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1、THE AFFORDABILITY IMPERATIVECapitalizing on Value-Led Grocery Retail in the GCCCONTENTSIntroduction 3The Opportunity in Value-Led Grocery Retail:A Study of Saudi Arabia 467Learning from Global Leaders in Value-Led Grocery Retail The Two-Step Approach:Value,Then Enhancing Offer Differentiation Betwee

2、n Retailers 8Thoughts on Winning Value-Led Grocery Retail Models in the GCC 9How to Set Up Successfully in the GCC 12Key dimensions for Building a Winning Model 12Value-Led Archetypes 12Conclusion 14The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCC Oliver Wyman3INTRODU

3、CTIONAs the grocery retail landscape in the Gulf Cooperation Council(GCC)becomes increasingly saturated,the need for differentiation has never been more critical.Retailers face the challenge of driving like-for-like growth in a market where consumer priorities are shifting dramatically.This report d

4、elves into the transformative potential of value-led grocery retailing in the GCC,a strategy that not only addresses the pressing demand for affordability but also offers a pathway for retailers to disrupt the market landscape.We will explore the diverse spending power and evolving consumer behavior

5、s that shape this dynamic environment,presenting key strategies for success.These strategies include crafting compelling value propositions,streamlining operations for enhanced cost efficiency,fostering dynamic growth,and tailoring approaches to meet local market needs.Drawing on insights from globa

6、l leaders in value-led grocery retail,this report provides actionable strategies while addressing the unique challenges faced in the GCC region.It concludes with four market-entry archetypes and a compelling call to action for retailers to capitalize on the burgeoning opportunities within value-led

7、grocery retail.As the GCC market evolves,understanding and implementing these strategies will be essential for retailers aiming to thrive in this competitive landscape.Oliver Wyman4The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCTHE OPPORTUNITY IN VALUE-LED GROCERY RE

8、TAIL:A STUDY OF SAUDI ARABIAGiven the shifting economic dynamics,it is crucial that retailers understand consumer spending power.In this section,we will do a deeper analysis of Saudi Arabia,the GCCs largest market.Oliver Wymans 2024 Saudi Arabia Consumer Trends Survey highlighted that income levels

9、for more than half of households in Saudi Arabia shifted throughout 2024.The overall findings showed that disposable income is shrinking,and customers are seeing an increasing need to make conscious decisions with their money.Around 31%of households reported a drop in income during 2024,with 11%seei

10、ng declines of more than 50%(see Exhibit 1).Also,40%of consumers reported a drop in savings,while only 23%managed to increase their savings.It is clear that consumers are navigating a landscape where affordability and value have become paramount.When looking to save,consumers are shifting behaviors:

11、48%of those surveyed say they compare prices,while 46%actively seek stores offering lower prices.Retailers must recognize these shifting behaviors and adapt their offerings to meet the evolving needs of a consumer base that is increasingly focused on maximizing value.Exhibit 1:Household finances in

12、Saudi Arabia in 2024(%)Question:How have your household finances changed over the past 6-12 months?Increase of more than 50%Increase of 26-50%Increase of up to 25%It hasnt changedDecrease of up to 25%Decrease of 26-50%Decrease of more than 50%61743128115112530127106153816915IncomeSpendingSavingNote:

13、This survey question was asked in December 2024Source:Oliver Wyman 2024 Saudi Arabia Consumer Trends Survey Oliver Wyman5The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCAdditionally,the Oliver Wyman Customer Perception Map Survey(CPM)provides valuable insights into co

14、nsumer behavior in Saudi Arabia,reinforcing the trend toward value-driven shopping.When it comes to choosing a primary retailer,Value,encompassing price and promotions,is the most significant factor for Saudi customers(51%).Furthermore,80%of consumers reported regularly purchasing private-label prod

