KSA Food Delivery Market Outlook to 2029

KSA Food Delivery market Overview

• The Saudi Arabia food delivery market is valued at SAR 32 bn, driven by a five-year historical analysis of increasing internet penetration and smartphone adoption. This growth is fueled by evolving consumer lifestyles, the rising popularity of online platforms, and the strategic investments of major players in digital infrastructure.

• The market is dominated by Riyadh and Jeddah due to their high population density, rapid urbanization, and a tech-savvy demographic. These cities host a significant number of restaurants, cloud kitchens, and logistics providers, making them hubs for food delivery services. Their advanced infrastructure and consumer inclination towards convenience further bolster their leadership in the market.
• The acquisition of HungerStation by Delivery Hero SE for USD 297 million was executed on July 21, 2023. This strategic move allowed Delivery Hero to take full ownership of HungerStation, which is the leading food delivery service in Saudi Arabia, connecting over 10,000 partners with customers. The acquisition is significant as it enhances Delivery Hero's position in the Middle Eastern food delivery market and facilitates greater integration and knowledge sharing within its ecosystem.

KSA Food Delivery market Segmentation

KSA Food Delivery market is divided into further segments:

• By Cuisine Type: The food delivery market in Saudi Arabia is segmented into four categories under Cuisine Type: Fast Food, International, Saudi Food, and Healthy & Others. The Healthy & Others segment dominates due growing awareness of health-conscious eating, combined with the availability of familiar brands and affordable options, contributes significantly to its high market share in the Saudi food delivery market.

• By End User: The market is segmented into Young Professionals, Students, Families, and Others (including Expats and Short-term Residents). Young Professionals segment is the largest due to their preference for convenience and time-saving options. Their busy schedules and disposable incomes make them frequent users of food delivery services.

KSA Food Delivery market Competitive Landscape

The Saudi Arabia food aggregator market is highly competitive, with prominent players such as HungerStation, Jahez, Mrsool, and others actively shaping the landscape. HungerStation leads the market, leveraging its strong logistics network and user-friendly platform, while Jahez has steadily gained market share by offering high-quality service and appealing to local preferences.

KSA Food Delivery Industry Analysis

Market Growth Drivers

• Rising Digital Adoption: Over 90% smartphone penetration and growing internet usage are driving significant growth in digital food ordering. This digital shift not only facilitates quick and convenient ordering but also enhances user experiences through features such as real-time tracking and personalized recommendations.
• Shift to Digital Food Ordering: The 40% rise in dual-income households in KSA is driving demand for convenience, making digital food ordering a key market growth driver. As time-pressed consumers seek quick solutions, food delivery businesses can capitalize on this trend by offering diverse menus and flexible ordering options, catering to the needs of busy households.
• Collaborations with Cloud Kitchens and Grocery Platforms: Partnerships with cloud kitchens and hyperlocal grocery platforms enable faster scaling and diverse menu offerings. Strategic partnerships with cloud kitchens and hyperlocal grocery platforms are emerging as a powerful avenue for growth in the digital food ordering market. Collaborations with cloud kitchens allow food brands to scale operations quickly without the overhead costs associated with traditional restaurant setups.

Market Challenges

• Low Average Order Value (AOV): A low AOV poses a considerable challenge for businesses, as it means that each transaction generates limited revenue. This sensitivity to minor leakages and operational inefficiencies can severely affect profitability. Even small costs associated with delivery, packaging, or payment processing can disproportionately impact the bottom line when the average order value is low.
• High Attrition Rates: High turnover among delivery personnel is another critical issue that affects service quality and customer satisfaction. When delivery staff frequently change, it leads to inconsistency in service, which can frustrate customers and result in negative experiences.

KSA Food Delivery Future Market Outlook

Over the next five years, the Saudi Arabia food delivery market is expected to grow significantly, driven by rising urbanization, technological advancements, and increased disposable incomes. Factors such as government initiatives supporting digital transformation, expanding cloud kitchens, and a growing preference for convenience will play pivotal roles in this growth.

Market Opportunities

• Non-Metro Expansion: Rising demand in Tier 2 and Tier 3 cities presents a substantial opportunity for the food delivery market in KSA. As internet penetration and smartphone usage continue to grow, these regions are becoming increasingly receptive to digital services, including food delivery.
• Subscription Models: The development of subscription models within the KSA food delivery market can significantly enhance customer retention and profitability. By offering loyalty programs that include benefits such as free delivery, exclusive discounts, or access to special promotions, companies can encourage repeat usage among consumers. These subscription services create a sense of value for customers, making them more likely to choose the same platform for their food orders consistently.