Traditional Trade Faces Challenges as Online Shopping Surges
Mokshita P.
10x Industry

Traditional Trade Faces Challenges as Online Shopping Surges

FMCG consumption sees slow growth due to price sensitivity, shifting preferences. E-commerce flourishes despite price hikes, indicating changing consumer habits. Omnichannel strategy urged for industry adaptation.

Alright Readers, let's break down what we've observed in the FMCG and e-commerce sectors in Saudi Arabia and the UAE during the last quarter of 2023.

So, what we've noticed is that the FMCG consumption in both KSA and the UAE had a slow recovery, clocking in at less than 0.5 percent. This sluggish growth can be pinned on a couple of factors: firstly, consumers are becoming more price-sensitive, meaning they're paying closer attention to what they're spending on goods. Secondly, there's been a shift in what consumers prefer to buy.

Interestingly, while traditional retail channels saw a bit of an increase in the UAE, overall FMCG consumption dropped. In KSA, there was a decline in consumption alongside a slight downturn in growth.

One big influencer in consumption trends has been price changes, especially noticeable in categories like Baby Care in KSA and Personal Care in the UAE. We saw prices increase in both countries, and this influenced what people were buying.

Now, when it comes to e-commerce, it's been a different story. Despite prices going up, people have been spending more online. The convenience, variety, and often competitive pricing of online shopping platforms seem to be winning over consumers.

Andrey Dvoychenkov from NielsenIQ APP points out that this rise in e-commerce shows that consumers are still keen to spend, even when faced with higher costs. It reflects a significant shift in how people shop, with more and more turning to online platforms.

Now, traditional trade, like smaller shops and independent businesses, saw prices go up too. This affected consumers, especially in categories like Snacking. Interestingly, while KSA saw growth in traditional trade, consumption drops caused value decline in the UAE.

Switching gears to the Technology and Durables sector, both regions saw growth in 2023. In KSA, this was driven by advances in Telecom and Small Domestic Appliances, while in the UAE, Telecom and Small Domestic Appliances also saw notable gains.

According to Dvoychenkov, businesses in both FMCG and T&D sectors should think about adopting an omnichannel strategy to stay competitive. This means having a presence both online and offline. And the rise of e-commerce shows just how important convenience and a wide product selection are for consumers these days. So, it's all about adapting to these changing trends to stay ahead in the game.