15、ucts,primarily motivated by price considerations.These findings highlight a significant shift in consumer preferences toward affordability,creating a robust opportunity for retailers who excel in terms of value-driven offerings.In a related finding,the CPM survey also reveals strong demand for disco

16、unt grocery retailers in Saudi Arabia,with 68%of customers expressing interest in cost-effective shopping options(see Exhibit 2).Additionally,97%of consumers familiar with international discount brands such as Aldi and Lidl say they would consider shopping at these stores if they were available loca

17、lly.This significant interest underscores a substantial market opportunity.The entry of established international players or new local brands that prioritize value-driven strategies could transform the competitive landscape,which could exert pressure on margins throughout the entire value chain.Exhi

18、bit 2:Customers interest in shopping at a discount grocery retailer in Saudi Arabia(%)Question:Would you be interested in shopping at a discount grocery retailer?Question:Would you shop at Aldi or Lidl if they were available in Saudi Arabia?1353404 1 25521352I already shop at such a storeI would be

19、interestedMaybeTried,but stoppedI would not be interestedI do not know what discount grocery retailers areYes,regularlyYes,occasionallyMaybeNot sureNoSource:Oliver Wyman 2024 CPM Survey Oliver Wyman6The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCLEARNING FROM GLOBAL

20、LEADERS IN VALUE-LED GROCERY RETAILSuccessful international value-led grocery retailers offer critical lessons for navigating the evolving grocery retail landscape.These players thrive by leveraging three key strategies(see Exhibit 3):1.An attractive propositionWinning value-led grocery retailers ma

21、intain an unwavering focus on price,effectively attracting consumers who prioritize value for money.Their strong private-label offerings,bolstered by strategic product management and innovation,further distinguish them in competitive markets.Success in the“Fresh”category is equally crucial,achieved

22、through high product turnover and direct sourcing.Each retailer crafts its own unique formula for success some emphasize planned-purchase,brands and larger store formats,while others thrive with limited assortments,smaller stores,and private-label products.2.Streamlined operationsOperational efficie

23、ncy is core to the success of these retailers.They focus on reducing operating costs through end-to-end optimization,especially in the private-label and fresh categories.Winning retailers cultivate a“discount mindset”among highly motivated teams,fostering a culture of cost-efficiency.3.Aggressive sc

24、ale-upRapid growth is a hallmark of successful discount retailers,often achieved through a light capital expenditure(CAPEX)model.These players combine fast scaling with tailored market adaptation,enabled by deep local market knowledge.Reinvesting operating profits back into the business fuels contin

25、ual growth,solidifying market leadership.Exhibit 3:Proven success factors for European value-led grocery retailersAttractivePropositionStreamlinedOperationsAggressiveScale-UpLeverage high volume through aggressive pricingOffer a high-quality limited range with high private-label shareUtilize high bu

26、ying power through high volume per Stock Keeping Unit(SKU)Keep things as simple as possibleAchieve end-to-end excellenceMaintain high labor productivityOperate with negative net working capitalReinvest operating profits in rapid store expansion and attractive propositionScale efficiently with standa

27、rdized models,low CAPEX stores and high RoCE(return on capital employed)Source:Oliver Wyman analysis Oliver Wyman7The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCTHE TWO-STEP APPROACH:VALUE,THEN ENHANCING OFFERNow that we have outlined the three key strategies employe

28、d by global leaders in value-led grocery retail,let us delve deeper into their two-step approach for building value and then enhancing their offerings.These retailers share a singular priority:an unwavering commitment to delivering value,which is essential for attracting cost-conscious consumers.The

29、y typically begin by establishing a strong value perception,focusing on low prices,a basic yet adequate assortment that meets core needs,and simple,low-CAPEX store formats.This foundational strategy ensures operational efficiency while effectively capturing consumer interest.Once value perception is

30、 firmly established,they then shift their focus to enhancing offer perception(see Exhibit 4).This transition involves improving product quality,expanding product assortments,upgrading store aesthetics,and enriching the overall shopping experience to better meet the diverse needs of consumers.This tw

