As Competition Escalates, Oliver Wyman Urges UAE Grocery Retailers to Embrace Specialization

A recent report by Oliver Wyman, a global management consulting firm, reveals that the UAE's grocery sector is undergoing significant modernization amid rising competition. The report indicates that "modern trade" grocers in the UAE are now striving for like-for-like (LFL) growth by attracting customers from competitors and increasing their share of wallet with existing customers.

As the market matures, retailers face the risk of saturation and potential disruption. The Oliver Wyman Customer Perception Map (CPM) survey highlights that retailers must differentiate themselves through superior value or exceptional offerings to remain competitive. The survey also shows that UAE customers have developed unique preferences compared to other GCC markets, presenting both challenges and opportunities.

Focus on Differentiation

Joe Abi Akl, a partner at Oliver Wyman, stated, "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." He added that some brands focus on premium experiences while others balance value and quality.

This differentiation is evident in the UAE grocery market. For instance, Spinneys and Waitrose emphasize high-quality fresh products and unique labels. Conversely, Viva focuses on value with its discount model. Large hypermarket chains like Carrefour, LuLu, and Nesto aim to balance both by offering extensive assortments and attractive promotions.

Customer Preferences

The CPM analysis reveals that customer satisfaction in the UAE is driven 53% by value (price and promotions), 20% by quality, 18% by range, and 9% by service. Retailers need to focus on these aspects to attract customers without compromising margins. Offering an attractive price entry range and own-label products can be crucial strategies.

An opportunity for disruption exists for a truly value-led retailer. According to the CPM findings, 58% of UAE customers are interested in shopping at discount grocery retailers or already do so. Additionally, 85% expressed interest in shopping at well-known European discount chains like Aldi or Lidl if they entered the UAE market.

Technological Advancements

Emerging technologies such as generative artificial intelligence are expected to play a significant role in supporting differentiation and personalization in the UAE's grocery sector. The survey found that 71% of respondents are interested in personalized promotional offers, while around 60% would welcome AI-assisted services like chatbots and recipe recommendations.

UAE consumers appear more willing to engage with new technology compared to their Western counterparts. For example, they are three times more interested in using customer service chatbots than US consumers. This technological openness provides an advantage for UAE retailers looking to innovate.

Loyalty Programs

Loyalty programs are crucial for enabling consumers to access relevant products and promotions. The survey found that 60% of UAE respondents want more services through loyalty schemes, including F&B, payments, and healthcare services. Moreover, UAE consumers are more likely to share data for such programs compared to European consumers.

"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," said Alexander Poehl from Oliver Wyman. This diversity offers an opportunity for retailers to differentiate through personalization.

The report concludes that while the UAE grocery market has successfully modernized and serves as a model for emerging markets like Saudi Arabia, competition remains fierce. Brands must continue evolving towards differentiated propositions to ensure long-term success.