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Amazon's entry heats up local competition in Egypt

US e-commerce giant Amazon opened its logistics zone in Egypt, offering new options to consumers and new challenges to small businesses.
This picture taken on Oct. 22, 2019, shows a new Amazon warehouse near Paris.

SHARQIYAH, Egypt — In the 10th of Ramadan city in Sharqiyah governorate, Egyptian Prime Minister Mustafa Madbouly inaugurated on Aug. 31 a logistics zone for e-commerce giant Amazon on ​​28,000 square meters. The opening ceremony was attended by a number of ministers and company representatives.

The inauguration of the new zone coincided with the re-branding of Souq.com, the Middle East online retailer owned by Amazon since March 2017, as Amazon.eg.

In a statement on its official page, Amazon said it will provide the Egyptian market with millions of high-quality products and brands, a distinctive shopping experience with great prices and easy payment options, and fast, reliable delivery service. Amazon will offer these services through its more than 15 delivery stations across Egypt and investments that exceed 1 billion Egyptian pounds ($63.5 million), according to the statement.

These new developments come amid Egypt’s steady e-commerce development and growth, especially in light of the coronavirus pandemic. According to Ibrahim Ashmawy, head of the Internal Trade Development Authority, the e-commerce market volume in Egypt has reached about 80 billion Egyptian pounds ($4.8 billion) based on official statistics.

Speaking to Al-Monitor via phone, Ashmawy said, “Given the existence of a large number of unofficial pages on social media platforms specialized in buying and selling operations, the volume of e-commerce may reach the fivefolds of this figure soon, which is estimated at around 400 million Egyptian pounds ($25.4 million).”

He continued, “The entry of Amazon into the Egyptian market is beneficial in several aspects. It will expand the size of the internal trade sector, create job opportunities and trigger competition between companies, which would reflect positively on the quality of products. E-commerce will not replace traditional trade. Each has its own pattern and customers. Each targets a specific segment or group of segments of consumers.”

Ashmawy explained that the presence of any international company with a respectable reputation in any country will have a good economic impact on said country. “When it first launched its operations in Egypt, the giant retailer announced 3,000 local job opportunities. Amazon also requested premises in Egypt to set up its warehouses,” he said. “More investments are anticipated.”

Ehab Saeed, Cairo Chamber of Commerce board member and head of the chamber’s Division of Communications Centers, agreed with Ashmawy. “The presence of giant companies and their injection of investments in Egypt is the best evidence of the strength of the Egyptian economy. This is evidence that the Egyptian market is large and strong and can attract investments. These companies will provide many job opportunities,” he told Al-Monitor.

“Egypt is Africa's economic gateway to any foreign investor. Seeing their investments succeed in Egypt, foreign investors will become assured that their investments in other African countries will also be successful,” he added.

Saeed continued, “E-commerce has boomed over the past years. It became the most popular type of commercial activity among sellers and consumers of goods and services. Sales platforms and mobile phone applications are widely used by various categories of Egyptian people. The consumer prefers to choose the commodity via a phone application and receive it at his own home without having to go out to buy it himself from the merchant. This pushed many merchants to use technology and sales platforms to display their products.”

He added that Amazon’s presence in Egypt will push local companies to improve their products to gain the confidence of consumers and raise their competitiveness.

But at the same time, Saeed expressed his concern that Amazon's presence in Egypt will negatively affect small merchants in Egypt who promote their products on social media pages since they can't compete with the global company when it comes to prices.

Economist and director of the Economic Research Forum Rashad Abdo told Al-Monitor the relaunch of Souq.com as Amazon.eg will give Egyptian consumers from different social segments many privileges, including buying good-quality products at reasonable prices. “Amazon has good discount offers. The consumer can experience this himself on Black Friday, for example,” he said.

He explained that by displaying their products via Amazon.eg, Egyptian companies now have a good opportunity to enter new markets. “This indirectly boosts foreign trade and pushes producers to improve the quality of Egyptian products so as to compete with foreign products and achieve more profits.”

Abdo called on the Egyptian government to promote its successful experiment with Amazon.eg, build bridges of trust, ease obstacles for any foreign investors wishing to invest in Egypt and attract more foreign investments.

Mohammad Gamal, founder of the self-publishing platform Kotobna, told Al-Monitor Amazon contacted him seven months ago to be among a group of sellers whose products will be displayed on Amazon.eg. “Kotobna started adapting its products to be displayed on Amazon,” he said.

He indicated that by managing Souq.com since 2017, Amazon was able to understand the Egyptian consumer and market, which enabled it to avoid expected problems. He added, “Amazon developed its services on Souq.com. It offered diversified products, easy payment methods, good and competitive prices, and fast delivery. This is in addition to the training programs it offered to sellers through this website.”

Gamal indicated that Egyptian sellers who display their products through Amazon.eg will have good opportunities to export them to consumers in Arab and European countries. “Amazon.eg will also make available to the Egyptian consumer foreign products at competitive prices that cannot be found on any other e-commerce sites available in Egypt,” he said, expecting a price war between Amazon, Jumia, Noon and other selling platforms.

“Amazon.eg will push other selling platforms and pages on social media to improve the quality of the products they offer; otherwise, they might lose their consumers' trust,” Gamal said.

"Egyptian sellers who display their products online are expected to face a crisis since consumers would rather use Amazon for the variety of products it displays and the special offers and prices," he added.

Mohammed Abdah, owner of the Rayhan el-Sham perfume store, displays his products online. He told Al-Monitor, "Online sales have helped me and other small merchants reach out to a large audience. But with Amazon, we are expecting a slowdown in our sales because consumers prefer new products that are available on Amazon."

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