31、o-step approach allows retailers to secure market share through value dominance and continuously increasing pressure on incumbent retailers by gradually evolving into a more comprehensive,consumer-centric offering.Exhibit 4:The two-step approach to value-led expansionStrong offerStrong valueStep 1St

32、ep 2WinningWeak offerWeak valueLosingFair trade lineOptimal offer/value tradeoffStep 1:Move EastImprove value perception Strong focus on value lowest prices Basic assortment,but covering all needs Basic stores,low CAPEX In-Out(non-food)promotions driving trafficStep 2:Move NorthImprove offer percept

33、ion Improved assortment,signs oflocalization Improved fresh quality and experience(e.g.,bake-off)Improved store look-and-feel Taking over the full basket and expanding target customer setSource:Oliver Wyman analysis Oliver Wyman8The Affordability Imperative:Capitalizing on Value-Led Grocery Retail i

34、n the GCCDIFFERENTIATION BETWEEN RETAILERSWhile global value-led grocery retailers share a strong commitment to delivering value,they also differentiate themselves through unique strategies across four critical dimensions:pricing,product assortment,operational efficiency,and customer engagement.Here

35、,we will analyze the approaches of some key players across Europe and the United Kingdom.PricingPricing strategies remain a key differentiator.Retailers such as Aldi and Lidl focus on an Everyday Low Pricing(EDLP)model combined with attractive promotions,while Colruyt employs a lowest price promise,

36、ensuring no customer can buy the product cheaper in the catchment area,including promotions.Product AssortmentProduct assortment also sets retailers apart.Aldi and Lidl excel with high-quality private-label products that deliver significant savings while allowing greater control over quality and pri

37、cing.In contrast,retailers like Netto emphasize branded products,leveraging low prices and attractive promotions to appeal to consumers.Operational EfficiencyOperational efficiency is central to maintaining competitive pricing while ensuring profitability.Each retailer approaches this differently:Bi

38、edronka uses modern distribution technologies and local sourcing to reduce costs;Colruyt and SOK incorporate automation and advanced analytics to optimize inventory management;while Mercadona enhances end-to-end efficiency through vertical integration.Customer EngagementCustomer engagement strategie

39、s are critical for building lasting relationships.Loyalty programs,digital tools,and promotions play a growing role in todays grocery retail market.For example,Lidls Lidl Plus app has loyalty features that work to enhance customer experience and drive sales.Oliver Wyman9The Affordability Imperative:

40、Capitalizing on Value-Led Grocery Retail in the GCCTHOUGHTS ON WINNING VALUE-LED GROCERY RETAIL MODELS IN THE GCCWhile many principles from Western value-led models are relevant and can provide valuable inspiration for GCC retailers,success in the GCC requires careful consideration of regional dynam

41、ics.Here are some factors that make the region so unique and nuanced:The regions clientele is particularly culturally diverse,especially in the UAE(89%expatriate population spanning 200+nationalities1)and Saudi Arabia.Additionally,significant income inequality shapes shopping habits.Notably,income d

42、isparity in the GCC is among the highest in the world.2 The GCC market is unique due to the prevalence of baqalas and traditional markets,which offer low but often untransparent pricing alongside strong quality and personalized service.Modern trade outside of these traditional grocers currently acco

43、unts for 83%of FMCG value in the UAE and 52%in Saudi Arabia.3 Price levels vary widely across the region,requiring a differentiated pricing approach while presenting opportunities for centralized sourcing platforms to optimize costs.4 Consumer behavior reflects a strong preference for service-orient

44、ed shopping,with 56%of UAE respondents and 33%in Saudi Arabia saying they are motivated by speed and convenience when buying groceries both in store and online.5 Another critical factor is the underdeveloped private-label market,driven by high trust in established brands and supply chain gaps.Privat

