Challenges Faced by Online Supermarket Chains in Middle East

Online shopping is going through a boom in the Middle East, especially after the pandemic. However, it still only accounts for about 2-3% of the total market as compared to 10-15% in developed economies. We have discussed the key problems that are holding back supermarket chains in Middle East.

There is no doubt that online delivery is the new normal in the Middle East. Consumers are more inclined towards online shopping due to its convenience and ease of use. But supermarket chains in the Middle East have so much more to do in order to scale up.

Before we jump to key challenges faced by online retailers, let’s take a closer look at current market statistics.

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MENA Region Growth in Online Retail Sector

According to Statista, the eCommerce penetration rate in MENA is 3.8% and experiencing a 53% growth Rate. Among all other countries of the region, the Gulf Cooperation Council (GCC) members have a better growth rate. 

The region has seen quick growth in online shopping since 2015. Within 5 years, the online retail share jumped from $5 billion to $17.7 billion in 2019.

The consumer data shows a 6% additional eCommerce growth in the MENA region due to the pandemic. Covid-19 has caused a boom and the market size is expected to reach $50 billion in 2025.

In the UAE, about 73% of consumers preferred to buy online as well as offline in 2019. This shopping behavior grew to 80% during the pandemic in 2020. Similarly, in KSA, about 82% of consumers said they prefer to buy online as well as offline.

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Platforms Used in the Middle East for Online Grocery Delivery

The rise in the online retail trend is mainly because of the young population. In the MENA region, about 60% of the population is aged under 30. There are consumers who use one of the two main mediums to shop online.

1. Desktop Website

Web commerce is the most popular medium for consumers in the Middle East. Despite the popularity of smartphones, people use desktop websites to browse, compare and shop for products online. Amazon, Noon, and Souq are some of the biggest eCommerce platforms in the region.

2. Mobile Application

According to the World Bank, 80% of the population in the Middle East has smartphones. The majority of young consumers under 25 use mobile applications to purchase goods online. Mobile applications like InstaShop and Carrefour are more famous when it comes to online grocery shopping.

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Category Breakdown of the Middle East Online Grocery Delivery Market

Now that you are aware of the MENA region market, let’s dig a little deeper. It’s time to break down the online grocery delivery market of the Middle East.

Fresh Foods

The MENA region heavily depends on imported food, especially the GCC members. These countries import more than 80% of their total food. This means the majority of the population has to buy it from supermarket chains. 

Household Products

Shopping for home products and furniture shopping is not common. The total share of this category in eCommerce was $1.0 billion in 2020. The data shows that this category is expected to reach $1.6 billion by 2025.

Packaged Foods & Beverages

Fresh foods are often perishable and for this reason, consumers prefer packaged foods. This is a grocery category which is seeing rapid growth. Right now, the packaged foods and beverages market in the Middle East accounts for 5% of global consumption. However, the demand for packaged food is growing and is expected to touch 44 million tons by 2026.

Personal Care

In 2019, the market size of the personal care category in the Middle East was estimated at about $1,781 million. It’s expected to grow with a 5.8% CAGR by 2027. 

Baby Care

The baby care products market is also getting a boost in the Middle East. With a 4.66% CAGR, the baby care category is expected to have a share of $15,571.280 million in the retail market by 2024. 

Beauty & Health

Personal care products have become a vital part of the modern lifestyle. Middle Eastern consumers prefer to buy skincare products both online and offline and through grocery apps. The fashion and beauty category reached a market size of $4.9 billion in 2020 and is now expected to reach $10.6 billion in 2025.

The data shows a rising online shopping trend and tells that consumers under 30 years of age will be the key. Online supermarket chains have to take necessary steps if they want to engage this audience.

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Challenges Faced by Supermarket Chains

Like all businesses, supermarket chains also have to stay updated with modern trends. They must be aware of upcoming challenges so that they can rectify them without disturbing their sales. We have discussed some biggest problems that online retailers are facing while catering for their consumers.

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Low-Profit Margins

Let’s be honest, profit is always the sole concern of any business. Nobody wants to sell at low-profit margins, especially supermarket chains. But supermarket chains have to offer discounts and deals and cut profits to beat the competition. This helps them engage and retain customers but lowers the profits. 

Today’s consumers are more conscious and they not only demand high-quality products but quick service as well. As a result, retailers have to offer fast or same-day delivery. This further lowers the profit margins as they have to bear the extra cost of operations.

