addition to the low cost base in Egypt; low cost and abundant labour, low-priced energy, and cheap building materials and land rentals. Privatisation, along with the large multinational penetration of the local retail industry, has helped shape the sector as a profitable business on its own. The main retailers who succeeded in the market include Carrefour and Spinneys within the hypermarket sector and a long list of international and multinational names within the non-food retail sector. It is encouraging real estate developments in large shopping centers and prioritizing the introduction of modern grocery distribution, including hyper and supermarkets, as well as taking steps to ensure that local suppliers implement international quality standards to meet needs of market entrants. In addition, the Ministry of Trade and Industry and Chambers of Commerce are working with international organisations, like the US’s National Retail Federation. This will establish training and certification programmes for workers in the sector to introduce them to industry standards and best practices. The aim is to see small retail enterprises understanding how to do window displays, sell, keep proper stocks, manage space and do proper accounting. Latest export opportunities in the Business and Consumer services Latest export opportunities in Egypt Getting into the market The Egyptian market requires careful study and a sustained sales effort. There is strong competition from other exporting countries. Price and credit terms are a deciding factor when obtaining contracts, though quality is increasingly important. Back-up servicing facilities and the supply of spare parts is also important. Having a local partner can be vital to successful penetration of this market. There are several reasons for this. Firstly, given the continuing bureaucracy, a local partner can shepherd the foreign business through the delays and obstacles. Secondly, foreign companies require a local agent to bid for government tenders. Thirdly, as the Egyptian market becomes more sophisticated there is a growing demand for after sales service, which a local agent can convincingly provide. In general, British products and services are very highly regarded in Egypt for their quality. The main obstacle facing the growth of British involvement in the Egyptian market is that British products have a reputation as being expensive compared to some foreign products, though this has lessened slightly over the past year as exchange rate fluctuations have been in favour of UK exporters. More about doing business in Egypt Contacts Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits through our chargeable Overseas Market Introduction Service (OMIS). To commission research or for general advice about the market, get in touch with our specialists in country - or contact your local international trade team ξ Wafaa Saad, British Embassy Cairo. Tel: (00202) 2791 6000 or email: ξ Gary Hunt, British Embassy Cairo. Tel: (00202) 2791 6000 or email: UKTI Events UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows. Latest events in the Business and Consumer Services sector Major Events World Retail Congress 2012 Date: 19-21 September 2012, Excel - London Website Address: The Retail Conference 2012 Date: 19 September 2012, America Square Conf Centre, London Website Address: Mobile Retailing Summit Date: 26 September 2012, Cavendish Conference Centre, London Website: The Independent Retail Show Date: 28 -29 October, NEC - Birmingham Website Address: Retail Week Conference 2013 Date: 13-14 March, Hilton London Metropole Website Address: Retail Business Technology Expo Date: 13-14 March, Earls Court - London Website Address: Useful links More about OMIS and other UKTI services for exporters
Posted: 28 September 2012

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