45、e-label penetration remains low,standing at just 3%in the UAE and 1%in Saudi Arabia,presenting a large opportunity.6,7Understanding these nuances is essential for successfully navigating the GCCs grocery retail landscape.Certain global success factors align well with the region,while others require

46、stronger adaptation.See Exhibit 5 for an overview of the applicability of these factors to the GCC context.1 Global Media Insight|UAE population statistics,20242 WID World Inequality Database3 Kantar report Understanding the Middle East Shoppers,20244 Milk price:Comparison GCC/ME vs.Europe based on

47、Numbeo,20245 Oliver Wyman Customer Perception Survey KSA and UAE,20246 issuu,GDONews.Statista.Market share of private-label brands worldwide in Q1 2023,by selected territory,20237 Nielsen Oliver Wyman10The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCExhibit 5:Success

48、factors of value-led grocery retailers GCC ContextValue-led grocery retailers success factorsAdaptability to GCC contextAttractive propositionLeverage high volume through aggressive pricingHigh relevance due to price-sensitive marketOffer a high-quality limited range with high private-label shareGCC

49、 private-label ecosystem still in infancy,lowest income segments willing to compromiseUtilize high buying power through high volume per SKUHigh relevance to keep prices lowStreamlined operationsKeep things as simple as possibleHigh relevance to keep cost lowAchieve end-to-end excellenceOverall suppl

50、y chain still very inefficient,costs often hidden,huge opportunity for differentiationMaintain high labor productivityLabor cost still low in many GCC marketsAggressive scale-upOperate with negative net working capitalHigh relevance of enhanced cash flow and RoCEReinvest operating profits in rapid s

51、tore expansion and attractive propositionHigh relevance to gain economies of scaleScale efficiently with standardized models,low CAPEX stores and high RoCEHigh relevance for NOPAT RoCESource:Oliver Wyman analysisWhen comparing the profit and loss(P&L)statements of grocery retailers in Western countr

52、ies to those in the GCC region,it is evident that P&L management poses significant challenges in the GCC.Currently,some cost factors are still less significant than in Western markets,as detailed in Exhibit 6,and many players in the region lack the scale necessary to optimize gross margins.Despite t

53、he difficulties associated with value-led grocery retail in the GCC today,the precedents set in European markets demonstrate that the landscape can shift rapidly once value-driven concepts begin to gain traction.Oliver Wyman11The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in t

54、he GCCExhibit 6:Profit and Loss in grocery retail in Europe and the GCCEuropeGCCTraditional supermarketTraditional hypermarketValue-ledTraditional supermarketTraditional hypermarketValue-ledSales productivity($/sqm/year)4,000-7,0003,000-6,0008,000-12,0002,000-4,0003,000-6,0002,000-4,000Western,value

55、-led grocery retailers have much higher sales productivity($/sqm),pattern still to emerge in GCCNet operating profit after taxes(NOPAT)RoCE8-12%8-12%12-15%10-15%15-20%8-12%Value-led grocery retailers have minimal capital investments,together with higher profitability leading to higher NOPAT RoCESale

56、s100%100%100%100%100%100%Costs of goods sold(67-71%)(72-76%)(76-80%)(68-72%)(73-77%)(78-82%)Higher%of COGS for value-led given lower prices Contains significant hidden cost for traditional super-and hyper-markets in the GCCGross margin29-33%24-28%19-24%28-32%24-28%18-22%Distribution(2-3%)(2-3%)(1-2%

57、)(1-2%)(1-2%)(2-3%)Lower%distribution in the GCC as largely covered by suppliers In the GCC higher%distribution for value-led as no direct deliveryRetail Opex excl.store labor costs(10-14%)(7-11%)(5-9%)(7-11%)(5-9%)(4-8%)Lower%retail opex for value-led stores,driven by lean operationsStore labor cos

