Online grocery shopping used to be one of the lowest performing ecommerce categories in the Middle East. Since the pandemic, however, sales have doubled. With people spending more time inside than outside and consumers shopping online more than ever, e-groceries in the UAE have seen remarkable growth. The value of ecommerce in the region trebled between 2015 and 2019 mainly driven by electronics and beauty products, while online grocery sales were lagging.
While COVID-19 has been disastrous for many areas of business in the world, it has boosted the e-grocery world exponentially. Pre-pandemic growth in the sector was steady but slow. Between 2018 and 2019 in the UAE, online grocery sales grew from $170 million to $299 million. In 2020, the market was expected to keep growing, but no one anticipated it to more than double in size, with the market now worth over $1.1 billion. The pandemic has changed the way consumers behave, and with the increased need to shop online as lockdowns and quarantine interrupt everyday life, this is going to continue.
What's driving the growth?
If it wasn't for the pandemic, the current levels of growth from the e-grocery market may not have occurred. People enjoy shopping in person. Examining fruit and vegetables up close to determine their viability was a pastime many would indulge in at least once a week. During a pandemic, however, this is not always possible. With consumers wanting to avoid crowded places due to risk of infection, they are now favouring the safety and convenience of online shopping. This behaviour shift is particularly evident in the older generation who have been urged by the virus to join the online shopping bandwagon. An increase in order numbers was coupled with an increase in the average order value which increased to AED 180-200.
There was double-digit growth across all essential product categories, in particular water, fresh fruit and vegetables, health and nutrition, and general household products.
To cope with this surge in demand, retailers partnered with third-party delivery companies to manage last-mile logistics. In addition to this, in Abu Dhabi and Dubai, online grocers partnered with taxi fleets to take care of door-to-door delivery. Despite these partnerships, delivery lead times increased and it is expected that online grocers will introduce new technology like drone delivery, warehouse automation, and voice ordering to enable quicker deliveries, but also reduce fulfilment costs and increase convenience for consumers.
The introduction of other technologies like artificial intelligence will also provide consumers with a more personalised shopping experience, which is likely to drive further growth. Investing in AI would also allow retailers to accurately predict demand and analyse consumer behaviour, which is crucial to ensure sufficient availability of products and keep waste to a minimum.
According to a report by Ken Research, the online grocery market will be valued at AED 3.8 billion by the end of 2025 and the market will witness growth owing to the introduction of subscription models and innovative strategies adopted by service providers. Regional expansion and the increase in working population will also stimulate future growth.