With thriving discounter segment, Egypt’s retail market set for another boom
The retail industry in Egypt is set for another boom after it slowed thanks to the far-reaching political and economic instability in the country over the past few years.
Egypt has been aggressively pursuing economic reform measures to restore investment confidence after foreign investors shunned the country following the ouster of longest-serving president Hosni Mubarak in 2011.
The North African country recently agreed to a $12 billion loan over three years with the International Monetary Fund (IMF) to reinstate market confidence.
With the economy picking up steam, the face of the retail market in particular is changing, with the discounter segment growing rapidly as the industry steadily shifts away from traditional retail towards modern trade, according to the latest report from A.T. Kearney.
The leading consulting firm, in its Egypt’s retail market (cautiously) back in business report, said the rapidly growing population in the emerging market, which is expected to clock 100 million by 2020, has created “a demand for discount offerings catering for the demand for retail products in the low to medium price bandwidth.”
Nearly half of the population are urban dwellers and are highly sensitive customer price points. This would give a major push to the discounter segment, which could see up to 47 per cent annual growth in the coming three years, according to the report.
“Overall, the Egyptian retail sector has always been a key facet of the economy. By meeting the demands of a growing population, it has remained largely intact, despite several adversities in the macro landscape,” says Shamail Siddiqi, principal at A.T. Kearney.
“Egypt’s retail market is set to further transform over the next decade. First and foremost, we see the discount segment at the forefront of this transformation driven by the current socio-economic situation,” adds Siddiqi.
Apart from the discounter segment, other areas of Egypt’s retail market are also growing, with much to offer to investors. The country’s grocery retail market grew by 12 per cent nominally and two per cent in real terms between 2009 and 2015.
Supermarkets are the largest modern trade segment with 12 per cent of sales, while hypermarkets make up a small but fast-growing portion of overall retail with three per cent of sales. This segment is expected to double sales from 2015 to 2019.
Retail spend in Egypt is expected to rise from around $1,500 per capita in 2015 to more than $1,800 by end of 2017.
“Forward-thinking investors are investing in Egyptian retail, revealing growing confidence in the sector.” said Mirko Warschun, lead partner, Consumer and Retail Practice EMEA, A.T. Kearney.
“This year in particular, we can see the return of investors’ appetite and a surge for the first time since 2010. The country has a strong growth potential and is creating an investment-friendly climate to encourage both domestic and foreign investment,” he added.