By Wael Hossam El-Din

The Egyptian retail sector is one of the promising sectors due to the huge and swiftly growing population, as well as high wages, which lead to an increase in household spending in all subsectors of retail trade. Moreover, this will provide long-term consumption opportunities in the Egyptian market, triggered by young people’s purchases of non-essential and creative materials.

Shopping malls in Egypt that attract young consumers between 20-39 years old who seek to buy products made by international brands have witnessed significant growth. With this age category making up a third of the population, this is an important indicator reflecting an increase in household spending in the retail sector.

Although the Egyptian retail market is still based on individual efforts amidst the dominance of small shops and family run stores in densely populated urban areas, the number of consumers relying on modern retail methods is increasing.

The market share of small neighborhood shops has begun to decline (5% annually) with the growth of the modern retail sector. Egyptian consumers are being introduced to a new shopping experience, particularly with the emergence of the large-scale grocery retail sector.

Retail Sector’s Significance Performance in H1 2023

Ibrahim Ashmawy, the Deputy Minister of Internal Trade and Supply and Head of the Egyptian Internal Trade Development Authority, said: “The size of the retail sector in Egypt reached EGP 1.4 tn.”

Ashmawy explained that the Russia-Ukraine war has affected the global economy after it began to recover from the pandemic. The war negatively affected the energy, food, transportation, and financial sectors.

Ashmawy added that supply chains took the hardest hit with expectations that global economic growth would reach 5.6%, now unlikely to happen. He said that the crisis affected Egypt, causing many government measures to be taken to mitigate it.

It is worth noting that the retail trade sector’s sales volume reached EGP 55 bn, and the total retail sector sales globally went to $25 tn, according to Ashmawy.

Expectations for 2023 Performance

The retail trade sector in Egypt is developing steadily, as consumers turn to official retail trade, especially in major cities, such as Cairo and Alexandria, according to the Information and Decision Support Center (IDSC) that highlighted a report by the US agency, Fitch, on the retail trade sector in Egypt.

The report mentioned that e-retailing in Egypt will record strong growth over the coming years, supported by widespread Internet access in urban areas and improved logistics.

Thus, the willingness of the retail trade sector in Egypt to achieve strong growth during the forecast upcoming period will depend on massive investments in the industry, high income, and the diverse demographic composition of the population, especially the large number of young adults, according to the report.

Additionally, experts anticipate that Egypt’s large and youthful population will help achieve significant demographic gains for investors in the organized retail sector, with a population of more than 100 mn people, of whom 58% are under 30. These expectations are according to the market updates.

Retailers are expected to benefit from large and diversified consumer market segments. The growing number of young adults (20-39 years) will increase sales in the formal food retail sector, as this group tends to adopt modern consumption patterns and is willing to make purchases of higher value.

Furthermore, expectations indicate that young adults will constitute about 30% of the total population over the five-year forecasted period. In addition, experts noted that increasing income levels would boost sales of food and beverages in the retail sector.

Egypt’s Effort to Dodge Inflation Impact on Real Estate & Retail Sectors

Egypt has managed successfully to overcome the adverse effects of the COVID-19 pandemic and inflation, as evidenced by the real GDP growth rate of 3.5% in 2020 and a further 3.3% in 2021. This makes the retail sector more secure for investors and makes them feel relieved that they will profit from this process.

It is noteworthy to mention that Egypt is the only country in the Middle East and North Africa (MENA) region that succeeded in avoiding a decline in GDP since the start of the pandemic.

Over the past seven years, the economy has grown by 5% on average due to various economic reforms that have successfully increased foreign investment and domestic consumption.

The Egyptian economy anticipates expanding by 4% this year after growing by an estimated 6.6% in 2022, according to the International Monetary Fund (IMF).

Major Expected Deals in the Retail Sector in 2023

Carrefour, owned and operated by Majid Al-Futtaim in Egypt, intends to invest over EGP 400 mn in the Egyptian market in 2023 and to double the amount to hit EGP 750 mn through 2025 to open new stores and modernize the existing ones, and these investments are expected to enhance the performance of the retail market in Egypt in the second half of 2023, according to the Country Manager of Majid Al-Futtaim Retail in Egypt Philippe Peguilhan.

Given the previous outcomes, all of these factors will undoubtedly boost opportunities for retail sector investment; the opportunity will ensure the investors’ success once they decide to enter the retail sector field, and more profitable deals will come.

Why is the Retail Sector Still Worth Investing in?

Egypt achieved an economic growth rate of 3.6% during the last fiscal year. The internal trade sector was one of the largest economic sectors at the state level, contributing 21% of the GDP, Invest-Gate reports.

This sector includes many activities such as wholesale, semi-wholesale, retail trade, supply chains, storage spaces, logistical areas, and other activities that serve and support the trading system in Egypt. Nearly 10 mn employees work in this strategic sector, representing the third of the labor force in Egypt.

In light of the increased demand for trade components, it is the second largest sector that witnesses high and rapid growth rates, after the communications and technology sector, for the second year in a row.

These figures can easily convince potential investors to enter the retail industry, where they are certain to get the best possible return on their investment.