Strong demand for discount retail in Saudi Arabia and UAE

• Private labels gain traction
• 90% seek locally-produced products
• Viva plans 50 stores in Oman

Experts are predicting significant growth in discount retail stores and private label brands in UAE and Saudi Arabia in the coming years. 

Cost-conscious consumers in the region are looking for convenience and value in their weekly shop and that extends to buying retailer own-brand products usually cheaper than market leading brands.

In a recent survey of customer behaviour and preferences in the UAE and Saudi Arabia, consultancy Oliver Wyman found that value ranked first both in terms of customer satisfaction and what motivates them to shop in a particular outlet.

“In grocery specifically, 70 percent in Saudi Arabia and 60 percent in the UAE have expressed very high interest to shop at discount retail,” Joe Abi Akl, head of retail and consumer for India, the Middle East and Africa at Oliver Wyman told AGBI.

“It’s something that didn’t exist in the region before, to the extent that now we see customers are starting to build that awareness around the models that are more prevalent in Europe, like Aldi, Lidl and the similar models.”

Discount retailers offer products at a cheaper price than traditional ones, mainly through efficient operations and bulk purchasing. Several are currently operating in the UAE, including Gala, which is owned by Western International Group, and Viva. 

Owned by the Landmark Group, Viva has 100 stores in the UAE and Oman, with plans to add 50 more in Oman by 2028.

Viva will also open stores in Saudi Arabia next year.

Dukan is the main grocery discount retailer in Saudi Arabia. Founded in 2013 by the Al-Dabbagh Group, it has about 100 stores across Jeddah, Mecca and Al Taif, with plans to expand to Riyadh. Last year Kazyon, an Egypt-based discount supermarket chain, bought a 50 percent stake in the retailer.

“There is definitely a huge opportunity for a value play to emerge at a sizeable scale,” said Abi Akl.

“We estimate that this could capture probably 20 percent of the [grocery] market, both in Saudi and in the UAE.”

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Abi Akl said their grocery retail trends survey found that 90 percent of customers look for locally produced products. He said private labels are also starting to gain traction in the market. 

“If you want to trade down, you can get a Spinneys or Carrefour or Lulu product at 20-30 percent cheaper than the global brand, customers would go for it,” he said.

The survey found that 66 percent of UAE and 79 percent of Saudi respondents buy private-label products on at least half of their shopping trips.

David Cantatore, retail lead at NIQ Middle East, said: “Private label products have been increasing in modern trade, but in the UAE, they still account for only 3 percent, lagging significantly behind most European countries, where the share is above 30 percent.”