The grocery retail landscape in the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) is undergoing a seismic shift. As consumer preferences evolve and competition intensifies, grocery retailers in these two fast-growing markets face a stark reality: adapt or fall behind.
This is the core message of a compelling new report from Oliver Wyman, a global management consulting powerhouse, which has expanded its acclaimed Customer Perception Map (CPM) survey to include the UAE and KSA for the first time. The findings reveal a market brimming with opportunities but fraught with challenges that demand strategic reinvention.
A Booming Sector with No Room for Complacency
Together, the grocery retail markets of the UAE and KSA are valued at a staggering $102 billion in 2023, with growth trajectories outpacing many global markets. KSA’s grocery sector, estimated at $62 billion, is expected to grow at a compound annual growth rate (CAGR) of 4.2% over the next five years. Meanwhile, the UAE, at $40 billion, boasts an even faster CAGR of 6.5%.
But these numbers, impressive as they are, mask an urgent challenge: the pressure to stand out in increasingly crowded marketplaces.
In the UAE, where competition for “like-for-like” sales growth is already fierce, retailers are scrambling to differentiate themselves. Viva has carved out a niche with its discount-driven value model, while Spinneys has found success through its premium offerings, focusing on high-quality fresh produce and unique products.
Saudi Arabia’s market, while less mature, is following a similar trajectory. With significant room for expansion, retailers have the advantage of growth potential—but the time to define their future strategies is now.
“Retailers in both the UAE and Saudi Arabia are at critical points in their evolution,” says Alexander Poehl, Retail and Consumer Partner at Oliver Wyman. “They must learn from the experiences of Western markets, where intense competition and shifting consumer demands have already redefined the grocery sector.”
What Consumers Want—and Why It Matters
To win in these dynamic markets, understanding the consumer is paramount. The survey results paint a vivid picture of what matters most to shoppers.
Value emerged as the top priority, cited by 53% of UAE consumers and 51% of those in Saudi Arabia. But the UAE places slightly more emphasis on quality (20% vs. 18%), while Saudi shoppers are more focused on product range (20% vs. 18%).
Interestingly, discount retail models are gaining traction, with a majority of consumers expressing a strong interest in budget-friendly options. Nearly 70% of Saudi respondents and 60% of UAE shoppers said they would embrace discount retailers if they were more widely available. For those familiar with brands like Aldi and Lidl, the enthusiasm is even higher—over 90% in Saudi Arabia and 75% in the UAE would welcome these concepts.
The appeal of local products also presents an untapped opportunity. Over 90% of respondents in both countries said they deliberately seek out local fruits and vegetables, offering retailers a chance to connect with customers through fresh, high-quality local goods.
Three Strategies to Succeed in an Evolving Market
The report identifies three winning approaches for grocery retailers navigating this competitive landscape:
- Discount Retailers: Offering exceptional value with a streamlined product range.
- Offer Specialists: Providing niche or premium experiences that stand out in a crowded field.
- Adaptable Incumbents: Leveraging local insights to address the specific needs of individual communities.
In addition to these models, technology is becoming a critical differentiator. Tech-savvy consumers in the UAE and Saudi Arabia are far more open to innovations like personalised promotions and “just-walk-out” transactions compared to their Western counterparts.
“With 71% of UAE respondents and 63% in Saudi Arabia showing interest in personalised promotions, the potential for AI-driven solutions and targeted marketing is immense,” says Poehl.
What’s Next for Retailers?
The report’s conclusions are clear: the time for retailers to act is now. Joe Abi Akl, Head of Oliver Wyman’s Retail and Consumer Practice for India, the Middle East, and Africa, believes embracing differentiation is key.
“Whether it’s harnessing technology, focusing on local products, or redefining their value propositions, retailers in these markets need to make strategic decisions today to ensure their long-term success,” he says.
For the UAE, the challenge lies in navigating a saturated market where innovation and customer experience will separate the winners from the rest. For Saudi Arabia, the window for expansion is still wide open—but it won’t stay that way forever.
