MENA online grocery market to touch $25 billion by 2030

The MENA online grocery market stood at $4.5 billion in 2022 and is expected to grow at a CAGR of ~24% to reach $25 billion by 2030, estimates RedSeer. Currently, the UAE is the most mature market in the region with online grocery penetration of ~9%, whereas other countries such as Egypt and the Kingdom of Saudi Arabia (KSA) have a penetration of less than 5%.

Supporting these growth estimates trends including discovery commerce, operational efficiency and sector diversification are expected to reshape the regional online grocery retail market, believes Sandeep Ganediwalla, Partner – MEA for RedSeer.

The grocery retail landscape has undergone a massive shift since the pandemic as online shopping gained steam. Before the pandemic, grocery was one of the least penetrated sectors in online shopping as consumers wanted to touch-and-feel their grocery items before buying. But during the pandemic-induced lockdowns, online grocery usage picked up as safety became paramount.

As things have normalised now, there is a lot of curiosity around whether this shopping behaviour is here to stay.

“The MENA online grocery market was accelerated with a CAGR of 250+% and reached 2% of the overall grocery market in 2020,” Ganediwalla shared. “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.”

There’s still massive growth potential

Another question that comes to mind is if online grocery buyers have reached a critical mass in the region?

The UAE and KSA continue to be the largest online grocery markets. In these markets, the order volume has crossed the thresholds needed at an overall level. However, the online market continues to be fragmented with omnichannel, online marketplaces, e-grocery specialists and hyperlocal players serving the consumers, Ganediwalla observed. “Not all these players have reached critical mass yet and majority of the growth is still ahead of us in this segment.”

Impact of quick commerce

Quick commerce which typically refers to delivery within four hours or in some cases even 60 minutes or less has been a critical driver of online grocery. It provides more convenience to customers with its instant and doorstep delivery curated selection of products, thereby addressing top consumer needs while removing inefficiencies and upgrading the experience of online retail channels.

“In recent years, quick commerce has played a pivotal role in shaping the online grocery market with sales contribution rising from less than 10% in 2020 to more than 30% 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,” Ganediwalla stated.

Three trends to reshape online grocery retail landscape

• Discovery commerce: As brands look to enhance discovery of their products, discovery commerce will be the key to unlocking the future potential of the grocery market.
• Operational efficiency: Grocery and other sectors will witness the acceleration of the dark store model along with increased adoption from hinterlands. Retailers will need to expand logistics capabilities and place greater emphasis on inventory planning to drive customer satisfaction.
• Sector diversification: Quick commerce players will diversify into categories such as gifts, pharmaceuticals and flowers to strengthen their position in the market.