Bucking the trend

Persuading consumers to turn their backs on conventional retail stores and buy online is by no means an easy task in the MENA region. Just ask e3050.com, a division of Sistrum and Egypt’s ‘first online technology retailer’. It has had to grapple with supplier scepticism and a channel culture far more suited to traditional retail to get where it is today, but as Sistrum’s CEO Tarek Abdel-Rahim reveals, the company’s efforts are finally paying dividends.

Tags: Egypt
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Bucking the trend
By  Andrew Seymour Published  October 24, 2010

CHANNEL:You bill e3050.com as Egypt’s first online retailer. How long has the company been in operation?

Tarek Abdel-Rahim: Sistrum started operations in 2004 and the original core business was supplying IT products to our group of companies, with a vision of creating the first online retailing company in Egypt. Back in 2004, the market wasn’t ready for any form of online selling. There were a couple of companies around, but nothing on the scale we were looking at. So we started a corporate division selling IT products to corporations and businesses, and began the research stage of developing our online e-tailing shop. It took us two or three years to develop that and we officially launched the website in 2006.

CHANNEL: How easy was it at the time to launch an online retail business given the fact that the physical retail channel remains to dominant in Egypt?

Tarek Abdel-Rahim: It was very difficult. The banks didn’t want to work with you for credit card [transactions], courier services didn’t want to work with you, suppliers didn’t want to send their price lists — simple things that you would never face anywhere else in the world. But we were able to pass through all those challenges and today when I look at the situation I see that the online retailing market is growing. People are starting to understand online shopping and there are competitors popping up every day.

CHANNEL: It has been suggested that online retailing will never take off in Egypt because people would rather purchase from traditional outlets, where they can see and touch the products first.

Tarek Abdel-Rahim: If you go back 15 years there was exactly the same concern in Europe and the US. People do like to hold things and see things, but they also like to save time — especially in Egypt with the traffic! Usually before buying, people will go down to the stores, check prices and get an idea of what they want to buy. But there is a big difference between spontaneous buying and planned research buying. At the moment, in this part of the world, people still want to touch products mainly because they want to see the quality of it. But as bandwidth grows — and this is why the success of online depends a lot on connection speeds and broadband — we will be able to start putting videos online and so on. That will help customers to start trusting sites and buying online.

CHANNEL: Is the online sales model an expensive one to operate? What sort of manpower do you need to operate an e-commerce operation in Egypt?

Tarek Abdel-Rahim: The benefit of online retailing is that you have access to so many customers everywhere and you can control your operational costs. Those are key things. If you really want to start a good online retail chain you have got to offer good products and provide good [website] content. We have about 12 people in that division at the moment, but they depend a lot on the infrastructure of Sistrum. In fact, that was the main concept of Sistrum: create a strong back-end and from this back-end start to create projects like e3050 and the corporate division, or even new things we are working on such as a sourcing company.

CHANNEL: How many products do you offer to customers?

Tarek Abdel-Rahim: We currently have around 6,000 IT products. 4,000 are online and the rest we are working on. By the end of the year, this number should reach between 8,000 and 10,000. The issue is that we have to work on getting the information, pictures and videos for each item, which can take time. If we had distributors and suppliers which really helped us it would be completely different — the time would be halved. We always knew this was going to be a problem, so from the beginning we developed our own automated system for loading and updating products. Compared to other companies around us we do it very fast, but we still need more help from the vendors.

CHANNEL: Can you give any indication of the sort of sales you are making?

Tarek Abdel-Rahim: When we started in 2006-2007 we weren’t selling more than the equivalent of US$10,000 per month. By 2008-2009 we were able to reach about US$50,000 a month. This year we are in the range of US$150,000 to US$200,000 a month, which is a big jump. What is also interesting is that the number of visitors has increased a lot. We used to get between 10,000 and 20,000 unique visitors to the site. Today, we are up to 70,000, and by the end of the year we hope to reach 100,000. Bear in mind we started this company with EGP60,000 (US$10,000) and we have not had a huge marketing budget — it has all been through word of mouth.

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