Walking with giants: How Egypt’s small supermarkets maintain retail market dominance

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At the onset of the millennium, Egyptians’ retail shopping habits have more or less been the same for quite a few decades, mostly relying on an ever-expanding network of small supermarkets, locally known as ba’aleen. It was there that they bought most of their household items, food products, and even fresh produce should they be available – in addition to a countable number of chain supermarkets. With the then-growing tides of globalism, the new millennium ushered in a new era of retail shopping; hypermarkets.

“We never had a need for a hypermarket back in the time. We would buy all products and ingredients of our daily meals at the nearest supermarket, and would rarely have excess for the following day. So we buy the next day from the same supermarket. This wasn’t just us, it was everyone we knew,” says Amal*, a 64-year-old New Cairo resident. “But now that I have lived inside a compound for a decade or so, I almost only buy things from a nearby hypermarket twice or three times a month.”
This shift in consumer habits isn’t only for relatively wealthy, gated-community residents such as Amal, but it reflects a deeper shift. According to a recent report dissecting the traditional retail market in Africa by Boston Consulting Group, Egypt is expected to witness the fastest growth in modern retail this decade across the continent, forecasted to expand by 13 percent annually and account for around 45 percent of sales by 2030.’

“The usual target market for hypermarkets is married people between age 25 and 40,” says Hamed Shamma, associate professor of marketing at the AUC School of Business. “This is the segment of people who maybe just started a family and bought a house, so they don’t have a huge income but still have a lot of needs. For them hypermarkets are greats because of the package pricing and many discount offers.”

Another target segment for modern retailers, according to Shamma, are price-conscious consumers. Not necessarily financially insecure, they’re consumers who use their unprecedented access to information to know where to get the best deals. “This is a worldwide trend,” asserts Shamma.

At the moment the market share for modern retailers now stands at 25 percent, with 12,000 small supermarkets spread across the country accounting for 75 percent of national retail sales. Though modern retailers are quickly expanding, the total demise of traditional retailer remains very unlikely. This is, in part, due to an unlikely partner; fintechs. E-payment and micro finance innovations that are massively expanding in Egypt, including Fawry, Vodafone Cash, Aman, and many others, have become small supermarket staples, renewing their relevance to an increasingly tech-savvy population.

“Traditional shops are diversifying well beyond daily essentials,” finds the report. “In Egypt, for example, 69 percent of traditional outlets said they sell [prepaid card and SIM card]. A growing portion also offer digital services—and around one-third offer remote ordering and delivery and bill payment services.”
And as customers step in traditional supermarkets to pay their bills or transfer cash, other purchase opportunities arise. “You could, while you wait, pick up a few items or remember a bigger household item you wanted to buy that you can see is available. It brings other business and these fintech and e-payment companies depend on traditional retailers for survival – so they’re not going anywhere,” expects Shamma.

This argument was backed up by Hassan*, a 43-year-old owner of a small supermarket in the east Cairo neighborhood of Nasr City. After bordering on total collapse, Hassan started offering a wider range of products including fintech conveniences. He also spent money renovating his run-down supermarket – a combo which, to his surprise, worked like magic.

“I would say that I do offer more products now, but not that much more that warrants such growth in sales,” says Hassan who had been experiencing a sales boost that was slowed down by the recent waves of inflation. “It felt like all people wanted was to pick up the same item only from a nicer shelf.”

Just like Hassan, up to 36 percent of owners of similar traditional supermarkets said that ‘modernizing look and feel as a priority” for their businesses.
Hassan was lucky to have some rainy-day funds for the renovation. But not all other supermarket owners who share his fortunes would opt to do the same. According to the report, around 50 percent of Egyptian small retailers would instead be interested in becoming part of a network of modern retailers by way of franchising, a business model that is also seeing an uptick in the market across the continent.

Despite the demonstrated tools at their disposal to assert their market dominance, small retailers are mostly not very optimistic about the future, a continent-wide trend. Only 43 percent of Egyptian supermarket owners expressed optimism that their businesses will grow in the years ahead.

“There isn’t one consumer that buys all their needs from one type of store; it’s all through different channels,” explains Professor Shamma.

Quality and convenience are major advantages that traditional retailers can utilize to stay ahead, as well as micro-finance innovations that allow them to obtain small loans to upgrade their operations even if they’re informal and can’t apply for a loan through traditional channels.
“Today, modern retailers have more tools to survive and adapt than ever before,” concludes Shamma. “
*Last names have been withheld at the request of the interviewees.

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