GCC grocery retail is at a critical point. With consumers tightening their wallets and price sensitivity on the rise, the path forward demands a radical shift in strategy. The latest Oliver Wyman report, in collaboration with the RLC Global Forum, dissects this reality and provides a blueprint for retailers to stay ahead.
Economic fluctuations have significantly impacted consumer behavior in the GCC, particularly in Saudi Arabia. A recent report created by Oliver Wyman, titled “The affordability imperative: A new era for grocery retail in the GCC,” reveals that over half of Saudi households experienced changes in income levels throughout 2024, with 31% noting a decrease. This financial strain has led consumers to prioritize affordability, with many comparing prices and seeking retailers that offer lower costs.
In fact, according to the survey, 40% of consumers indicated a drop in savings, while only 23% managed to increase them. Additionally, price sensitivity is driving behavior shifts, with 48% of consumers actively comparing prices and 46% choosing cheaper stores, reinforcing the growing demand for value-led grocery options.
Global strategies tailored to the GCC market
Drawing lessons from international value-led grocery retailers, the report identifies three core strategies:
- 1. Attractive proposition: Emphasizing competitive pricing and high-quality private-label products to meet the needs of cost-conscious consumers.
- 2. Streamlined operations: Enhancing operational efficiency to reduce costs, thereby enabling lower prices for customers.
- 3. Aggressive scale-up: Rapid expansion using cost-effective models to quickly establish market presence.
However, the GCC market presents unique challenges, including a culturally diverse demographic, varying price levels, a strong preference for service-oriented shopping, significant income disparities, and a prevalence of traditional markets and local baqalas. Success in the region requires careful consideration of these dynamics and necessitates a tailored approach to implementing value-led retail strategies.
Strategies for retailers
The report outlines a two-step approach for retailers aiming to succeed in the GCC’s value-driven market:
- 1. Establish a strong value perception: Focus on offering low prices, a curated product assortment, and simple store formats to attract budget-conscious shoppers.
- 2. Enhance offer perception: Once a loyal customer base is established, gradually improve product quality, expand assortments, and upgrade store aesthetics to retain customers and attract new segments.
Embracing the opportunity
To recap, the grocery retail sector in the GCC is changing and entering a defining era. With disposable incomes fluctuating and 68% of consumers expressing interest in discount grocery options, affordability has become a key priority. Retailers that adapt to the rising demand for value-driven shopping experiences stand to gain a competitive edge. By implementing the strategies detailed in the report (including streamlining operations, enhancing private label offerings, and adopting a two-step approach to value), businesses can meet the current needs of consumers while positioning themselves for success in the region’s evolving market landscape.
You can access the full report HERE.
