E-commerce winners from Covid-19

Ahmed Morsy , Sunday 9 May 2021

Egypt’s e-commerce companies have followed global trends in coming out stronger in the wake of the Covid-19 pandemic

E-commerce in Egypt
Experts say a shift of consumption online has happened in Egypt due to Coronavirus (photo: Reuters)

As some experts have predicted, prolonged periods at home necessitated by the social distancing measures introduced to combat the spread of Covid-19 can drive consumers online and change behaviour. These predictions were recently confirmed by a report issued by the UN Conference on Trade and Development (UNCTAD) on 3 May.

Online retail sales jumped by three percentage points and grew by 22 per cent throughout 2020 in seven countries —including China, the US, South Korea, and Singapore — that account for more than half of global business-to-customer (B2C) e-commerce worldwide, the report said.

E-commerce companies like eBay, Amazon, and Walmart achieved 17, 38 and 72 per cent increases, respectively, in gross merchandise value (GMV) in 2020, compared to 2019, it said.

According to figures for the African e-commerce platform Jumia, a 22.3 per cent increase in gross profit was achieved year-on-year in 2020, reaching 92.8 million euros and up from 75.9 million in 2019. In addition, Jumia witnessed a 58 per cent hike in total payment volume (TPV) when comparing 2020’s 196 million euros to 2019’s 124 million.

In Egypt, the impact of the pandemic on e-commerce was no different. EuroMonitor International, a provider of market research, said in a report issued in March that Covid-19 drove a surge in the rate of growth of online retail sales in Egypt during 2020.

With consumers locked down for extended periods, making it difficult for them to shop in person, many tried Internet shopping for the first time.

“Though a shift of consumption online, including of private and government services, had long been predicted, nobody expected it to happen so quickly in a country where the illiteracy rate is close to 30 per cent,” Samia Khedr, a professor of sociology at Ain Shams University in Cairo, told Al-Ahram Weekly.

“It happened as a result of the pandemic.”

The shift happened in line with an increase in the number of electronic transactions and payment operations due to the pandemic. The National Telecoms Regulatory Authority (NTRA) said in a report in November that Egypt saw a 156 per cent increase in the number of electronic transactions in October 2020 compared to March of the same year, while the number of electronic payment operations increased by 155 per cent.

Mohamed Noureddin, a former director of research at the Arab Bank, told the Weekly that pre-coronavirus expectations were that it would take years for Egypt to shift from a cash-dependent society to a cashless one, but the pandemic had accelerated the process.

Despite the hike in revenues of online retail companies in 2020, the UNCTAD report highlighted a notable reversal of fortunes for e-commerce services companies, such as ride-hailing and travel, however.

It said that travel site Expedia’s GMV fell from $108 billion in 2019 to $37 billion in 2020, a 66 per cent drop. The GMV of Booking Holdings, an online travel services company, fell from $96 billion to $35 billion.

“These figures are logical for several reasons related to the coronavirus pandemic, and a decrease in tourism revenues was also tangible in the local market,” Ahmed Hassan, CEO of the Jaunt in Time (JIT) travel and tourism company, told the Weekly.

With partial or total lockdowns imposed throughout 2020 in many countries in addition to the suspension of international flights for most of the year, Hassan stated that a catastrophic impact had been seen in the tourism sector globally.

The pandemic dealt a double blow to the local tourism industry, Hassan said. Tourism companies had been suffering even prior to the pandemic due to competition from travel platforms like Booking and Expedia, he said, adding that he was nonetheless expecting a rebound in the tourism industry in 2021.

The spread of vaccination against the virus worldwide would lead to the resumption of flights and tourism, he said.

Russian flights to Egypt’s Red Sea resorts of Sharm El-Sheikh and Hurghada, whose suspension since 2015 has taken a heavy toll on Egypt’s tourism industry, are expected to resume soon. The return of Russian tourists to Egypt, accounting for 75 per cent of Egypt’s tally in 2014, will lead to increased revenues of $3 billion, according to US investment bank Goldman Sachs.

Besides tourism, the pandemic has also affected the business of ride-hailing companies like Uber, which according to UNCTAD witnessed an 11 per cent decline in 2020 GMV.

According to Uber figures, trips in 2020 fell by 27 per cent compared to 2019. While drivers completed 4.98 billion trips in 2020, they did 6.9 billion the previous year.

The ride-hailing company generated $11.1 billion in revenue in 2020, a 21 per cent decrease from 2019’s $14.1 billion, due to the coronavirus pandemic shutting down ride-hailing operations for much of the year.

Uber Eats became the company’s key business, with an over 200 per cent increase in revenue year-on-year, the UNCTAD report said.

*A version of this article appears in print in the 6 May, 2021 edition of Al-Ahram Weekly

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