58、t(10-14%)(8-12%)(6-9%)(7-11%)(4-8%)(4-7%)Lower%store labor cost in the GCC as labor less expensive in the GCC Lower%store labor costs for value-led stores,driven by labor productivityCentral cost(3-4%)(3-4%)(2-3%)(3-4%)(3-4%)(2-3%)Comparable across players,slightly lower for value-led due to more fo

59、cused overhead spend,higher standardization and fewer suppliersEBIT1-2%1-2%2-4%5-9%6-10%2-5%EBIT%is still substantially higher in the GCC for traditional super-and hyper-markets,expected to decrease if value-led grocery retailers gain tractionSource:Oliver Wyman analysis Oliver Wyman12The Affordabil

60、ity Imperative:Capitalizing on Value-Led Grocery Retail in the GCCHOW TO SET UP SUCCESSFULLY IN THE GCCKEY DIMENSIONS FOR BUILDING A WINNING MODELTo succeed as a value-led grocery retailer in the GCC,it is essential to focus on several key dimensions.Offering an attractive proposition requires caref

61、ul decisions on pricing,product assortment,promotions,loyalty programs,and store formats to appeal to price-sensitive consumers.Streamlined operations are equally important,with an emphasis on sourcing strategies,end-to-end operational efficiency,labor management,and logistics.The integration of dig

62、ital technologies can further enhance operations and customer engagement,which ensures competitiveness in the market.Finally,scaling effectively and adapting to local markets involves developing a clear brand message,optimizing store designs based on demographic insights,and strategically planning g

63、eographical expansions.By addressing all the above dimensions,retailers can build a model that meets market demands,fosters customer loyalty,and supports sustainable growth.VALUE-LED ARCHETYPESOliver Wyman identifies four potential archetypes that can be used to successfully establish a value-led gr

64、ocery retailer in the GCC(see Exhibit 7):1.Neighborhood discount model:This model focuses on offering essential grocery items at low prices in small,easily accessible stores,catering to the everyday needs of nearby residents.Example players include BIM and Kazyon.2.Basic discount model:Characterized

65、 by a no-frills shopping experience,pragmatic store formats,efficient operations,and limited private-label and fresh offerings at attractive prices.Example players include Netto and Biedronka.3.Mature discount model:Built on a strong value and operational efficiency foundation,this model upgrades it

66、s proposition with differentiated private-labels,fresh product offerings,and more attractive stores.Example players include Aldi and Lidl.4.Full-basket value-led model:This model offers comprehensive grocery solutions with a broad product assortment at competitive prices,encouraging bulk purchases a

67、nd fostering loyalty through value-driven offerings.Example players include Colruyt and S-Market.Oliver Wyman13The Affordability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCThe neighborhood discount model is often the most scalable due to its simplicity and accessibility,followed b

68、y the basic discount model.In contrast,the full-basket value-led model is more complex to establish but leads in profitability,followed by the mature and basic discount models,with the neighborhood model being the least profitable in the long-run.Exhibit 7:Potential archetypes for the value-led groc

69、ery retailer setupNeighborhood discount modelBasicdiscount modelMature discount modelFull-basket value-led modelComprehensive grocery solutions with wide product assortment at competitive prices,encouraging bulk purchases and loyalty through value offeringsExamplesCulruyt,S-MarketWhile true value an

70、d an efficient operating model stays core to the DNA of the business,there is an upgraded proposition through differentiated private-label and fresh products and attractive storesExamplesAldi,LidlFocusing on no-frills shopping experience,efficient operations,limited private-label and fresh products

71、at overall very attractive prices,very pragmatic storesExamplesNetto,BiedronkaFocuses on providing essential grocery items at low prices in local,easily accessible stores,catering to the everyday needs of nearby residentsExamplesBIM,Kazyon MarketMore attractive in terms of scaling Large,low-income m

72、arketsMore mature GCC marketsMore attractive in terms of profitabilitySource:Oliver Wyman analysisThe archetype or model that a retailer sets as a target must align with the specific market context.For example,large low-income markets may favor simpler models,while more mature markets such as the UA

