• Almost 60% of UAE customers would be interested in shopping at a discount retailer
  • Personalization is a differentiation opportunity in the UAE, with more than 70% of survey respondents saying they would be interested in personalized offers
  • More than 50% of respondents expressed interest in technology and AI use cases that can enhance their overall shopping experience
  • More than 90% of respondents deliberately look for fruit & vegetables produced in the UAE
  • Retailers need to revisit their relationship with suppliers and put the customer at the center of assortment, space, price and promotion decisions to win in the market

Dubai, United Arab Emirates – A major new report from Oliver Wyman, a global management consulting firm and a business of Marsh McLennan (NYSE: MMC), highlights that the UAE’s grocery sector has reached a new stage of modernization as competition intensifies.

However, the report also notes that the success of the UAE’s “modern trade” grocers in capturing market share is pushing them to increasingly compete for like-for-like (LFL) growth by winning customers from competitors and increasing share of wallet with their existing customers. This dynamic creates the risk of market saturation and opens opportunities for market disruption.

The latest Oliver Wyman Customer Perception Map (CPM) survey, which tracks customer perceptions and habits in the grocery sector in different regions around the world, highlights that, in an increasingly saturated market, retailers are being pushed to differentiate themselves either by offering superior value or an exceptional offer, with only rare exceptions successfully balancing both, to stay competitive. The survey indicates that, as the UAE market has matured, customers have developed differentiated preferences compared to their peers in other GCC markets, creating both challenges and opportunities.  

“Our recent CPM shows that, as the UAE market has matured, various customer segments now clearly prioritize different factors in their choice of retailer. In response to these changing preferences, we expect a stronger differentiation of formats to emerge. Some brands are focusing on a truly differentiated proposition supported by a premium customer experience, while other retailers are striving for a balance between value and quality of products,” said Joe Abi Akl, a partner and the head of Oliver Wyman’s Retail and Consumer Practice for India, the Middle East, and Africa (IMEA).

This emerging differentiation can already be observed in the UAE grocery market. With players like Spinneys and Waitrose focusing on high-quality fresh products and offering unique products and own labels, and Viva, on the other side, focusing on value by establishing the first discount model at scale in the UAE. Finally, the large hypermarket chains like Carrefour, LuLu and Nesto try to balance both by offering large assortments and attractive promotions. In this context undifferentiated players are likely to struggle with leading players driving consolidation in the market.

“As has been observed in more developed retail markets, the major supermarket groups most likely to prosper are those that can best innovate and differentiate themselves from their rivals,” said Alexander Poehl, Retail and Consumer Partner from Germany, who has supported many Western European retailers in their transformations. “Developing a differentiated proposition will require retailers to upgrade their category management capabilities and revisit their relationships with suppliers. Just selling shelf space and promotions to the highest bidder will no longer be good enough. Winners put the customer at the center of all decisions on format, assortment, space, price, and promotions,” Poehl added.

In developing a differentiated proposition, many approaches are possible, although a deep understanding of customer preferences is key. For the UAE, satisfaction is driven to 53% by value (price and promotions), 20% by quality, 18% by range and to 9% by service, the CPM analysis shows. Getting the basics right by putting the customer at the center for all commercial decisions is key. Given the relative importance of value, retailers might want to make sure to offer an attractive price entry range and own-label products, increase their pricing capabilities, or provide attractive promotions that drive customers to the store without destroying margin for the retailer. Offer specialists might opt to take larger control of their supply chains and offer unique high-quality fresh products, satisfying the hunger of UAE customers for local products, with 92% of customers deliberately looking for fruit and vegetables produced in the UAE.

An opportunity highlighted by the findings is the potential for a truly value-led retailer to disrupt the market. In total, 58% of UAE customers said that they would be interested in shopping at a discount grocery retailer or already shop at one, while 85% said they would be interested in shopping at one of the well-known European discount grocery chains, such as Aldi or Lidl, if they came to the UAE. While several homegrown brands are already pushing to stand out in this sector, the opportunity exists for greater competition, according to the CPM findings.

“One of the key findings of the survey is that, compared to Western markets, consumers in the UAE are much more diverse in terms of cultural background, purchasing power and languages spoken. For retailers, this opens an important opportunity for differentiation through personalization,” Poehl added.

Enabling consumers to access the products and promotions most relevant to them could deliver a significant market advantage. In this context loyalty programs play a vital role. Ideally a customer sees them as a trusted companion in many daily interactions in an ecosystem spanning beyond the retailer owning the program. The survey found that 60% of UAE respondents expressed interest in getting access to more services through their loyalty schemes, with F&B, payments and healthcare service being the most interesting options. In addition, UAE consumers are significantly more likely to share data to enable such programs, compared to European consumers.

Emerging technologies, such as generative artificial intelligence, are also likely to play an increasingly important role in supporting differentiation and personalization in the UAE’s grocery sector. This view was supported by the survey respondents: 71% said they would be interested in personalized promotional offers, and around 60% would be interested in AI assisted services such as customer service chatbots and recipe recommendations. In terms of technology, UAE’s retailers may also have an advantage over their Western counterparts in that UAE consumers appear to be more willing to engage with new technology, for instance UAE customers are three times more interested in using customer service and shopping help chatbots than their US counterparts.

“The UAE grocery market stands out in the region for its successful modernization. In many ways, it offers a blueprint for emerging grocery markets like the Kingdom of Saudi Arabia. However, competition continues to escalate, so many of these brands will need to make progress towards a truly differentiated proposition in order to be successful in the long run,” Abi Akl concluded.

About Oliver Wyman  

Oliver Wyman is a global leader in management consulting. With offices in more than 70 cities across 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has 7,000 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on LinkedIn and X.