A Sector to Watch

For retailers, the biggest challenge the revolution wrought involved shifting Egyptians’ buying patterns across the board. It’s safe to say few were immune from the uncertainty and strong emotional responses to the tumultuous events of 2011, including the ongoing trial of deposed President Hosni Mubarak, the clashes in Maspero or the latest violence along the streets of Downtown Cairo.

This list is not exhaustive in the least, and that’s part of the problem, say analysts and retailers. With so much going on and the security situation still tenuous, consumers are focused on buying necessities versus more frivolous spending, and they are looking for the best bang for their buck, making lower-end items stand out when they wouldn’t have otherwise.

The latest Nielsen Egypt consumer confidence index shows that only 30% of Egyptians think now is the right time to buy, while 67% claim current economic conditions have changed their household spending with the emphasis on spending less and saving more. Other indicators are just as stark. Some 48% of respondents had decreased their budgets on home entertainment, while 47% spent less on clothing. Those surveyed are cutting down on takeaway meals, mobile expenses and technology upgrades and more than 20% have opted to put a hold on vacations and holidays for now.

Anecdotally, retailers and mall managers say foot traffic on weekends has also dropped, which has had a negative effect on bottom lines and led some brands to send their items out to customers’ homes in an effort to boost sagging sales.

And that’s not the only thing retailers are doing. They are also hosting special events to promote confidence and give consumers a reason to spend. Two of the biggest events of last year include Cairo’s Fashion Nights Out, hosted by Pashion magazine, and the Buy Egyptian initiative in December, put together by prominent journalist and TV presenter, Amr Adeeb.

The brainchild of editor-in-chief Susan Sabet, Cairo’s Fashion Nights mimicked the famous Vogue magazine events around the world where luxury brands and fashion outlets opened their stores well into the evening to hold special promotions and behind-the-scenes activities for customers.

The Buy Egyptian weekends worked similarly, but instead of hosting events in the evenings, stores held special sales of around 20% off to entice shoppers to support local brands and thereby the economy. Both were highly successful and helped end 2011 on a brighter note.

Getting innovative
But not all the news was gloomy last year. Because where there is trouble, oftentimes there is also opportunity, particularly for savvy retailers who know a good deal when they see one. While areas like luxury goods, jewelry and automotives suffered, the revolution and its tumultuous aftermath have been a boon for food producers and pharmaceutical companies. Strong brands also did well, particularly if they had less expensive product ranges on offer.

Juhayna was one of the winners, growing its revenues 24.4% as of 3Q2011 compared to the same period in 2010. This is significant since its sales to hotels and shops in areas affected by the drop in tourist arrivals declined. Milk and juice sales were also down, although yogurt made a comeback during the holy month of Ramadan.

GB Auto also saw some measure of success and outperformed the market. Passenger car sales in Egypt were down over 30% between January and October of last year. But GB Auto’s sales were only down by around 20% due to customers choosing its cheaper Hyundai-brand models over more expensive options sold by other dealers. The company also saw three-liter engine tuk tuk sales skyrocket 66%.

However, many companies were unable to get over losses, including home appliance giant Olympic Group (OG). According to Beltone Financial, its Egyptian sales, which account for 90% of the company’s total, were cut in half. Its exports also saw a decline of 36%, no surprise since the majority are sold to Libya, Sudan, Tunisia and Gulf and Levant countries.

Not all is lost for OG. Swedish firm Electrolux completed its bid to buy the majority of OG’s shares in one of the only sales between Egyptian and foreign companies to go through post-revolution, which could mean there are still some firms willing to take a chance on Egypt’s stability in the future.

That being said, it’s anyone’s guess when the nation will finally get to enjoy that stability.