Unlocking Success in Saudi Arabia’s Grocery Retail Landscape

This article is brought to you by our Knowledge Partner Oliver Wyman

The grocery retail market in the Kingdom of Saudi Arabia (KSA) is rapidly changing. Once defined by rapid expansion and availability, today’s landscape is shaped by rising consumer expectations, growing competition and a clear demand for both value and differentiation of offering.

At first glance, these priorities might seem at odds. However, for retailers looking to thrive in the Kingdom, understanding how Saudi consumers balance cost, quality, service and experience is key to long-term success.

Drawing on insights from Oliver Wyman’s Market Pulse 2024 — Grocery Retail Trends in the UAE and Saudi Arabia report and the strategic management consultancy’s Customer Perception Map (CPM) survey, we explore how grocers can respond to the shifting dynamics and what strategies will define the next chapter of growth in KSA.

The Evolving Saudi Grocery Market

With a market valued at $62 billion and a five-year compound annual growth rate (CAGR) of 4.2%, Saudi Arabia remains one of the most attractive grocery retail environments in the region. Unlike the more mature United Arab Emirates (UAE) market, KSA offers more room for expansion because its modern retailers still represent a lower share of the market than informal outlets such as small, traditional grocers.

Expansion alone is no longer enough. Differentiation of offering is now key – when looking at the results of Oliver Wyman’s CPM, it's clear that Saudi customers perceive less differentiation between their local grocery players than customers in the UAE and the European markets surveyed.

As the battle for customer trips and share of wallet intensifies globally, more unique concepts will emerge that focus on either offer or value and this will in turn make Saudi consumers more selective. A deep understanding of customer needs helps retailers navigate this evolving landscape.

The Value Imperative

The Oliver Wyman Customer Perception Map gives insights into key trends in the market. For Saudi consumers, value is the most significant factor in selecting a retailer, influencing 51% of their outlet choice decisions. When asked directly about the main reasons for choosing a store, Saudi consumers place good offers and promotions ahead of quality or freshness.

Clearly there is a demand for more affordable options in the market. This is further backed by the fact that 68% of Saudi consumers expressed an interest in shopping at a discount grocery retailer, with more than 90% of consumers who had heard of the brands saying they would shop at Aldi or Lidl if they operated in the Kingdom.

For retailers striving to offer value to their customers, a strong private-label range is key. Historically underrepresented in the region, private labels are gaining traction as consumers seek cost-effective alternatives without compromising quality. In fact, 79% of shoppers in Saudi Arabia state they already purchase private label items regularly.

The Differentiation Play

Yet, value is not the only factor driving customer decisions. A combination of quality, assortment, shopping experience and service influence where customers shop nearly as strongly as value. Spinneys in the UAE is a great example of a retailer focusing on winning customers through exclusive assortments, innovative own-label products, high-quality fresh products and a premium shopping experience.

When building a differentiated assortment, offering local products is a key ingredient. Depending on the category, 80% to 90% of Saudi consumers deliberately look for locally produced products, most prominently in the fruit and vegetables category.

In a country as diverse as Saudi Arabia in terms of demographics, regions and purchasing power, understanding different customer needs at each location is key for success. Technology is a key enabler.

Technology and AI: The Next Frontier for Differentiation

While price and product remain core drivers, technology, including artificial intelligence (AI), is emerging as a powerful tool for differentiation in KSA’s grocery retail sector.

Saudi consumers are increasingly open to digital innovations that enhance convenience, personalisation, and engagement. Whether through AI-driven promotions, seamless omnichannel experiences, or smart loyalty programs, technology offers retailers new ways to build stronger customer relationships.

With 33% of Saudi customers already engaging in both online and in-store shopping, there’s a clear demand for flexible, tech-enabled experiences. This hybrid behavior is only set to grow as infrastructure improves and consumers become more accustomed to digital touchpoints.

Moreover, Saudi consumers display a relatively high willingness to share personal data when it leads to tangible benefits, creating opportunities for retailers to further refine personalisation strategies.

Looking Ahead

As Saudi Arabia’s grocery retail industry enters a new chapter of maturity, new formats will emerge. Retailers will need to upgrade their capabilities to succeed in this competitive environment, meet the increased demand for value from Saudi consumers and excite through attractive, localised and personalised shopping experiences both offline and online.

Retailers that adapt now by aligning with evolving consumer expectations and embracing innovation will be best positioned to lead the way in this next phase of growth.

Source: “Market Pulse 2024 — Grocery Retail Trends in the UAE and Saudi Arabia” Report, Oliver Wyman