The grocery retail markets in the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) are changing quickly — and as consumer expectations rise and competition grows, retailers need to adapt to keep up. In the UAE, where the market is already crowded, retailers must stand out to attract and keep customers. In Saudi Arabia there is still room for expansion, but competition is increasing, making it essential to understand consumer preferences for future success.
Our "Market Pulse 2024 — Grocery Retail Trends in the UAE and Saudi Arabia" report, which features our Customer Perception Map (CPM) survey, reveals key insights into consumer behavior and trends in these markets. These findings offer a road map for retailers looking to refine their strategies and excel in a more complex and demanding marketplace.
UAE and Saudi grocery markets are growing — but differentiation is key
Both markets have experienced strong growth. In 2023, the UAE grocery market reached $40 billion, at a 6.5% five-year compound annual growth rate (CAGR). KSA’s grocery market, valued at $62 billion, has grown at 4.2% CAGR. While the UAE’s market is more mature, KSA’s larger population offers more room for expansion.
In both markets, consumers are looking for value, quality, and convenience. In the UAE, retailers like Carrefour, Lulu, and Nesto have differentiated themselves through their mix of value and premium offerings. With the market nearing saturation, retailers in the UAE must focus on differentiation to remain competitive. There are three main approaches:
- Offer specialists: Retailers that focus on premium products and experiences
- Value specialists: Retailers that focus on low prices and promotions
- Multi-specialists: Retailers offering a balance of value and quality
In Saudi Arabia, where expansion has been the primary growth driver, the market is starting to shift. Lulu, Panda, and Carrefour are the most visited retailers. Abdullah Al-Othaim Markets, however, has the highest percentage of primary customers, illustrating that while it may not have the most visitors, its customer base is relatively loyal. Differentiation will become key to success as competition increases.
Consumer value focus boost growth for private labels and discounters
Our study reveals that consumers in both the UAE and KSA prioritize value, with 53% of UAE shoppers and 51% of KSA shoppers ranking it as the most important factor when choosing a retailer. However, UAE consumers place great emphasis on quality, while Saudi shoppers focus more on range and service.
In light of these preferences, private label products, as cheaper alternatives to branded products, offer a significant opportunity for retailers to enhance their value propositions. Currently, private labels make up a small portion of the market, but demand is growing, giving retailers a chance to differentiate themselves and improve profitability. Similarly, consumers are keen to buy local products, especially fresh produce, which is appreciated for its quality and price. Expanding local offerings could help retailers meet this growing demand.
In addition to the rise of private labels, discounters like Viva in the UAE are gaining momentum. This reflects a trend seen in Europe with retailers such as Aldi and Lidl. Consumers in both the UAE and KSA are showing increased interest in discount grocery stores, creating pressure on traditional retailers to compete on price.
In the UAE, 66% of consumers buy private label products regularly, and in Saudi Arabia, 79% do so. Retailers that can provide quality private label products at competitive prices will be well-positioned to succeed in this evolving market.
Technology and AI are shaping the future of grocery retail
Technology, including artificial intelligence (AI), is playing an increasingly important role in grocery retail. In both the UAE and KSA, consumers are looking for ways technology can enhance their shopping experience. AI offers opportunities for personalized promotions, seamless online and offline shopping, and enhanced customer engagement.
With 56% of UAE consumers and 33% of Saudi customers shopping both online and in-store, omnichannel strategies are critical. Retailers must invest in technology to meet these changing expectations and improve customer satisfaction.
The consumer diversity in the UAE and Saudi markets also presents a unique opportunity for retailers to differentiate through personalization. Moreover, retailers can leverage consumers’ relatively high willingness to share their data to enhance personalization and loyalty programs.
Retailers must act now to stay competitive in the UAE and Saudi Arabia
Insights from our CPM survey show that grocers in both the UAE and KSA have a clear opportunity to innovate, differentiate, and engage more effectively with customers. Those who act now will be best positioned for future success.
For a custom summary of your company’s CPM results or to discuss recommendations in more detail, contact our team using this form.
