According to a study by McConnell International, Egypt still
requires substantial improvement in connectivity for e-commerce to
thrive. The report says full participation in the new economy
requires the availability of affordable, reliable network access and
an underlying infrastructure that supports e-business. Once the
infrastructure is in place, the way we order goods, buy food and
view entertainment could radically change. Web-savvy Egyptians can
expect both increased bandwidth and lower costs over the next few
years. Until then, some e-tailers have already built their
businesses to suit Egyptian consumers.
A 1998 study by the American
University in Cairo found "Only 10 Web sites were equipped to offer
some level of transactional back office and clearance mechanism to
provide some form of Internet enabled acquisition of
goods/services." While things have certainly picked up since then,
another observation still holds, "In general, the businesses engaged
in business-to-consumer activity reflect the small and family-owned
nature of the Egyptian private sector. As such, most Egyptian
business sites would involve the marketing of small consumer
products such as flowers, Egyptian artifacts and
software."
RECIPE
FOR SUCCESS?
egypt's most-mentioned
e-commerce site, Otlob.com (www.otlob.com), began as a fast food
delivery site. It works by routing orders for fast food made online
to local restaurants. Expecting a large influx of customers
demanding a variety of items delivered rapidly, Otlob expanded its
services to include flowers and pharmaceuticals. Ahmed Helmy,
Otlob's marketing and Web development manager explained, "To
encourage people to order online, we offer discounts on some
restaurants, flowers are 25 percent cheaper than you get them from a
store and pharmaceutical products are 10 percent
cheaper."
Critics say Otlob did not
thoroughly think through the expansions. They say the novelty of
online ordering is not enough; the goods on offer make a big
difference in customer credibility.
"We were the first to do the
pharmaceutical online delivery in Egypt. Pharmaceuticals seem to be
trickier," said Helmy. While food orders usually arrive in 30
minutes, customers expected this as standard for all Otlob products.
"Someone who has the luxury to pick up the phone and order medicine
is obviously not in a rush," says Helmy, quoting the pharmacy's
rationale in delivering orders.
Helmy thinks consumers need to
see the value of buying products or services online rather than
going to a shop or phoning in an order. Most Web sites with
e-commerce rely on the impulse buys of Web visitors, who arrive with
little or no intention of purchasing unless their interest is piqued
by a particular deal, such as a competitive price or an incentive.
"In the flower service we've been received quite well," says Helmy.
"But we have to convince people we have more variety and we offer
cheaper prices and we're committed to providing you with the bouquet
you choose."
Helmy says online ordering
breaks the language barrier. "People we cater to are mainly
expatriates, who would rather deal with an English interface than
have to explain themselves to an Arabic speaker on the other end of
the phone."
Amr Soliman, program director
at e-Business Solutions & Services (www .ebseg.com), the company
behind Egypt Presents.com, says response to the site has been good.
"We deal with suppliers and shipping agents directly. We take
ownership of order all the way. We're not a dispatching service. We
take the whole cycle. This is a competitive advantage we have in the
market," says Soliman.
As it stands, Otlob doesn't
have a logistics problem because the delivery responsibility lies
with the vendor. "We partnered with certain courier services in
Egypt like Aramex, but we weren't happy with them. If we have a
problem with delivery, we use dispatch services."
CORNERING THE MARKET
"our target [market] in the
beginning was Egyptians abroad wanting to send gifts to their loved
ones in Egypt, then people inside Egypt started contacting us,
wanting to use the service. Now 60 percent of our orders are from
inside Egypt," says Soliman. He believes prices have to be lower
than brick-and-mortar stores. Pure-play dot-coms uncover niche
opportunities when they find customers who are not catered to, and
when the site serves as an effective engine to get customers what
they want. "We have a different approach. We're not an online mall.
We don't plan to sell fridges or TVs online. We leverage the need
for convenience in gift exchange. The Middle Eastern culture loves
to give gifts, so the positioning for us is different. Positioning
and marketing is the name of the game. Everyone wants online malls
but you have to focus."
Tarek Samir of Atableplz.com,
a service that books tables at popular restaurants, agrees with the
concept of offering incentives. "If you reserve online with us, you
get certain promotions, like a free bottle of wine at a restaurant."
Samir believes Egyptians are, by nature, a forgiving clientele,
"People here are not picky...they are still very curious about the
Internet."
