Provision Shops, Backed by Economic Halls, Edge Out Hypermarkets

This scenario was not envisioned. All expectations at the start of this millennium and during the period that followed agreed that grocery stores and provision shops would exit the market due to the massive expansion of supermarkets and hypermarkets. Experts, theorists, and even specialized marketing research firms at the time elaborated and agreed that these grocery stores and provision shops would not withstand the fierce competition from those large companies, nor the set of regulations organizing market conditions, in addition to the great pressures arising from digital transformation, such as e-invoicing, payment infrastructure, and numerous costs that did not exist in the cash era.

Although the market has not yet seen any declared bankruptcies of major hypermarkets and supermarkets, many indicators on the ground reflect a significant decline in the operations of these entities. This includes closing many branches to control expenses, reducing space and activity by eliminating many departments such as clothing and electrical appliances departments, as well as attempting to expand the use of self-service machines to reduce operational costs.

Grocery stores and provision shops managed to survive in the market and remain its core for reasons led by a good understanding of consumer needs and maintaining a strong relationship with them, so that the credit book continues as a bond and constraint that is difficult to resolve. Added to that is the rapid response and compliance with regulatory measures that emerged in the sector, as many owners of these grocery stores and provision shops took the initiative to rectify their situations and implement all municipal requirements, in addition to the immediate adoption of digital transformation innovations. This greatly helped them retain the consumer who does not carry cash and prefers to use electronic payment devices. It also helped them maintain a significant share of the e-grocery market in the Kingdom and continue as an active player in the retail market, currently estimated at about $370 billion, expected to grow between 4 and 5 percent over the next five years.

The presence of fierce competition for hypermarkets and supermarkets from provision shops, grocery stores, economic halls, and digital stores did not necessarily mean their exit and handing over the reins, but it emphasized the importance of moving and seeking ways to confront and ensure survival. Indeed, we have recently begun to observe fundamental changes in the methods of these large stores, starting with matching discount halls and warehouses in giving up high profit margins and offering consumers an economical price, in addition to expanding the rental of spaces for effective activities that help attract and draw customers. Also noticeable is the tendency of many to cancel useless and non-profitable departments.

The conclusion is that staying in the market or exiting it is not dependent on the competitor's threat as much as it is linked to keeping pace with the rapid changes in trade patterns and adapting those changes to respond to consumer behavior and desires.