Wednesday, Dec 07, 2005
Not far from the towering concrete tenement blocks of the Cairo district of Nasr City, a vast shopping and entertainment complex is drawing visitors from across Egypt's capital and further afield.
If it were in the Gulf emirate of Dubai, the Dollars 800m Citystars shopping centre - with its expansive polished floors, snazzy store fronts and endless escalators - might be just another mall.
But in Egypt, where older shopping centres are mostly small, cluttered and in varying states of dilapidation, Citystars is something of a novelty.
Its opening at the end of 2004 has coincided with an unprecedented influx of foreign retail outlets.
While international brands such as Adidas and Nike have been manufacturing in Egypt for the local markets for some time, they were deterred from setting up shop by high customs tariffs and stubborn bureaucracy.
With an average 40 per cent reduction in import tariffs last year and efforts by the government more recently to standardise procedures regulating foreign retail outlets, the tide is shifting.
The arrival in Cairo of international brands such as Mango, Benetton, Sisley and, with some fanfare, Virgin Megastore in September, has coincided with signs of economic recovery the beginnings of a recovery in consumer demand.
Traditionally, wealthy Egyptians make annual trips to Europe or the US to stock up on the latest fashions. But with more choice, and familiar foreign brands on offer close to home, shopping in Egypt is becoming interesting for those who might once have turned up their noses at shop windows full of locally made goods.
Tim Hinde, managing director of Chrysalis Development, says the market is still virtually untapped and there is room for the absorption of another 10 mega-malls in Cairo alone.
"In theory, mega-malls are a recipe for success," he says.
"In comparison to its saturated Gulf neighbours, the market is underdeveloped. Volume wise we're up there in terms of purchase power. In terms of sophistication, service, quality and variety we're still lagging behind."
Growing interest in newer malls and mega-malls where attention is placed on shop spaces, lighting and display on, is a blow to the older versions - haphazardly planned in the 1990s and of which some have proved to be flops.
It is also a worry for some of the old shops surrounded by the fading grandeur of crowded, central Cairo, the displays of which are beginning to appear antiquated.
"Our old customers still come to us, as well as those who know what they want exactly and don't like walking around a lot. But young people are going to malls - it's more entertaining for them," says Aly Eman, an old shopkeeper of a downtown clothing store.
In the past it was not easy for foreign groups wanting to step in as competition. British supermarket chain J. Sainsbury learned the hard way when it retreated in 2001, after staying in Egypt for only 18 months. It left with a Pounds 10.2m loss for the first half of the 2000-2001 financial year.
Recently, however, retailers say government efforts to clear the way have begun paying off. Brands such as Virgin Megastores which were themselves entangled in a web of bureaucratic problems have finally started operating.
Spanish clothing brand Mango was among the first to set up shop last July.
"We took in all the trouble, especially in what concerns customs. It's getting better though," says Dina Amin, marketing manager of Mango at Citystars.
The opening of Mango was met with anticipation from consumers, and having already reached break even point, more outlets may be added to its three existing ones.
The mall culture, so prevalent in Gulf states, remains relatively new to Egyptians, yet retail specialists expect it to catch on. Apart from easier regulations, interest from foreign brands in Egypt would have been impossible in the absence of the world class mega outlets that have begun to spring up.
"New neighbourhoods where the mega-malls are cannot have street shops and walking, so malls are really the only medium for commercial retail given the landscapes of many of these zones," says Mohamed Galal, management consultant, and former CEO of Dandy mall, another huge shopping and entertainment complex on the Cairo-Alexandria Desert Highway.
With greater purchase power as a result of brighter economic prospects, mall goers are actually buying and not just window-shopping, retailers say.
According to Mr Galal, however, 60 per cent of people who go to inner city malls are there for the outing, not to buy.
In the case of malls located on the outskirts of the city, he estimates the ratio of buyers to be in the 90 per cent range, as it takes more of a decision to get there.
The Egyptian Tourism ministry, eager to diversify its visitor base, is well aware of the potential of shopping tourism for high-spending Gulf Arabs who are already flocking to Egypt in greater numbers in the hot summer months.
More hotels, more malls and transport infrastructure around the city are still needed, however to make this possible.
"Egypt definitely has the capacity to compete. There's reason to be optimistic with 70m people needing to buy things on a daily basis," says Mr Hinde.
By GAZBEYA EL-HAMAMY
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