73、E and Saudi Arabia might support more sophisticated approaches(see Exhibit 8).Ultimately,retailers must choose their model carefully and consistently apply the strategy across dimensions such as store size,pricing,promotions,product range,private-label share,and fresh products.Oliver Wyman14The Affo

74、rdability Imperative:Capitalizing on Value-Led Grocery Retail in the GCCExhibit 8:Mapping value-led grocery retail value,offering,and customer captureStrong offerStrong valueWinningWeak offerWeak valueLosingCustomer Perception MapFair trade lineOptimal offer/value tradeoffStrongStrongWeakWeakInner d

75、rawCapture more trips from people closest to youOuter drawCapture more trips from people who drive past other grocery retailersNeighborhood discount modelBasic discount modelMature discount modelFull-basket value-led modelFull-basket value-led modelBasic discount modelNeighborhood discount modelMatu

76、rediscount modelSource:Oliver Wyman analysisCONCLUSIONUnlocking the potential of value-led grocery retail in the GCC requires a strategic,consumer-focused approach that resonates with the regions diverse demographics.By drawing insights from global leaders and adapting successful strategies to the u

77、nique characteristics of the GCC market,retailers can effectively meet the rising demand for affordable,value-driven shopping experiences.As the grocery retail landscape continues to evolve,now is the critical moment for retailers to redefine value in ways that align with the needs and preferences o

78、f consumers across the region.Those who act decisively and invest in the right strategies will not only thrive but also set new standards for value-led grocery retailing on a global scale.The opportunity is significant who will seize it first?Oliver Wyman,a business of Marsh McLennan(NYSE:MMC),is a

79、management consulting firm combining deep industry knowledge with specialized expertise to help clients optimize their business,improve operations and accelerate performance.Marsh McLennan is a global leader in risk,strategy and people,advising clients in 130countries across four businesses:Marsh,Gu

80、y Carpenter,Mercer and Oliver Wyman.With annual revenue of$23billion and more than 85,000 colleagues,Marsh McLennan helps build the confidence to thrive through the power of perspective.For more information,visit ,or follow on LinkedIn and X.Americas Europe Asia Pacific India,Middle East&Africa+1 21

81、2 541 8100+44 20 7333 8333+65 6510 9700+971(0)4 425 7000The RLC Global Forum is a leading platform that brings together the worlds most influential global retail leaders,innovators,and policymakers to drive positive industry change.The Forum marks the next phase of the Retail Leaders Circles(RLCs)de

82、cade-long mission to connect and empower leaders within the retail sector.Through high-level discussions and strategic cross-industry initiatives,the Forum addresses the long-term forces shaping a brighter future for retail and its interconnected Copyright 2025 Oliver WymanAll rights reserved.This r

83、eport may not be reproduced or redistributed,in whole or in part,without the written permission ofOliver Wyman and Oliver Wyman accepts no liability whatsoever for the actions of third parties in this respect.The information and opinions in this report were prepared by Oliver Wyman.This report is no

84、t investment advice and should not be relied on for such advice or as a substitute for consultation with professional accountants,tax,legal or financial advisors.Oliver Wyman has made every effort to use reliable,up-to-date and comprehensive information and analysis,but all information is provided w

85、ithout warranty of any kind,express or implied.Oliver Wyman disclaims any responsibility to update the information or conclusions in this report.Oliver Wyman accepts no liability for any loss arising from any action taken or refrained from as a result of information contained in this report or any r

86、eports or sources of information referred to herein,or for any consequential,special or similar damages even if advised of the possibility of such damages.The report is not an offer to buy or sell securities or a solicitation of an offer to buy or sell securities.This report may not be sold without the written consent ofOliver Wyman.AUTHORSJoe Abi AklPAlexander PoehlPSimone KorrelEngagement MOliver Wyman A business of Marsh McLennan