Egypt E-Commerce 2.0 D2C

The war over end-to-end value chain from manufacture to consumer

The opportunity for D2C players in MENA region & Egypt specifically is huge and its expected to be the largest opportunity in the 2020s.

A.????Business History & Digitisation

1.?????History recap

• Businesses since ever were defined as either?A. Business to Business (B2B)?which are companies selling products & services to other businesses like manufacturers selling to distributors or IT companies selling services to other businesses; or?B. Business to Consumer/ Customer (B2C)?which are companies selling products or services to customers as retail companies, supermarkets, etc.

2.?????Digitisation

• With the Dot Com (.com) bubble in late 1990s and the rise of digital - Digital Era) late 2000s; the direction of Digital Transformation (Digitisation) focused on how to optimise digital operations by digitally transforming businesses operations and value chain to become more efficient with very few digital customers experience focused platforms (excluding Amazon, eBay and few other players).

B.????Digitisation Outcome

1.?????Consumer Assets monetisation

• New business models for companies started popping up with the digital era including the rise of?Digital Supervised Shared Economy Model?platforms like Uber & Airbnb which focused on enabling consumers to monetisation their assets and becoming the merchant to other consumers. Those companies would never exist without the digital communication internet and digital era enabled.
• Shared economy existed for years, but business never adapted it till digital enabled the mass roll out with control to guarantee the service quality; thus, it boomed with digital era.

2.?????The rise of servicing over products

• Adding to shared economy; Subscription Model?derived from the “As A Service” model also boomed with moving customer single big purchases to subscriptions, like Netflix, Spotify & OSN. Yet most of those services focused on a digitally driven service - mainly content - for subscription or apps & games premium features.

3.?????The New Social

• With boosted adoption of digital platforms especially social driven like Facebook, digital marketing and platforms becoming digital advertisement driven with segmented customer data created the?Digital Marketing & Communication?model which revolutionised the marketing industry.

4.?????The Marketplace

• Last but not least model is?Services on Demand Model?& Super platforms connecting customers to service or sales providers digitally over marketplace super platforms with many merchants or service providers like Amazon, Talabat, Hello Food & many others.

C.????Digitisation Conclusion - 2010s

1.?????Digital Middleman

• Digitising the middleman was the key in all new digital era business models (Shared Economy & Subscription) which focused on how to market, connect customers to buyers or even delivering a service digitally. Yet B2B - specially manufacturers kept on either using retailers for consumers reach or using super platforms as marketplace.

2.?????Manufacturer trying to control full value chain

• A few marketplaces started developing their own products. You can see this with Netflix producing their own content, Apple producing some music tracks on Apple Music and of course the pioneer Amazon with their own 20+ brands sold on their platforms and delivery hero.
• Yet big manufacturers adoption to direct consumers focused on digital marketing for their brand.
• Some of the big manufacturers moved to owning their distribution arm by acquiring distribution partners and some even acquired retail branches but only small percent moved to that model.
• P&G owns local distribution partners in more than 30 markets.
• Big E-Commerce platforms like Amazon & Jumia are moving to having their own fulfilment centres & delivery arm.

D.???Direct to Customer (D2C) The Future

1.?????COVID19 impact

• With the Rise of COVID & its impact on businesses, many of SMEs started adopting more aggressive digital strategies with leaping forward digital steps including offering their?products to marketplaces, more aggressive?digital marketing campaigns?or even creating their own?E-Commerce platforms over ready platforms like Shopify & WooCommerce

2.?????New Payments Trend

• In the digital payments report published January 2022, one of the key findings was the?rise of D2C platforms ?in the highest percent compared to all other models’ growth with indicators that it will rise even more in 2022.

3.?????Model evolution

• It started with retailers working over marketplaces moving to their own customised mobile apps offering same features as the marketplace do but focused only on the brand then evolved to become even better in terms of features & pricing for consumers.
• Evolution came stronger when manufacturers started building their own mobile apps and websites for direct distribution to customers
• Now you can order Coca Cola products directly from local Coca Cola website in 14 countries
• McDonalds moved to separate ordering app in 33 countries with better promotions & features along with its moving to be their main sales channel worldwide
• Consumer transactions over E-Commerce platforms owned by same manufacturing brand growth year over year is the highest compared to other marketplace e-commerce platforms

People searching for the main brand over social media or search engines vs searching over marketplace platforms also grew by 17% in 2021 vs 2020 to become almost 48% of total searches online

4.?????What to expect next?