Solution

It’ll be unwise to raise the prices to cover operational costs and increase profits. But you can cut costs by implementing a more effective and efficient operational solution. You can manage your workload by using a quick commerce delivery system that helps you manage inventory and sales.

A hyper-local, headless quick commerce solution can boost your operational efficiency. Such a solution will increase your profitability by allowing you to receive orders through a website and mobile application. You can get orders from nearby customers, manage them on one dashboard, and can assign them to multiple couriers. 

Quick commerce systems eliminate unnecessary manual processes and ensure efficient staff utilization. Thus, you get to cut down operational costs and can deliver orders in minimum time.

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Management of Spoiled Inventory

Spoiled inventory is one of the biggest problems an online retailer faces. Without proper management, you can easily lose track of your stock. The problem is even more worrisome for food suppliers because their inventory is often filled with perishable items. You can easily miss the expiration date and end up spoiling the whole stock.

Solution

You can easily deal with this issue by employing an inventory management system. However, make sure the inventory system you get meets your retail needs. Good inventory management software with FIFO will allow you to keep track of all items and help you prevent spoilage.

A quick commerce system with built-in inventory features will come in handy, especially if it offers tailored inventory solutions. You can manage inventory across multiple locations and keep track of your multi-chain business on one dashboard. Furthermore, you can check the real-time status of your stocks. The supermarket management system also allows you to set product-wise inventory alerts. So you will get a notification once a product is near expiration or has a low stock level.

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Lack of Coordination and Inefficiency in Delivery Systems

Delivery operations can literally make or break an online supermarket business. You need an effective and organized system to deliver desired products to customers within the minimum time possible. Today’s consumers expect faster response times from retailers.

So if you are in quick commerce, you need to up your game. You need to sync logistics and delivery partners to deliver products on time. Failing to do so will only mean losing your customers to your competition.

Solution

To address this challenge you need a system which can help you in:

• Route optimization
• Real-time order tracking

Make sure you have an eCommerce system which facilitates the process by chalking out the shortest and easiest route possible. It must allow you to integrate 3PLs and your own or other companies’ courier services. such integrations will enable you to track all your en-route orders in real-time. 

The best part is that you’ll get performance-based insights into your delivery services. So you can evaluate the performance and time taken by the rider or third-party couriers to deliver the products. This will further help you optimize your delivery operations.

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Fluctuating Loyalty among Customers

Do you know acquiring new customers costs five times higher than engaging an existing customer?

If customers are not coming back to your website or mobile app to buy products, you need to think about it seriously. Customer fluctuation not only increases the marketing budget but also affects sales. To engage your customers, you must make them emotionally connected to your brand or supermarket chain. You need to increase customer loyalty among your buyers to sustain your sales.

Solution

Customers feel attached to brands and supermarket chains that share the same values as they do. Having a loyalty program in place can greatly increase your chances.

In fact, market research has shown that when a loyalty program is offered, 68% of regular customers stay engaged with the brand. By offering a loyalty program, you can establish relationships with your consumers. You can reward them with points and offer them perks for being loyal to your store. This will also encourage them to spend more and you’ll get to keep them as customers for a long time.

The best way to retain your customers across all channels is through an omnichannel loyalty management system. And since they use artificial intelligence (AI) technology, you’ll be able to create highly personalized offers with such a system. This will allow you to segment your customers and offer rewards to loyal consumers by implementing any additional code or software.

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Reverse Logistics Management

If you don’t have an effective reverse logistic management plan in place, you are losing big time. Return or refund is one of the biggest problems an online retailer faces. Consumers often return products if they are damaged or not as per their requirements. All supermarket chains face such issues but the real trick is how you handle them.

Solution

To manage reverse logistics, you need a system which can handle and keep track of such orders. An all-in-one, omnichannel system allows you to integrate reverse logistics with your grocery ordering and delivery app and website. You can cancel orders, manage refunds, and update your inventory using the same system.

 In addition, you get to keep track of the reasons to ensure your customers don’t have to face such an issue again.

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Final Note

Supermarket chains in Middle East need the latest solutions to cater emerging needs of their consumers. They need to ensure quick delivery while enabling reverse logistics and offering loyalty programs to their customers. But the most challenging task is to do so without lowering their profit margins. This is where a headless, quick commerce management system like Hypr can come in handy.

Hypr enables retailers to scale their operations online and offline effortlessly. You can receive online orders from customers through a website or mobile app within the selected areas. Hypr will automate the entire order process for you from fulfillment to courier pricking and order tracking.