Retail Media in MENA

Digital advertising has become a crucial facet of global marketing, with the widespread availability of digital content and internet connectivity worldwide. Most of the global advertising investments are directed towards digital platforms, overshadowing traditional mediums like television, which garnered less than a quarter of the total expenditure. And, the Middle East and North Africa (MENA) region mirrors this trend, with countries like Saudi Arabia, the UAE, and Egypt witnessing substantial growth in advertising spending, particularly in the digital sphere.

Saudi Arabia and the UAE are the frontrunners in digital advertising expenditure within the MENA region.

The competitive landscape of digital advertising in the regions mentioned above in MENA has intensified, presenting significant growth opportunities. The UAE, in particular, was recognized as the fourth most appealing destination for digital agency professionals worldwide a few years ago. On top of that, according to Statista, the MENA region is witnessing a rapid expansion in mobile internet users, projected to reach approximately 357 million by 2025.

With a youthful demographic and increasing smartphone usage, a significant portion of internet traffic originates from mobile devices such as smartphones and tablets. Thus, marketers are prioritizing mobile marketing strategies as indispensable components of their overall marketing and advertising strategies.

The increasing use of mobile and digital platforms provides a rich environment for the growth of e-commerce. Within this context, retailers and brands have significant opportunities to enhance their digital advertising efforts, with a particular focus on the expanding field of Retail Media advertising.

Online Shoppers in the MENA Region

The convenience of using digital platforms and shopping online has sparked a notable increase in shopping activity across the MENA region. Since transitioning to online shopping, two-thirds of shoppers have found themselves shopping more frequently. This shift is largely driven by the immediacy of online purchasing, with shoppers often making multiple smaller purchases to fulfill specific needs quickly.

As shoppers grow accustomed to the online shopping experience, they tend to expand their online purchases. This trend is accompanied by a more deliberate approach to shopping, with consumers investing time in researching products and brands before making a purchase. Online touch-points such as retailer and brand websites play a crucial role in this pre-purchase exploration.

A common practice among MENA shoppers is hybrid shopping, where they research products on one channel and make purchases on another. Increasingly, this hybrid journey is happening predominantly online rather than offline. This shift is supported by the region’s high levels of internet and smartphone use, with countries like Bahrain and the UAE leading with a rate of 95 percent.

Even during offline shopping trips, mobile internet usage remains prevalent, with a significant portion of shoppers relying on their smartphones to compare prices and read product reviews while browsing in malls or physical stores.

MENA’s Booming E-commerce

MENA’s e-commerce sector is experiencing a significant transformation, as consumers increasingly turn to online platforms for their daily shopping needs, electronics, and essential goods. The appeal of convenience, as mentioned above, diverse product offerings, and competitive marketplaces has created new avenues for shoppers, presenting exciting opportunities for both local and international brands.

The e-commerce market in the Middle East is on track to reach a substantial market volume of $50 billion by 2025. According to the Mordor Intelligence report, the size of the MENA region’s e-commerce market will nearly double by 2028 compared to 2023, with an expected Compound Annual Growth Rate (CAGR) of 11.5%.

MENA countries exhibit impressive results in comparison to global counterparts. For instance, the UAE leads the pack as the first MENA player in e-commerce, with a predicted revenue of $11,782.3 million in 2023. Following closely is the KSA, which generated $8.53 billion in e-commerce revenue in 2022, with expectations of reaching $20.01 billion in revenue by 2027.

Middle East Emerges as the World’s Fastest-Growing Advertising Market

The advertising market in the Middle East is expected to grow very quickly, faster than anywhere else in the world. The MENA region, which reached a market size of $37 billion in 2022, is a big part of this growth, and it is estimated to be worth $57 billion by 2026. This growth is driven by factors like the region’s stable economy, modern infrastructure, new technology, and government projects.

Also, easy-to-use apps for online shopping are making a big difference, making it easier for people to shop online. This growth means that the advertising industry and Retail Media advertising opportunities in MENA is going to get much bigger. By 2024, it’s expected to spend more than $12 billion on advertising, up from about $9.2 billion in 2021. And, online advertising continues to be the region’s biggest category, worth $3.6 billion.

Ad Spend in the MENA Region

The IAB MENA recently unveiled the findings of its 2022 Digital Ad Spend Study during an event on June 9, 2023. According to the study, the MENA region’s digital ad spend amounted to $5.5 billion, ranking it among the top four EMEA markets in terms of size. Statista forecasts MENA’s ad spending to surpass $12 billion this year.

In 2021, the total advertising expenditure in MENA stood at $5.07 billion, a significant increase from $3.12 billion in 2020, marking a 62 percent growth. Notably, online advertising witnessed an 84 percent growth, outpacing offline advertising, which grew by 47 percent compared to 2020.

Digital advertising has emerged as the dominant force, constituting nearly half of all advertising expenditure in the region.

The Middle East’s advertising market is poised to be the fastest-growing globally in the coming years, driven by Saudi Arabia’s ongoing transformation. With the regional market valued at $5.9 billion in the previous year, it is forecasted to grow by 10 percent in 2023 and an additional 6.2 percent in 2024, reaching a value of $6.9 billion, as per the recent data provided to AGBI (Arabian Gulf Business Insight) by marketing consultancy WARC Media.

