Online sales of fast-moving consumer goods (FMCGs) are significantly outpacing the overall market in the UAE and Saudi Arabia, accounting for a combined value of more than $888.4 million and creating a new stream for economic growth, Chicago market intelligence company NielsenIQ has said.
FMCG sales through online channels in the UAE, have grown by more than two thirds in the past 12 months to about Dh1.5 billion ($408.4 million), accounting for 6 per cent of the total FMCG market, which grew by a modest 8 per cent, a NielsenIQ report said on Monday.
In Saudi Arabia, online sales increased by 58 per cent to about 1.8 billion riyals ($480 million), representing 4 per cent of the entire FMCG sector that grew by only 3 per cent, it said.
The growth of this category is another indication of the continued proliferation of the e-commerce market, which rose to prominence as a result of the Covid-19 pandemic and is considered to be the “foundation for future growth” in the Arab world's two biggest economies, NielsenIQ said.
“Online shopping penetration and sales are still rising strongly in the region, even in the post-pandemic sequence,” Andrey Dvoychenkov, NielsenIQ's general manager for the Arabian Peninsula and Pakistan, said in the study.
“With this appetite from consumers and the latest retailers' initiatives, we are seeing big opportunities and obvious signs for further growth.
“Online is not an extension of the brick-and-mortar model; it is a new model with different cost drivers and different values for shoppers.”
FMCGs, which are also known as consumer packaged goods, are products manufactured at a relatively low cost that typically sell at a fast rate.
They are critical in daily living as they are easily accessible in supermarkets and small stores, and are generally cheaper.
Nearly everyone in the world uses FMCGs on a daily basis, and the sector accounts for more than half of all consumer spending, according to Investopedia.
FMCGs cover anything from sweets, drinks and fresh produce, to toilet paper and over-the-counter drugs such as aspirin.
They account for more than half of all consumer spending but tend to be low-involvement purchases.
People are more likely to show off a durable good such as a new car or beautifully designed smartphone than a new energy drink they picked up for $2.50 at the convenience store.
Consumer spending in the UAE surged 20 per cent annually — retail spending by 15 per cent and non-retail spending by 29 per cent — in the first nine months of 2022 despite inflation worries, Dubai-based retail major Majid Al Futtaim said last month.
E-commerce sales in the Emirates are projected to grow by 22 per cent to $6 billion in 2022 and remain on track to hit $9.2 billion by 2026, the study said.
In Saudi Arabia, consumer spending rose more than 6 per cent to about 348.6 million riyals in the third quarter of 2022, the latest data from Trading Economics show.
Online sales channels have clearly become a “not-to-be-missed” opportunity, especially as physical venues such as supermarkets and hypermarkets have witnessed a drop in footfall in 2022, NielsenIQ said.
Each FMCG e-commerce category has posted high double-digit annual growth in Saudi Arabia this year, topped by laundry products at 89 per cent and personal care at 39 per cent, which posted the least growth, the study showed.
This is even higher in the UAE, where frozen food was the best category, surging 112 per cent annually while home care, which was the weakest, recorded 50 per cent growth, the report said.
“If in the past one can have wondered if shoppers will ever use the online channel, now the critical question is how frequently they shop, how much do they spend and how do they use the online channel to supplement or even replace the traditional brick-and-mortar stores,” NielsenIQ said.