{"id":548151,"date":"2022-07-27T04:00:55","date_gmt":"2022-07-27T04:00:55","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/hardhats\/fragmented-infrastructure-is-proving-a-headache-for-e-commerce-players-in-egypt\/"},"modified":"2022-07-27T04:00:55","modified_gmt":"2022-07-27T04:00:55","slug":"fragmented-infrastructure-is-proving-a-headache-for-e-commerce-players-in-egypt","status":"publish","type":"hardhat","link":"https:\/\/enterpriseam.com\/egypt\/hardhats\/fragmented-infrastructure-is-proving-a-headache-for-e-commerce-players-in-egypt\/","title":{"rendered":"Fragmented infrastructure is proving a headache for e-commerce players in Egypt"},"content":{"rendered":"

<\/a> Egypt\u2019s infrastructure isn\u2019t where it needs to be for e-commerce players to run the show<\/strong> in an orderly fashion:<\/strong> E-commerce players are having a hard time accessing the infrastructure needed to run their businesses seeing that the demand for e-commerce-suitable infrastructure outweighs what the country has to offer, industry players tell us. E-commerce businesses typically require physical infrastructure such as warehouses and distribution facilities, tech infrastructure for their platforms to be online, and delivery services to get their products into their customers\u2019 hands. All three areas raise different problems for businesses, with smaller players often having a harder time than others, our sources suggest.<\/p>\n

These difficulties come at a time when e-commerce is booming:<\/strong> The covid-induced<\/a>e-commerce boom<\/a> in the country saw the rise of new e-commerce businesses and the expansion of existing ones, which spurred demand for suitable infrastructure and logistics.<\/p>\n

When it comes to physical infrastructure, the demand simply outweighs supply:<\/strong> \u201cFrom an infrastructure perspective, I think the demand for warehousing capacity is way more than the supply and the prices are too expensive,\u201d B2B food and grocery platform MaxAB<\/a> CEO and co-founder Belal El Megharbel tells us. \u201cThere is definitely a big lack in sustainable warehousing spaces \u2014 in terms of size, location, layout and design \u2014 that allow us to operate efficiently,\u201d El Megharbel. MaxAB had to make do with suboptimal warehouses in terms of layout, location and capacity, because it is all that is available.<\/p>\n

This dearth of warehousing options makes building (and maintaining) the required<\/strong> infrastructure quite expensive:<\/strong> \u201cAn end-to-end distribution infrastructure is expensive to build and more expensive to run, and it requires a strong, disciplined strategic approach to run it in a sustainable way that delivers a great customer experience,\u201d said Ismail Hafez, chief operating officer of grocery delivery startup Rabbit<\/a>. Local sportswear Magma<\/a> \u2014 which was recently acquired<\/a> by Mohamed El Sewedy \u2014 initially rented out a warehouse with its own in-house team, but eventually their overhead costs became too high, Marketing Director Reem Adel said. At that point, the company decided to use digital warehousing and fulfillment management platform Khazenly<\/a>\u2019s services.<\/p>\n

And that\u2019s to say nothing of the geographical and licensing issues:<\/strong> Finding \u201cthe right spot\u201d for fulfillment centers is also a process of its own, with factors to consider such as \u201clocation, space, surroundings, and many other factors that solve for maximum city coverage,\u201d Rabbit\u2019s Hafez told us. And businesses that want to expand out of Cairo face difficulties finding suitable warehousing spaces in remote areas, and even within the city, it\u2019s \u201cvery hard to get a license for a warehouse except in extremely designated areas,\u201d El Megharbel said.<\/p>\n

Tech is crucial for all e-commerce players, but the complexity of the infrastructure (and<\/strong> its cost) varies significantly:<\/strong> Half of Rabbit\u2019s investments went towards building out the company\u2019s \u201ctech backbone,\u201d which Hafez tells us was crucial to allow the business to minimize its \u201creliance on external factors.\u201d On the other side of the spectrum, founder of dried fruits and vegetables brand Foya<\/a> Khadiga El Mawardy tells us that building a website was not an initial priority for her, and started out by selling her products through her business\u2019 Instagram account. After growing her customer base, El Mawardy turned to Zammit<\/a> to build a website for Foya. \u201cIt\u2019s very cheap and suitable for Foya right now because we\u2019re still a small business that doesn\u2019t need a ton of tech maintenance \u2014 just an online shop for customers to buy my products with minimal human interaction,\u201d El Mawardy says. Magma took a similar route, but opted for Canada\u2019s Shopify<\/a>, which Adel says was an ideal choice for Magma instead of building out its own website from scratch.<\/p>\n

Once e-commerce players figure out warehousing and tech infrastructure, it\u2019s time to<\/strong> stare down one of the biggest issues: Delivery.<\/strong> Businesses that don\u2019t have an in-house delivery team tell us that it\u2019s unideal to rely on third parties for delivery. \u201cI\u2019ve tested out a few delivery companies, but due to poor handling from the delivery companies\u2019 end the products would see a decline in quality, so I decided that it\u2019s better for me to handle delivery myself,\u201d says El Mawardy. Magma also continues to rely on third-party delivery services, but faces \u201csome level of hassle,\u201d because they require constant monitoring and follow-up to ensure that deliveries are fulfilled, Adel says.<\/p>\n

So it\u2019s unsurprising that businesses integrate delivery into their own operations: <\/strong>Rabbit, whose motto is \u201cgroceries and more in under 20 minutes,\u201d relies on a fully vertically-integrated business model, where they control the process end-to-end and with minimal dependencies on third parties. \u201cThere are no fleet providers that can offload or take a last minute piece of B2B e-commerce and that\u2019s why we resorted to operating our own warehouses and operating our own fleet of last mile delivery,\u201d El Megharbel said.<\/p>\n

What do businesses want to see for an easier infrastructure landscape for startups?<\/strong> Ideally, startups would like to benefit from a one-stop-shop from the government for local licensing, utilities management and logistical needs, Hafez tells us. \u201cThe significant development in roads and transportation infrastructure, payments and financial infrastructure, especially over the past year has had a massive positive impact on e-commerce as well, and will set the sector up for further growth and success over the coming years.\u201d El Megharbel, meanwhile, suggests that it would be massively helpful for e-commerce players if authorities were to provide cheaper infrastructure \u2014 particularly warehousing options.<\/p>\n

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