Top E-commerce Product Categories in MENA

In 2023, the most popular e-commerce product categories in the MENA region were as follows:

Fashion: Accounting for 38.7% of UAE’s e-commerce revenue, fashion is a rapidly growing segment driven by the region’s young and affluent population. Popular platforms include Namshi.com, Ounass, noon, Souq.com, and our Retail Media partner Modanisa.

Electronics and media: This category constitutes 19.9% of all e-commerce revenue in the Middle East, fueled by the region’s tech-savvy population. Popular platforms include Jumbo Electronics , Virgin Megastore MENA, noon, and Souq.com

Toys and kid supplies: With a 15.4% share, this category is driven by the growing population of young families. Popular platforms include Mumzworld.com, Sprii, and Amazon.

Grocery and personal care: Making up 13.6% of total e-commerce sales, this category is driven by urbanization and changing consumer behavior. Platforms such as noon, Souq.com, and Nana | نعناع Direct cater to this demand.

Furniture and appliances: Accounting for 12.4% of e-commerce sales, this category is popular due to the convenience of online ordering.

More and more stores are popping up in the MENA region, with about 11–12% of them now having a retail presence. Most buyers, more than 80%, use their phones to shop, and 70% of them use social media to reach sellers.

Data Privacy Concerns and the Future of AdTech in MENA

Privacy concerns regarding data will significantly influence the future of ad tech in MENA. As third-party cookies decline, the industry is adapting targeting methods to safeguard user data and privacy. Similar to global trends, data privacy is becoming a crucial factor in shaping AdTech in the MENA region. With 71% of countries implementing data privacy laws, the digital advertising landscape is evolving rapidly. The discontinuation of third-party cookies on Chrome, following Safari and Firefox’s lead, is a major part of this transition. Brands are now legally required to ensure data privacy and governance measures, obtaining proper consent for data collection and usage, and providing consumers with the option to delete their data upon request.

These shifts challenge brands, publishers, and ad tech operators in MENA to focus on growing their first-party data solutions with Retail Media and moving away from solutions reliant on third-party data or lacking privacy compliance.

Similarly to Europe and the US, retailers in MENA are recognizing the value of consumer data and are beginning to partner with Retail Media enablers and start their Retail Media business.

Retail Media Advertising Trend in MENA

In MENA, Retail Media is rapidly advancing among top retailers and brands that have data privacy concerns and want to deploy Retail Media Ads for targeted advertising. This advertising strategy enables retailers to connect with consumers and drive sales by offering personalized offers tailored to individual shopping behaviors and preferences, and it’s future-proof!

While the Retail Media sector is still in its early stages in the region, it will grow rapidly as the e-commerce landscape expands. With the MENA e-commerce market projected to reach $57 billion by 2026, significant opportunities are emerging for Retail Media advertisers.

Online shopping in the UAE surged by 68% in 2023, with over 90% of MENA shoppers already making online purchases, and half of them planning to do so regularly. With an average spend of $144 per transaction, significantly higher than in Europe and the US, the MENA region presents a substantial market for consumption and engagement.

Retail Media plays a pivotal role in reaching audiences, particularly as a high proportion of commerce still occurs offline, such as in shopping malls where consumers spend significant time. Leveraging omnichannel approaches, including outdoor advertising and online platforms, enables brands to engage with consumers across various touch-points effectively.

As Retail Media continues to evolve, brands face the challenge of delivering consistently exceptional experiences throughout the consumer journey. By leveraging first-party data solutions, personalized Retail Media ad campaigns can enhance customer loyalty and drive conversions. Omnichannel strategies across on-site, off-site, and in-store experiences will enable brands to create high-impact Retail Media ads and capture customers at every stage of their buying process, thereby expanding the customer reach and revenue opportunities.

The MENA Retail Media landscape presents a unique opportunity for brands to understand and engage with local consumers, ultimately enhancing the shopping experience and driving profitability. As the e-commerce market in MENA grows, embracing Retail Media will be essential for retailers looking to remain competitive and capitalize on the region’s digital transformation.

According to stats published by IAB, retailers can expect up to a 5% increase in Gross Merchandise Value (GMV) and significantly higher profit margins by adopting Retail Media strategies. (There’s an indication of the potential for additional margins on media, which could surpass product retail margins by 85%, leading to an overall profit increase of approximately 10%.)

In conclusion, Retail Media is gaining traction as a lucrative opportunity for retailers in the MENA region, especially in light of challenges posed by the ban of third-party cookies. These networks offer a solution by harnessing first-party shopper data to target potential customers, boost traffic, drive sales and performance.

The opportunities for Retail Media in MENA are significant. With a growing online market and diverse product offerings, retailers have plenty of chances to succeed. Both local and international brands are capitalizing on this, with many transitioning from physical stores to online platforms.

With the population’s increasing purchasing power and governments’ initiatives to foster e-commerce growth, the future of Retail Media in MENA looks promising. This creates an ideal environment for retailers and marketplaces seeking to venture into the Retail Media business.

Sources:

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