GCC grocery market shifts toward value-led retail: Oliver Wyman

05/02/2025 09:32 AST

Gulf Cooperation Council retailers faced increasing pressure to stand out as competition in the region's retail sector intensifies, according to a recent report. US-based management consulting firm Oliver Wyman highlighted the rising significance of value-led grocery retailing in the region in a recent analysis titled "The Affordability Imperative: Capitalizing on Value-Led Grocery Retail in the GCC." "As the grocery retail landscape in the Gulf Cooperation Council becomes increasingly saturated, the need for differentiation has never been more critical," the report said, adding that shifting consumer priorities and rising demand for affordability provide an opportunity for retailers to reshape the market by adopting cost-conscious strategies. Saudi Arabia's grocery sector undergoes transformation The Kingdom, the largest market in the GCC, provided a critical case study in the transformation of grocery retail. According to a 2024 survey by Oliver Wyman on Saudi Arabia's consumer trends, more than half of the nation's households experienced a shift in income levels throughout the year. "Around 31 percent of households reported a drop in income during 2024, with 11 percent seeing declines of more than 50 percent," the study said, adding that 40 percent of consumers saw a decrease in their savings, while only 23 percent managed to increase theirs. Consumers prioritize affordability in shopping choices Consumers have responded by adopting new shopping behaviors. Nearly 48 percent of surveyed individuals compare prices before making purchases, while 46 percent actively seek out stores offering lower prices. The Oliver Wyman Customer Perception Map Survey found that 51 percent of Saudi consumers prioritize value, including price and promotions, when selecting their primary retailer. Private-label products have gained traction as a cost-saving measure, with 80 percent of consumers reporting regular purchases. The study added 68 percent of shoppers expressed interest in discount grocery retailers and 97 percent of those familiar with international discount brands, such as German-based supermarkets Aldi and Lidl, said they would consider shopping at these stores if available locally. Three key strategies driving success in value-led grocery retail The study identified several fundamental strategies employed by successful international value-led grocery retailers. One is maintaining an attractive proposition through competitive pricing, a strong private-label presence, and a streamlined product assortment. This approach allows retailers to maximize cost efficiency while appealing to budget-conscious shoppers. Another factor is operational excellence, which can be achieved by optimizing supply chains, enhancing private-label and fresh product management, and fostering a cost-effective corporate culture. Lastly, leading discount retailers prioritize rapid expansion by maintaining a low capital expenditure model, leveraging deep market knowledge, and reinvesting profits into further growth. The two-step approach to long-term success The report highlighted a two-step approach used by successful value-led retailers. The first step focuses on establishing a strong value perception through low prices, limited assortments, and simple store formats. Once a solid foundation is built, the second step involves enhancing offerings by improving product quality, diversifying selections, and upgrading the shopping experience.

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