Despite the slowdown in Egypt's economy over the past three years, some sectors have been growing and attracting fresh investment, among them e-commerce. Since 2010 many investors in the field of electronic shopping and electronic payments have been attracted by the potential of the Egyptian market, which, with its roughly 40 million Internet users, has the largest population of Internet users in the Middle East and North Africa (MENA) region. The latest of these investments has been Payfort, an online payment service provider. Payfort last week launched its Egypt operation, its second following the recent launch of its headquarters in the United Arab Emirates (UAE). Payfort said its operations in Egypt aimed at facilitating electronic payments while driving e-commerce adoption in the private sector and among small and medium enterprises. Ahmed Al-Salahi, business development manager at Payfort Egypt, said that e-commerce in the country was growing rapidly thanks to the jump in the number of Internet users from 16 million in 2010 to some 38 million in 2012. He said that the increase in the number of those using the Internet, particularly after the 25 January Revolution when social networking sites like Facebook and Twitter had played a supporting role, was the main reason behind the surge in e-commerce in Egypt. There were also other reasons, among them an increase in the number of credit cards in the country, now estimated at some eight million, and the development of several local e-commerce portals and websites, a development that has helped build confidence between customers and e-commerce providers. In late 2008, nefsak.com, an e-commerce site selling a wide range of goods, was launched, and it was followed by similar multi-category online stores such as souq.com, established by the Dubai-based Jabbar Internet Group in 2010, and jumia.com, created by the German Rocket Internet Company that specialises in launching online retail sites in 2012. These sites have been successfully operating, and they are now among the top visited sites in Egypt. “After the success of these websites, there are many companies that are eager to tap the e-commerce market,” Al-Salahi told Al-Ahram Weekly. There are currently three million users who regularly buy or pay for goods via the Internet, according to Al-Salahi, who expects this figure to triple by 2017. The spread of smart phones is adding to the momentum, with an estimated 82 per cent of smart-phone users having researched a product or service on their phone and 41 per cent having used their phone to make a purchase, according to Google. However, despite the recent surge e-commerce represents only 0.2 to 0.3 per cent of retail spending in Egypt, according to a 2012 Boston Consulting Group report. Omar Al-Sahi, general manager of souq.com Egypt, said that although e-commerce was growing significantly in the country, it was still performing well below its potential. He said that out of the 45 per cent of Egyptian Internet users, only eight per cent use the Internet to purchase goods, a small number only representing from two to 2.5 per cent of potential. However, Al-Sahi said that e-commerce was expected to see huge growth in the coming period, as Cairo's heavy traffic along with the recent poor security conditions and the three-month curfew had negatively affected the offline retail market, pushing consumers to look for other ways to satisfy their needs. “For all these reasons, the potential of e-commerce in Egypt is phenomenal,” Al-Sahi told the Weekly. Online spending in Egypt overall stood at $73 million in 2012, and it is expected to reach $125 to $130 million by the end of this year and $1.1 billion by 2016, Al-Sahi added As an emerging market, e-commerce in Egypt faces many obstacles that might hinder its expansion, however. Al-Salahi put these down to an underdeveloped ecosystem for online business in general, explaining that his company was having problems with Internet infrastructure which needed investment from the government. He added that the number of experienced people in the field was also small, but that this was increasing as more people were joining the business. Obstacles to e-commerce from the customers' point of view included the idea of buying objects they could not physically handle, Al-Sahi said. In a survey conducted by souq.com, it was found that 45 per cent of people purchasing online wanted to examine the goods themselves. Al-Sahi said that sites could overcome such obstacles by adding more product reviews, videos and feedback on goods. Another obstacle was the mistrust felt by consumers about paying online. Al-Sahi said that souq.com had overcome this through offering a cash-on-delivery service, in which people could pay for goods after receiving them. He added that consumers normally opted for the cash-on-delivery service for early transactions, but after two or three purchases they started to use their credit cards because these were more convenient. A recent study of the e-commerce market in Egypt showed that nearly 75 per cent of online purchases were conducted through the cash-on-delivery service, whereas 25 per cent were online payments. The e-payment obstacle is a problem that Payfort is particularly keen to solve. Al-Salahi said that many sites offered a cash-on-delivery service only without an e-payment option. Even for sites that allowed payment with credit cards, these accepted local credit cards only, limiting the sale of products to the local market. By opening the service to international cards, the site would be open to international customers, he said. Al-Salahi added that fraud could be a problem related to online payment, saying that at present there was no payment gateway with a fraud detection module enabling fraud on sites to be controlled. According to a 2013 study on the e-commerce market across the MENA region published by Visa, the region had seen the fastest development in e-commerce worldwide. The study showed that the MENA region had witnessed a year-on-year increase of an estimated 45 per cent, with e-commerce transactions across the region reaching $15 billion in 2012 compared to $10 billion in 2011. Egypt topped the region in e-sales in 2011 with $3.2 billion followed by the UAE with $2.8 billion in e-sales. The report showed that the use of the Internet had been spreading rapidly as more and more people had gained access to it. It said that in Egypt only a very small number of people in the country had access to the Internet just five years ago, but that this had now changed and most people could now go online. The report added that the Internet blackout imposed by the former Mubarak regime during the 25 January Revolution had temporarily crippled e-commerce in Egypt. However, investors had sensed better growth potential after the regime's ouster. Orders to international e-commerce websites such as amazon.com had risen over the years, though Egyptian credit-card holders remained relatively cautious about using their cards to order through domestic sites, since merchants often applied additional charges for accepting cards. According to the report, there are over six million e-shoppers in Egypt, with an average of $500 being spent per shopper. Finally, the report warned that political instability in the region might hamper not only economic growth potential, but might also block initiatives to promote Internet usage, the development of e-services and the growth potential of e-commerce.
