Many Chinese export enterprises are tirelessly working to open up the African market. With the help of cross-border e-commerce, Chinese manufacturing products can easily be sold in Africa. Egypt, as the third most populous country in Africa and the most populous in North Africa, is witnessing rapid development in e-commerce, bringing both challenges and opportunities.

Egyptian government promotes development of e-commerce market

Egypt is the third most populous country in Africa with a population of 99.3 million. The country is also home to the largest number of internet users in the Arab States, accounting for over half of the total.

The digital report released in 2018 by Hootsuite, a social media management platform, showed that the number of internet users in Egypt increased by 41 percent from January 2017 to January 2018. The size of the Egyptian e-commerce market is estimated to reach $2.7 billion by 2020.

The Egyptian government plays an important role in developing its e-commerce market. Last year, the Egyptian government cooperated with the United Nations Conference on Trade and Development (UNCTD), aiming to double the number of online-sales companies in Egypt.

According to Yasser El-Kady, Minister of Communications and Information Technology of Egypt, "for the past three years, we have been investing heavily in information and communication technology infrastructure such as 5G networks."

As much as 50 percent of the population of Egypt is under the age of 30. With the development of modern technology infrastructure, smartphones are bound to become an important channel for interaction between sellers and consumers.

Social media platforms are becoming more and more popular in Egypt. The figures from Societe Generale indicated about 40 percent of Egyptians are active on social media platforms, and 35 million of them access their accounts through smartphones. Social media platforms such as Instagram have begun to offer shopping functions, allowing consumers to purchase goods without leaving the app. Mobile shopping is becoming a general trend.

As the e-commerce market in Egypt is still in its infancy, many local companies have yet to become involved in the online business, cross-border e-commerce only accounts for about 20 percent of Egypt's e-commerce sales, meaning there is strong potential for growth.

E-commerce platforms fight for Egypt's market

There are about 450 home appliance websites in Egypt, of which only two are integrated e-commerce platforms – Souq and Jumia. Souq has been acquired by Amazon and entered the Egyptian market in 2011, while African Jumia followed Souq in 2012.

According to data provided in 2015 by Yaoota, the first price-based e-commerce shopping portal in Egypt, Souq and Jumia contributed a total of 60 to 70 percent of the total data traffic. "Matthew effect" will be more evident in 2019.

Souq's Egypt station has been its most trafficked market, accounting for 42 percent of Souq's 52 million monthly visits, a monthly visit of 21 million in Egypt. Jumia is the e-commerce giant co-incubated by Rocket Internet and Africa's largest e-commerce MTN. Its business covers 23 countries in Africa, of which Egypt is the second largest, following Nigeria.

Hesham Safwat, CEO of Jumia's Egypt station, once said that Jumia occupies 48 percent of Egypt's market, replacing Souq to become the largest e-commerce platform. It increased by 190 percent in 2017 and is expected to achieve 10-fold growth by 2021. Although Jumia has not yet announced its trading volume in Egypt, the financial report released by the Jumia Group found that its compound annual growth rate reached 42 percent, amounting to 500 million euros.

However, the Egyptian market is still challenging due to its low per capita GDP (about $3,500), inflation and customs tariffs, which are not friendly to e-commerce business.

Egyptian consumers are willing to look for cheap, reliable goods. In addition, due to the lag in the development of e-commerce, Egypt hasn't released exclusive tax laws for e-commerce. Most of the sellers on the platform are settled informally now. The government has not yet established clear tax incentives for small and medium sellers to enter the platform.

In addition, Egypt's import tariff policy is still in the era of trade and is unfriendly to e-commerce. Before Noon and Amazon officially entered the Egyptian market, many Chinese cross-border e-commerce companies tried but suffered from unstable customs clearance and seizure of goods.

It is worth mentioning that cash is still the main payment method in Egypt. About 80 percent of Egyptian consumers pay cash on delivery, while only a quarter of Egyptian internet users (10 million) have credit or debit cards.

As of now, Chinese cross-border e-commerce companies remain tepid in Egypt. However, Souq, Noon and Jumia, which have strong localization capabilities, regard Egypt as one of their most important markets in 2019.

In Feb 19 this year, Noon, a local e-commerce provider in the Middle East, released a beta version of its Egyptian station and released the official version in the second quarter of 2019. This is the third site that Noon opened after UAE and Saudi Arabia. Amazon also recently announced that its Egyptian station will go online this year.