Marks & Spencer has announced it is the latest international retailer to enter the Egyptian market. In the past decade, Egypt has experienced relatively strong economic growth and is a focus for global retailers interested in finding new markets.

Marks & Spencer has announced it is the latest international retailer to enter the Egyptian market. M&S plans to open its first store there this year. The 28,000 sq ft site, opened through a franchise partnership with the Al-Futtaim Group, will be at the Dandy Mega Hall shopping centre in Cairo. It also plans to open a two-floor, 47,000 sq ft flagship in Cairo Festival City shopping centre in 2012.

In the past decade, Egypt has experienced relatively strong economic growth and is a focus for global retailers interested in finding new markets. With a formal retail sector that has only 2% of retail sales, this growing country is ripe for investment.

With 80 million people, Egypt is a big market. The population is geographically concentrated in a few big urban areas along the Nile Valley, with Cairo being the largest. Until about 10 years ago, Egypt’s retail industry was almost entirely composed of small, independent shops and markets. There are only a handful of companies that operate more than five stores. The largest, Metro (no relation to the German company), operates 65 stores.

As for foreigners, their experience in Egypt has been mixed. Sainsbury’s had a brief and unhappy investment. Competitors angered by its discount pricing strategy stirred anti-Western, religiously oriented attacks on the grocer, ultimately leading to its exit from the market. On the other hand, French retailer Carrefour continues to operate hypermarkets under franchise with plans to open more. Carrefour’s choice of a franchisee, United Arab Emirates-based Majid Al-Futtaim, was probably helpful in avoiding politically inspired opposition.

There are, of course, problems in operating in this market. The infrastructure for moving goods is poor, the regulatory environment for foreign investors is complicated, there remain high tariffs and there is a high degree of official corruption. On the other hand, foreign investment in retailing is not discouraged. Although foreigners may own 100% of their investment, obtaining government approval is likely to move more quickly when a local partner is involved.

The Egyptian retail market has large potential for the coming decades. More foreign retailers are expected to enter in the medium to long-term and some Arab retailers from Gulf countries. Their impact will be small at first, but significant when looking at the wider implications this has for the development of retail structures across the Middle East.

Greg Hodge is research director of Planet Retail.

Planet Retail

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