The Mena online grocery market was worth $4.5 billion last year and is expected to grow at a compound annual growth rate of around 24 per cent, hitting $25 billion by 2030, according to consulting firm RedSeer.
Today, the UAE is the most mature market in the region with online grocery penetration of about nine per cent, while other countries such as Egypt and Saudi Arabia the rate stands at less than five per cent.
Supporting trends like discovery commerce, operational efficiency and sector diversification are predicted to transform the regional online grocery retail market, according to managing partner at RedSeer Middle East, Sandeep Ganediwalla.
The grocery retail landscape has changed beyond recognition since the lockdown hit as online shopping was rapidly gaining momentum as a result. Before 2020, the online grocery was a relatively untapped sector in online shopping since consumers preferred to touch and feel products before purchasing. But during lockdown, online grocery usage picked up steam as people had to stay at home.
As things have evened out now, there is a growing curiosity surrounding the question of whether this shopping trend is a fad or forever.
Mr Ganediwalla said: “The Mena online grocery market was accelerated with a CAGR of more than 250 per cent and reached two per cent of the overall grocery market in 2020.
“Post-pandemic, many consumers who tried online grocery for the first time liked the experience and flexibility that it offered. Consumer behaviour changed significantly from need-based to value-based to now experience-based shopping. Today, Mena consumers look for a large product range online, a differentiated experience and convenience across each step of the journey.
“We think this trend is here to stay as it serves an unmet demand in the market. However, online grocers will need to continuously improve their overall value proposition to meet the consumer expectations while deploying viable business models.”
Obvious growth potential
Another important question is if online grocery buyers have reached a critical mass in the Mena region.
The UAE and Saudi Arabia remain the largest online grocery markets. Their order volume has surpassed the thresholds needed at an overall level. Even so, the online segment is still heavily fragmented with omnichannel, online marketplaces, e-grocery specialists and hyperlocal players serving the consumers.
“Not all these players have reached critical mass yet and the majority of the growth is still ahead of us in this segment,” noted Mr Ganediwalla.
Effect of quick commerce
Quick commerce which typically means guaranteed delivery within four hours or in some cases even one hour or less has been one of the main driving forces in the growth of the online grocery market.
“In recent years, quick commerce has played a pivotal role in shaping the online grocery market with sales contribution rising from less than 10 per cent in 2020 to more than 30 per cent in 2022 in the Mena region. Going forward, grocery quick commerce will continue to be the key growth driver and will capture majority of the online grocery market by 2030,” said Mr Ganediwalla.
