The rise of e-commerce grocery shopping in the GCC: Who will take the lead?

Most shoppers today have tried and tested different applications, discovered their convenience and started to develop preferences. In the UAE alone, around 79 percent of consumers shifted to online grocery shopping, and more than 47 percent of them expect to maintain this new habit, citing simplicity, convenience and time saved, according to our recent ‘Changing Consumer Priorities’ study. The statistics are similar in Saudi Arabia, where 38 percent of consumers say their grocery shopping habits have been permanently altered by the pandemic.

E-grocery accounts to low-single digit percentage points in Saudi Arabia and the UAE with significant growth potential. Some GCC grocers, such as Carrefour and Spinneys, have adapted quickly with each having developed its own online platform. Others still lag significantly behind. As a result, a number of new plays and players are emerging including e-grocers such as Kibsons, aggregators such as InstaShop and Talabat, and marketplaces such as Amazon, as well as direct-to-consumer options such as Nespresso, clickcuisine and others.

Industry players are converging strategies by adopting a multi-channel approach to remain competitive. For example, Noon, a market-place, operates Noon Daily for grocery essentials, and Noon NowNow, which acts as an aggregator. Similarly, Talabat, an aggregator, operates dark stores under Talabat Mart to sell directly to consumers and compete with retailers listed on its platform. Each of these methods have high growth potential, but there is no clear leader yet. Big data provides an advantage to some of the aggregators, allowing them to identify what is being sold, where and when, which leads to fact-based investment choices, such as selecting a dark store location and a curated product range.

Now that restrictions have eased and grocery retail gradually moves back to physical experiences, we expect a growing share of shoppers to remain online. Consumers are now accustomed to different shopping experiences and have even started to mix and match, selecting different providers for different purposes: omni players for value, aggregators for top-ups, convenience and speed of delivery, marketplaces for value and subscriptions, and pure players for depth in specific categories.

Many omni-grocers are adapting their offerings to meet these growing customer needs. Carrefour, for example, actively participates in certain marketplaces with selected aggregators, while at the same time focuses on enhancing its in store experience. The company recently introduced “Scan & Go”, a mobile payment service to offer a contactless shopping experience with reduced wait time, as well as Tally, a shelf scanning robot to report stock levels and allow employees additional time to focus on customer service and tending to shoppers.

There are still some gaps in the market despite the expected growth of the e-grocery market across the GCC, and the influx of new players. In the UAE, there are a wealth of players, but none represent a clear destination across most grocery categories, with unreliable service delivery. Whereas, in Saudi Arabia, leading national grocers like Panda and Othaim have a nascent presence of their online business, while aggregators and marketplaces are challenged by limited coverage and a complex operating structure. Most operators across the GCC are not yet profitable, as many still face challenges with service and last mile delivery.

Who will fill these gaps and establish dominance in this rapidly growing space, carving out a path to longer-term profitability? It will depend on who efficiently captures both in-store and online segments, combines assortment, availability, and enhances speed of service in an efficient and profitable way – a difficult endeavour, but one with huge potential benefits.

Karl Nader, Managing Director, AlixPartners Dubai.