Glovo's Exit from Egypt: Why? & Why It Wasn’t Prevented This Time?

Glovo has officially made its final exit from the Egyptian market, this came as a disappointment to many of its customers. It came as a surprise to some, as it was prevented from exiting by the Egyptian Competition Authority (ECA) when it attempted an exit in April of 2019. The reasons for its previous exit as identified by an ECA investigation was to undermine Otlob.com’s competition in the country, which is why it was prevented from exiting the last time around. This exit attempt was considered as an attempt to undermine Otlob.com’s competition because when Glovo attempted to exit the first time around, their application sent their clients to Otlob.com’s website if they attempted to open it. Before going into analyzing why it wasn’t prevented from exiting this time around, and why it would want to exit from Egypt, I’ll go through some facts and figures about Glovo and the Egyptian market.

Glovo was founded in 2015, and before its exit from Egypt was operating in 29 countries; now with its exit from Egypt and its plan to exit from Turkey, Uruguay and Puerto Rico would be reduced to 26. Glovo’s CEO has stated that the exit from Egypt is in search of profitability in 2021, since their strategy is to be one of the top two delivery services in any market they enter and to see a clear path to profitability Delivery Hero, which is known as Otlob in Egypt, owns 16% of Glovo’s shares in 2018; giving them access to confidential information and allowing them to have a say in Glovo’s strategic decisions.

There are several other delivery apps such as UberEats, ElMenus, and Otlob.com; in addition to almost all restaurants, supermarkets and even pharmacies providing traditional delivery services through calling the shop or their call center. The main differentiation between delivery apps and the traditional delivery services is that they allow customers to use their credit cards to pay; although some traditional delivery services have also started allowing customers to pay by credit cards by sending credit card machines with the delivery staff. Glovo also tried to differentiate itself from other delivery apps by providing delivery from non-food places such as supermarkets and pharmacies; however, approximately 70-80% of their transactions were from food deliveries.

There are three possible reasons for Glovo’s exit this time around; to send more customers from the market to Otlob.com, they expanded too fast so they decided to get out of several countries to concentrate their capital and efforts in the more profitable markets, or they couldn’t profit enough due to the already existing and well-established competition. Their exit being another attempt to undermine Otlob.com’s competition is a possibility for the following reasons; they already established a link between themselves and Otlob.com since their previous attempt to exit, and if Otlob.com acquires a percentage higher than 16% of Glovo’s customers they would profit more than when Glovo was in market since they Otlob.com only owned 16% of Glovo’s shares.

Their attempt to concentrate their capital in more profitable markets is also a possibility since they have also announced that they will exit other markets including Turkey, Uruguay, and Puerto Rico; however, Glovo still haven’t officially exited these markets since they’re still on Glovo’s website unlike Egypt but they may have downscaled their operations there in anticipation of an exit in the near future. It could also be due to Glovo not receiving the profit that they were expecting due to the existence of well-established competition, especially traditional delivery services. Moreover, their competitive edge of providing cashless transactions was probably lost due to a very low percentage of transactions being cashless in Egypt, in fact a McKinsey report stated that only 2% of transactions in 2017 were cashless and another report stated that in the same year only 3.3% of people older than 16 in Egypt owned credit cards. This exit could also be a result of a combination of two or three of the above reasons, this is something that only Glovo’s shareholders and board of directors would know for sure.