Supermarkets in Saudi Arabia

PROSPECTS

Supermarkets continues to expand despite economic slowdown

Given the economic slowdown in the country, VAT implementation and increase in dependent fees impacting expatriates resulting in some leaving the country, in addition to the general rise in the cost of living, meant that most consumers tried to avoid unnecessary trips to larger grocery retailers and preferred shopping from nearby supermarkets. These stores offer carefully selected products across a range of categories and can be easily navigated due to the channel’s smaller format.

Supermarkets expected to be key grocery channel over the forecast period

Historically, traditional grocery retailers, locally known as “baqalas” was the preferred grocery channel among the masses. With new reforms and Saudization, expatriates working or owning baqalas were impacted as higher salaries for Saudi employees increased their operating costs.

Supermarkets to target niche segments

As consumers become increasingly health conscious, demand for healthy, organic and gluten-free products has also led to demand for unique and premium products among certain consumer groups in Saudi Arabia, while private label also continued to grow. Many customers decide where to shop for groceries based on the selection of organic and healthy products available at the store.

COMPETITIVE LANDSCAPE

Abdullah Al-Othaim Markets continues to lead supermarkets in 2018

Al Othaim (Abdullah Al-Othaim Markets) continued to be the leading supermarket in 2018, with a widespread network of 153 stores in 2018, an increase of 18 stores from 2017. Its strongest presence is in the capital city of Riyadh.

New entrants target niche segments

With demand for niche products developing, new players opening supermarkets aimed to sell organic and healthy foods. Natureland, Qaf Store, Nutrition Corner, Organica, Abazeer and Watania Agri are some of the major supermarkets targeting niche segments.

Emergence of tech start-ups to open avenues for delivery services

Entrepreneurial start-ups are expected to disrupt home delivery of groceries in Saudi Arabia, because most supermarkets do not have the capabilities and infrastructure to provide these services compared to traditional stores which offer offline delivery to homes, given their closer proximity to neighbourhoods. There is a lack of resources both at the digital and logistics fronts among grocery retailers and the gap is expected to be filled by emerging players and start-ups such as Careeb.

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