United Arab Emirates

Some supermarket customers in the UAE are making smaller purchases more often after fuel prices rose to a more than four-year high in October, according to retail executives who say shoppers are placing greater emphasis on essential items, promotions and value.

October fuel prices increased by Dh0.60 per litre, following a rise in global crude oil prices. Super 98 was set at Dh4.40 per litre, Special 95 at Dh4.28 and E-Plus at Dh4.21, an increase of about 16 per cent.

Mark Mortimer-Davies, chief executive of Choithrams, told Khaleej Times that customers have become “more considered” in their purchases. He said shoppers are paying closer attention to prices, promotional offers and the value they receive.

He said the effect differs between locations and customer groups. However, Choithrams has observed a modest move in some community areas towards smaller baskets bought more frequently, which may be directly associated with higher fuel costs.

Dr Dhananjay Datar, chairman and managing director of Adil Group of Supermarkets, said consumers are not necessarily reducing the frequency of their shopping trips. Rather, they are choosing products more carefully, comparing prices and giving priority to necessities. He said promotions and value packs are helping households control their spending.

Kamal Vachani, deputy CEO, group director and partner at Al Maya Group, gave a similar assessment, saying customers are becoming more discerning and value-conscious. In his view, shoppers are making “more deliberate purchasing decisions” and concentrating on essentials and promotions that offer meaningful savings.

Logistics costs under pressure

The retail executives agreed that more expensive fuel is adding to transport and distribution expenses, although they differed in their assessment of the scale and timing of the effect.

Datar said the impact can extend through the grocery sector because products must be transported from suppliers and distribution centres to stores. Businesses operating extensive delivery fleets or replenishing stores regularly face higher direct costs, he said, although the effect is “not immediate or uniform across all categories.”

Mortimer-Davies said fuel is only one element of logistics and distribution spending. Persistent increases can raise operating costs, he said, but retailers must also consider product sourcing, freight charges, supplier costs and broader supply-chain efficiencies. Choithrams is working with suppliers and logistics partners to manage the added pressure, he said.

Vachani said higher petrol prices can affect delivery and transport costs. He added that Al Maya Group’s scale, operating discipline and established supply-chain capabilities put the company in a position to manage the challenge.

Retailers are seeking efficiencies through measures including route optimisation, inventory planning and improved fleet use. Datar said these steps are a focus for grocers seeking to contain costs. If fuel prices remain elevated for a prolonged period, he said, there will “inevitably” be upward pressure on logistics and operating costs.

Even so, Datar said he does not anticipate an immediate, across-the-board increase in prices for all grocery categories. He expects consumers to become still more focused on value in the months ahead.

Mortimer-Davies described the UAE grocery sector as resilient. While extended high fuel prices could bring further supply-chain pressure, he said retailers and suppliers are expected to continue pursuing efficiencies. Vachani said he was “highly confident” about the retail outlook and expects healthy growth, supported by government economic initiatives and business-friendly policies.

Al Maya Group is refining its routes, inventory planning and logistics processes to reinforce resilience and preserve value for customers, Vachani said.

Balancing shelf prices and customer value

Datar said retailers are both absorbing part of the higher costs and, where necessary, passing on some of the pressure. Grocers cannot indefinitely take on every rise in expenses, particularly when several input costs increase at the same time, he said.

However, he said the grocery market is highly sensitive to prices. Retailers are therefore taking on a share of the costs and working with suppliers to keep prices competitive instead of immediately transferring the full increase to customers.

Choithrams’ priority is to safeguard value for customers, Mortimer-Davies said. The retailer does not base pricing decisions solely on fuel costs, he added, and assesses efficiencies and manages expenses carefully before considering any impact on shelf prices.

Vachani said Al Maya Group is improving procurement efficiency and reviewing its operating model in an effort to absorb cost pressures where possible.

Convenience, store visits and delivery

Higher transport costs may make nearby stores more important for consumers making smaller top-up purchases, Datar said. Supermarkets with an established presence continue to attract customers through their range of products, competitive pricing and promotional offers, he added.

Mortimer-Davies pointed to Choithrams’ neighbourhood network and the rollout of Quickerr by Choithrams at Dubai Metro locations, which he said places the retailer closer to customers during routine journeys.

Al Maya Group is seeing “strong and encouraging” footfall at its supermarkets, Vachani said, and he expects that trend to continue as the festive season approaches.

Datar said home delivery is becoming increasingly important for consumers looking to save time and transport expenses. Physical stores, however, remain central to grocery shopping, particularly for fresh produce. Mortimer-Davies said customers switch between in-store and digital shopping depending on the occasion, while Choithrams continues to develop its omnichannel offering.