E-commerce set to grow in Egypt


June 2, 2020 | By Rupkatha Bhowmick

Egypt has seen a significant rise in e-commerce transactions, especially over the past few months since the COVID-19 outbreak. As consumers adapt to a new normal, e-commerce penetration is set to grow in Egypt.

“E-commerce is one of the fastest-growing segments, globally,” states Hesham Safwat, CEO of online marketplace Jumia Egypt. “Even before the COVID-19 pandemic, we have clocked year-over-year growth on our platform, driven by the increased rate of e-commerce adoption. Since the COVID-19 outbreak, more people have become open to shopping online. Whereas earlier people would look for offers while shopping online, now they are shopping for day-to-day needs, including groceries. That’s the significant shift in consumption pattern.”

Jumia recently announced its financial results for the first quarter ended March 31, 2020. Its annual active consumers reached 6.4 million, a year-over-year increase of 51%, while orders reached 6.4 million, a year-over-year rise of 28%. The company’s gross profit after fulfilment expense stood at €2.5 million, up from less than €0.1 million in the first quarter of 2019.[i]

As such, Jumia Egypt’s business-critical goals in 2020-21 include driving profitability and increasing e-commerce adoption rate in Egypt, while partnering with government entities to support the growth of online retail. “We are also keen to educate and support local companies to develop online as a key sales channel, which is here to stay,” Safwat points out.

“Even after COVID-19, consumers will continue to shop online,” he emphasises. “The pandemic has caused a long-term shift in consumer buying behaviour. The shift from offline to online will continue to grow, both from supplier and consumer sides.”

Consumers and businesses increase digital focus

Jumia Egypt has seen a sharp rise in certain segments, including grocery and essential products. Not only consumer demand, but there has been a considerable rise in e-commerce presence of sellers/suppliers too.

“The lockdown period has adversely impacted brick-and-mortar retailers globally. In Egypt, too, the offline retailers had to operate under strict guidelines. Hence, they have leaned towards the e-commerce channel,” elaborates Safwat. “During this period, we have collaborated with big companies – like Reckitt Benckiser Group brands, including Dettol – bringing them online through our platform. We have offered free shipping facility on their products across Egypt. Such an increase in engagement from the supplier side has positively contributed to the rise in consumer engagement while instilling confidence, thereby increasing e-commerce penetration.”

Logistics marketplace improves last-mile

While the availability of brands and products is essential, the last-mile has proved to be a significant focus area for online retailers and marketplaces, especially during the lockdown period. In this case, Jumia Egypt follows a unique approach, having built a robust marketplace of logistics partners. It has helped Jumia Egypt in ensuring timely fulfilment of orders, even during the lockdown.

“We have a portfolio of logistics partners, ranging from small and medium to large and regional,” Safwat explains. “This has helped us to optimise our delivery network by linking partners to different regions, based on requirements. For example, in certain areas in the eastern region of Egypt, consumers are reluctant to receive unknown delivery operators in their buildings. Hence, local delivery companies get preference. We were able to split the order volumes among for our logistics partners, which helped us to absorb the spike in online shopping behaviour.”

“Having said that, we had to increase our online delivery timelines – by three-five additional days – duly communicating to consumers about possible delays. Our normal service level agreement (SLA) on delivery ranges between 24 hours and eight days, depending on the regions within Egypt as well as the type of merchandise,” he adds.

In this context, research firm JLL indicates that logistics and warehousing are in high demand in Egypt. This demand was being felt even before the COVID -19 outbreak. Egypt does have logistic centres around the main cities such as Cairo and Alexandria. However, with online shopping, there needs to be a good network of satellite warehouses across main cities to ensure that there is an efficient distribution network. It is still work in progress; it is slowly developing. The challenge is to find an excellent inner-city warehouse zoned for logistics or warehousing needs. Smaller cities lack proper warehouses. Documentations and permits remain a challenge with landlords.

Facilitating secure, contactless payments

Another pivotal aspect of online shopping is a secure – and now contactless – payment platform. In this regard too, Jumia has been ahead of the race in providing an in-house digital payment solution through Jumia Pay.

In fact, according to the company’s financial results, JumiaPay transactions reached 2.3 million, a year-over-year increase of 77% – for the first quarter ended March 31, 2020.[ii]

“Jumia Pay is one of the most important technology pillars of our platform,” Safwat confirms. “Since we offer digital services alongside facilitating payment, it has helped us to accommodate a clear shift in the way consumers are transacting today. We have seen a significant rise in the usage of Jumia Pay, as more and more consumers are paying bills, recharging mobile connections online. In turn, this has increased the credibility of Jumia Egypt as a platform that can meet end-to-end consumer needs online.”

 

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[i] https://investor.jumia.com/

[ii] https://investor.jumia.com/

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