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GCC Grocery Retailers Embrace Value-Led Strategies Amid Intensifying Competition
Retailers in the Gulf Cooperation Council adapt to shifting consumer preferences and economic pressures by focusing on affordability and operational efficiency.
The grocery retail sector within the Gulf Cooperation Council (GCC) is experiencing heightened competition, prompting retailers to adopt value-led strategies to meet evolving consumer demands.
A recent report by Oliver Wyman, titled 'The Affordability Imperative: Capitalizing on Value-Led Grocery Retail in the GCC,' emphasizes the increasing importance of affordability in the region's grocery market.In Saudi Arabia, the largest market in the GCC, significant changes have been observed in consumer behavior.
According to Oliver Wyman's 2024 survey on Saudi Arabia's consumer trends, over half of the households reported changes in income levels during the year.
Specifically, 31% of households experienced a decline in income, with 11% noting reductions exceeding 50%.
Additionally, 40% of consumers reported a decrease in their savings, while 23% managed to increase theirs.In response to these economic shifts, consumers are prioritizing affordability in their shopping habits.
The survey found that 48% of individuals compare prices before making purchases, and 46% actively seek stores offering lower prices.
Furthermore, 51% of Saudi consumers prioritize value, including price and promotions, when selecting their primary retailer.
Private-label products have also gained popularity, with 80% of consumers reporting regular purchases of these items.The report identifies key strategies employed by successful international value-led grocery retailers.
These include maintaining competitive pricing, a strong private-label presence, and a streamlined product assortment to maximize cost efficiency.
Operational excellence is achieved through optimized supply chains, enhanced private-label and fresh product management, and fostering a cost-effective corporate culture.
Leading discount retailers also focus on rapid expansion by maintaining a low capital expenditure model, leveraging deep market knowledge, and reinvesting profits into further growth.The GCC region presents distinct opportunities and challenges for value-led grocery retailers.
The market is shaped by diverse demographics; for instance, expatriates comprise 89% of the population in the UAE, significantly impacting consumer behavior.
In Saudi Arabia, the growing middle class influences spending patterns and drives demand for new products.
Traditional grocery stores, or 'baqalas,' continue to compete with modern trade, which accounts for 83% of fast-moving consumer goods sales in the UAE and 52% in Saudi Arabia.
Private-label market penetration remains underdeveloped, standing at 3% in the UAE and 1% in Saudi Arabia, indicating significant room for growth.The report also highlights emerging models for value-led grocery retail expansion in the GCC.
These include the neighborhood discount model, focusing on small, local stores offering essential products at low prices; the basic discount model, adopting a no-frills approach with a limited product range and competitive pricing; the mature discount model, enhancing private-label dominance, fresh product offerings, and store aesthetics; and the full-basket value-led model, offering a comprehensive grocery solution catering to bulk shoppers and price-sensitive consumers.To successfully implement value-led grocery retail models in the GCC, the report outlines key dimensions for consideration.
Retailers should focus on competitive pricing, efficient product assortments, and compelling promotions to attract consumers.
Streamlining supply chain operations and leveraging digital technology will enhance cost management and operational efficiency.
Growth strategies should be aligned with demographic insights and geographic expansion plans to ensure scalability.The study underscores the growing significance of value-led grocery retail in the region.
As disposable incomes fluctuate and consumer preferences shift toward affordability, retailers have an opportunity to establish themselves in this evolving sector.
By leveraging global best practices, adapting to regional nuances, and prioritizing operational efficiency, value-led grocery retailers can reshape the industry and drive long-term growth.
A recent report by Oliver Wyman, titled 'The Affordability Imperative: Capitalizing on Value-Led Grocery Retail in the GCC,' emphasizes the increasing importance of affordability in the region's grocery market.In Saudi Arabia, the largest market in the GCC, significant changes have been observed in consumer behavior.
According to Oliver Wyman's 2024 survey on Saudi Arabia's consumer trends, over half of the households reported changes in income levels during the year.
Specifically, 31% of households experienced a decline in income, with 11% noting reductions exceeding 50%.
Additionally, 40% of consumers reported a decrease in their savings, while 23% managed to increase theirs.In response to these economic shifts, consumers are prioritizing affordability in their shopping habits.
The survey found that 48% of individuals compare prices before making purchases, and 46% actively seek stores offering lower prices.
Furthermore, 51% of Saudi consumers prioritize value, including price and promotions, when selecting their primary retailer.
Private-label products have also gained popularity, with 80% of consumers reporting regular purchases of these items.The report identifies key strategies employed by successful international value-led grocery retailers.
These include maintaining competitive pricing, a strong private-label presence, and a streamlined product assortment to maximize cost efficiency.
Operational excellence is achieved through optimized supply chains, enhanced private-label and fresh product management, and fostering a cost-effective corporate culture.
Leading discount retailers also focus on rapid expansion by maintaining a low capital expenditure model, leveraging deep market knowledge, and reinvesting profits into further growth.The GCC region presents distinct opportunities and challenges for value-led grocery retailers.
The market is shaped by diverse demographics; for instance, expatriates comprise 89% of the population in the UAE, significantly impacting consumer behavior.
In Saudi Arabia, the growing middle class influences spending patterns and drives demand for new products.
Traditional grocery stores, or 'baqalas,' continue to compete with modern trade, which accounts for 83% of fast-moving consumer goods sales in the UAE and 52% in Saudi Arabia.
Private-label market penetration remains underdeveloped, standing at 3% in the UAE and 1% in Saudi Arabia, indicating significant room for growth.The report also highlights emerging models for value-led grocery retail expansion in the GCC.
These include the neighborhood discount model, focusing on small, local stores offering essential products at low prices; the basic discount model, adopting a no-frills approach with a limited product range and competitive pricing; the mature discount model, enhancing private-label dominance, fresh product offerings, and store aesthetics; and the full-basket value-led model, offering a comprehensive grocery solution catering to bulk shoppers and price-sensitive consumers.To successfully implement value-led grocery retail models in the GCC, the report outlines key dimensions for consideration.
Retailers should focus on competitive pricing, efficient product assortments, and compelling promotions to attract consumers.
Streamlining supply chain operations and leveraging digital technology will enhance cost management and operational efficiency.
Growth strategies should be aligned with demographic insights and geographic expansion plans to ensure scalability.The study underscores the growing significance of value-led grocery retail in the region.
As disposable incomes fluctuate and consumer preferences shift toward affordability, retailers have an opportunity to establish themselves in this evolving sector.
By leveraging global best practices, adapting to regional nuances, and prioritizing operational efficiency, value-led grocery retailers can reshape the industry and drive long-term growth.