• A huge decline in retail and physical stores along with the launch of many platforms by big manufacturers like P&G
• Out of the box platforms to enable more features and tools on their products in order to help manufacturers to enable direct sales to their consumers
• Loads of acquisitions for small businesses offering solutions that enable enterprise manufacturers to offer their products & services directly to consumers.
• Launch of new startups & small businesses with solutions that enable enterprise manufacturers to offer D2C as well.

E.????Current Market Analysis (Egypt)

1.?????Growth of Digital Adoption

Over the past 7 years, Digital adoption in Egypt grew by average 18% Year over Year with huge boost in past 2 years because of COVID 19 with total growth of 3X in 7 years

Growth in online payments ticket size and offered service also boomed with many merchants focusing on their digital channels.

Also, many businesses and startups opened with only online service

Online payments ARPU for Egypt rose from USD 20 to USD 80.

2.?????Eco system changes

• Last mile courier services boomed with more than 5 new major players in the past 3 years to accommodate for the high demand on digital merchants offering delivery for FMCGs, F&B, Fashion & even personal delivery custom services.
• Groceries and pharmaceutical delivery services also boomed with COVID 19 with fast delivery and offering discounts & promotions for online orders over call center.
• More than USD 20 Million worth of investment funded in new digital players and new businesses supporting them

o??Rabbit secures USD 11M pre-seed fund in November 2021

o??BreadFast secures USD 26M series A fund in November 2021

o??YFS secures USD 3M pre-seed fund in in 2019

Rise of Facebook marketplace posts in Egypt with over 189M products for sale as we speak.

The rise of ready-made e-commerce platform builders over ready-made platforms like Shopify along with the new technology local players for more affordable pricing

Zammit, a new player building end to end websites for small businesses with online payments & integration with delivery services with bundles from USD 13 per month

Even large ticket size products e-commerce grew massively in 2021

• Hozmart, marketplace for furniture launched in 2019 raised USD 15M in series A funding in 2021

FinTech & Payment platforms raised more than USD 50M in 2021

3.?????Very Few D2C players

Although B2C and B2B enablers grew a lot in Egypt over past 5 years, yet no significant rise of any D2C startups excluding FMCG manufacturers launching their B2C platforms as part of their global operating model

Only few significant players focusing on online D2C services managed to raise fund

• Drawzy, online furniture store raised 1M USD pre-seed fund in 2020

The opportunity for D2C players in MENA region & Egypt specifically is huge and its expected to be the largest opportunity in the 2030s.

1.??????The DOT COM bubble – 2019 Investopedia Click here for article

2.??????2022 Payments Trends – Jan 2022 by Capgemini Click here for article

3.??????The Rise of Services – Jun 2018, Tzuo blog on LinkedIn Click here for article

4.??????Global Digital Trends – Jan 2021, HootSuite Annual Report?Click here for article

5.??????Coca Cola adopting pandemic – Oct 2020, Coca Cola website Click here for article

6.??????McDonalds App Website Click here for website

7.??????P&G Beauty & Style app Click here for article

8.??????Shopify strategy Click here for article

9.??????2022 Digital Trends Report, HootSuite Full Report Link

10.??Egypt Digital Reports 2015 to 2021, HootSuite ?Click here for all reports

11.??Rabbit last mile courier funding Click for reference

12.??Bread Fast FMCG delivery funding Click for reference

13.??YFS courier funding ?Click for reference

14.??Shopify Growth in Egypt ?Click for reference

15.??Zammit website Visit Store Website

16.??TELDA Funding Click for reference

17.??PayMob Funding Click for reference

18.??MoneyFellows Funding Click for reference

19.??Hozmart Funding Click for reference

20.??Drawzy Funding Click for reference

21.??Evolution of E-Commerce over past 30 years, Mena Bytes Click for article

22.??D2C opportunities in MENA, Mena Bytes Click for article

23.??E-Commerce history Click for article

24. As A Service - Pizza 2.0 Click for article

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