CONSUMER CONFIDENCE
maged khalifa, managing
director of NetWave Productions, disagrees with Samir: "Consumers
are still afraid of ordering goods online. They want to make sure
that this company is real and it's safe to put the money there and
that deliveries will arrive."
Khalifa goes on to say that by
nature people in Egypt and the Middle East are still skeptical,
preferring tangible goods to virtual ones. "Until the Internet is
widely used in Egypt and people realize it's easier and cheaper to
order online, people will not use the Internet for ordering goods or
services online."
Khalifa believes Egypt is
still not ready for business-to-consumer e-commerce. NetWave
Productions began in 1998 as a one-stop e-business solutions
provider, and now provides both B2B and B2C Web solutions. "We focus
on B2B applications because we believe that currently in Egypt B2C
is not ready. It is not the time to do it. We feel that consumers
are still a bit reluctant in dealing with the Web and buying things
online. For a B2C to succeed in Egypt, the company has to invest a
lot in marketing. It has to have a very big budget for awareness for
this venture. Word of mouth can work, but it's not
enough."
CASHING
IN
soliman of egypt presents
believes e-commerce is not just about convenience. One has to
accommodate the cash-based society of Egypt. "We had a lot of
requests to support cash payments; cash collection for gifts or cash
on delivery." Khalifa agrees, "Another thing is credit card
verification and credit card systems, currently not supported in
Egypt and not many people have credit cards here." Khalifa adds, "we
are working with a number of banks to solve this problem and banks
are slowly starting to realize the importance of this and see this
as a means of income."
Egypt has no central clearing
mechanism; banks clear client transactions under bilateral
arrangements. If a company wants to accept credit card payments it
has to find a way to verify credit card details, which is consuming
and expensive. "For people who use credit cards we use a third-party
clearance company which is in the US. No bank in Egypt has this
facility yet. Even if you have an Egyptian credit card, sometimes it
doesn't work on the Net. Some of the banks just block it. The
merchant is at risk. As a user, if I tell the bank that I didn't
make this transaction, it will believe me," says
Soliman.
Otlob believes for its
business (which works on a cash on delivery basis), credit cards are
not necessary. The average value of an order is LE 50, so the risk
is minimal. "We don't really see a market for credit card payments,"
says Helmy "It might attract B2B, but not B2C. Most Egyptian
households do not even have credit cards."
The latest statistics indicate
there are about 250,000 credit card holders in Egypt, still far
below the 600,000 Internet users. And, of course, of those cards
some are not authorized for online transactions.
NEAR OR
FAR
companies in egypt no longer
want a static page on the Web, they realize they want to use the Web
to advance their business. But for some time Egyptians have been
using companies abroad like Amazon.com to get books and CDs. Whether
Egyptian sites compete on price, variety and service remains to be
seen.
Otlob sees the advantage
foreign dot-coms have over Egyptian ones, saying, "We've been
thinking about [importing goods] seriously. Most people complain
about the lack of certain consumer durables like CDs and videos or
electronic devices. We will do that as soon as we find out if it is
valuable to the business and to consumers. It involves a lot of
logistics and we have to find a way to negotiate this with the
government. We don't want to burden the users with the taxes and
shipping costs that we incur. Then, it wouldn't be a valuable
business proposition. As soon as the market allows for it, we will
do it. If the government is good to its word, if they do cut prices,
then I don't see why not."
Sites must make sure they
offer something reasonably simple to use and something that plays to
a general denominator. From an e-commerce standpoint, the Web has
been designed for technophiles. Most shoppers don't have the same
level of computer literacy as the technicians. Sites forget they
have to acquire and support a customer base that doesn't have the
time or patience for a complex ordering process.
The new generation growing up
with the Internet as part of their daily life will be more
comfortable ordering online than their parents. However, e-tailers
cannot afford to sit passively by and wait for their audience to
mature. They need to refine business models to find the perfect mix
of goods that customers want, that are easy to deliver and that have
a high profit margin. Companies have to realize they cannot be all
things to all people. Retailing is like a sieve: once you start
losing focus, you lose customers, money and staff.
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Until recently, shoppers have shopped in their own
backyards; Americans shop in America and Europeans shop in Europe.
When buying something over the Internet, consumers don't care if the
store is down the road or across the world, large or small. While
Egyptian customers remain cautious about ordering online, a few
local Web sites have attracted business.