Shopping portal rides Egypt’s e-commerce wave

An emerging shopping portal in Egypt is riding a growing e-commerce wave by attracting more than a million users every month.

The startup Yaoota, which was launched in June 2014 by friends Sherif El-Rakabawy and Mohamed Ewis, allows shoppers to compare prices online for products ranging from electronics to kids’ items.

In October 2015, the startup managed to raise $2.7 million from an Abu Dhabi family investment firm called KBBO Group.

The shopping portal’s co-founder, Rakabawy, said that his website was attracting about 70,000 users per month when it first got the UAE investment. Now Yaoota has 1.1 million monthly users, he told Al-Monitor.

Yaoota means “hey tomatoes” in Egyptian colloquial Arabic. In Egypt, street vendors selling tomatoes usually yell “Hey crazy tomatoes!” because of their wild price fluctuations.

A search by shoppers via Yaoota for a Casio keyboard, for instance, gets 15 results from two merchants with prices ranging from 803 to 8,454 Egyptian pounds ($50 to $528). A search for iPhone 7 Plus, meanwhile, generates 43 results from seven merchants with prices ranging from 15,799 to 21,699 Egyptian pounds.

“We have so far hosted around 200 retailers in Egypt, Saudi Arabia and the United Arab Emirates, and we operate on a cost-per-click model with a rate of 35 cents per click," the entrepreneur said. 

According to the Global Entrepreneurship Library, a nonprofit organization backed by the World Economic Forum, Egypt is currently ranked 12th in the world in terms of best places to invest in internet-based commerce. 

Data released by the Egyptian Ministry of Communications and Information Technology also showed that Egypt has the highest number of internet users in the Arab world, with more than half of the population — or 48 million people — having access to the internet.

“There is a lot of potential in the e-commerce market in Egypt,” Alia el-Mahdy, a professor of economics at Cairo University, told Al-Monitor. “It is a large country with a huge population and a lot of untapped resources,” she said.

According to the payments agency Payfort’s 2015 “State of Payments in the Arab World” report, Egypt’s e-commerce market will reach $2.7 billion by 2020, almost doubling compared to its $1.4 billion size in 2014. People aged 26-35 are the largest age group to buy products online.

Mahdy expects that online purchases will continue to grow in Egypt for several reasons. “A large percentage of Egyptians are under 30 years old. There is huge government support for technology. There is an unprecedented growth on smartphones, and there is also a greater demand for branded products,” she said.

However, Rakabawy sees a lot of challenges for the e-commerce market growth in Egypt. Only 8% of the country’s internet users are online consumers. Also, 72% of consumers use cash for their e-commerce activity.

“Egypt remains a cash-based economy,” Rakabawy said. According to Payfort, only 10% of Egyptian people have bank accounts, and fewer have credit cards.

“If we move beyond the domination of cash society, the growth of e-commerce in Egypt would accelerate even more,” he added, hoping that his startup would help such a drive. Rakabawy and his friend Ewis knew that entrepreneurship would be a tough ride.

In 1998, Rakabawy graduated from the German International School in Cairo. With a German education, Rakabawy headed to the University of Bonn, where he obtained both bachelor’s and master’s degrees in computer science, graduating in 2003. The young entrepreneur also studied for a Ph.D. in computer science at Leipzig University in Germany and spent a semester in 2009 at the University of California at Berkeley.

“In Berkeley, I began thinking about Yaoota. But I preferred not to launch the project because the e-commerce market in Egypt and the Middle East was still small at the time,” Rakabawy said.

Rakabawy then decided to complete a master’s degree in public management and governance at the London School of Economics, graduating in 2010.

Just three months ahead of the January 25 Revolution in 2011 and upon his graduation, Rakabawy headed back to Cairo where he worked for Booz & Company, advising technology clients in the Middle East. There, he met his partner and high school friend Ewis, who had already been working at the Cairo-based company for three years. Ewis also earned a Master of Business Administration from the graduate business school INSEAD in 2009.

At Booz & Company, Rakabawy sought to build connections, gain experience and save money for his project. “In my last few months there, I created a prototype about Yaoota to test the possibility of launching the project. And it worked,” Rakabawy said.

He then suggested the idea to Ewis, who was immediately interested in joining the project. The two Yaoota co-founders quit their job at Booz & Company at the same time and launched their startup shortly after. Rakabawy was also working as an assistant professor at the American University in Cairo before launching Yaoota in 2014.

The two men rented a small office at the Greek Campus, an entrepreneurial hub in downtown Cairo, and hired two developers in the beginning. Rakabawy was involved in the business and information technology department, while Ewis ran the marketing section.

“We gained traction immediately,” Rakabawy said, adding, “A lot of users accessed our website." By 2014, Yaoota attracted 100,000 active monthly users and two of the biggest online retailers in Egypt: Jumia and Souq.com.

The two entrepreneurs then began their search for an investor — and they found one from the United Arab Emirates. “The investor injected $2.7 million in our company, and this is considered the largest investment so far in a startup in Egypt,” Rakabawy said.

Like any entrepreneur, Rakabawy has walked the hard line of government bureaucracy, political instability, taking risks and enduring capital pressures. Yet, he believes that the startup culture in Egypt is rapidly developing despite all of these challenges. “Egyptians are now accepting the idea of establishing a startup, and they are gradually becoming courageous to take risks,” he said.

According to Silatech, which is a dynamic social initiative that creates jobs for young people in the Arab world, 26% of young people in the Arab world in 2010 — even before the uprisings — were planning to open their own businesses in the next 12 months, versus 4% in the United States.

Ahmed Alfi, the CEO of Sawari Ventures who invested over $5 million in developing Egypt’s startup scene through Flat6Labs, said there is optimism among young people in the Arab world about startups. He said that optimism has accelerated youths' willingness to take on the risk of starting a business despite political instability, according to the Middle East Institute.