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[22 comments]

Consumers explain why they dump their supermarkets

March 28, 2014

While much of the press coverage of Consumer Reports' supermarket ratings has focused on the usual suspects getting the highest scores (Wegmans, Trader Joe's, Publix, Costco), it was not the only information in the report worthy of discussion. One troubling point is that one-third of subscribers to the magazine said they had stopped shopping at their main grocery store over the past year.

High prices were the biggest, but not only, reason that consumers made the decision to switch. Other factors included long waits at the checkout, inadequate selection of products, out-of-stocks on advertised items and poor food quality.

Price, according to Consumer Reports, is becoming a much bigger factor in where consumers choose to shop. Fifty-eight percent of those who switched grocery stores did so because of price. That compares to 43 percent who gave the same answer in 2011.

As to those chains that topped the list of favorite grocery stores, price was a significant selling point. Six of the top 10 rated chains on the Consumer Reports list got the highest grade for price satisfaction. These included Trader Joe's, Costco, Market Basket, Fareway Stores, Stater Bros., WinCo and Aldi.

Wegmans received the highest overall rating with top marks for service, cleanliness and perishables. It was ranked slightly lower on price satisfaction.

Trader Joe's received the highest rating for so-called national chains. "Trader Joe's gets exemplary marks for service and very good marks for perishables. Their prices were considered extraordinary and they're a very clean store," Tod Marks, senior projects editor for Consumer Reports, told Today.

The magazine's ratings are based on 27,208 responses to a survey conducted by the Consumer Reports National Research Center. The survey reflects more than 48,000 visits to supermarkets, supercenters, warehouse clubs, and limited-assortment grocery stores.

Supermarket Ratings
Wegmans 88
Trader Joe's 87
Publix 85
Costco 84
Sprouts Farmers Market 84
Market Basket 83
Raley's 83
Fareway Stores 83
Stater Bros. 82
WinCo 81
Aldi 81
Hy-Vee 81
Harris Teeter 81
H-E-B 81
Source: Consumer Reports

FINANCIALS:     [OTCMKTS:PUSH]

Discussion Questions:

Do you think consumers are quicker to switch grocery stores today than in the past? Were you surprised by the growing importance of price in the decision to switch stores?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much quicker or slower are American consumers to switch their primary grocery store today compared to a decade ago?

Comments:

Most traditional grocers don't have a core story and therefore have little to differentiate their stores from the competition. Without a point of difference, why shouldn't consumers shop based on price?

As has been discussed by many BrainTrust members in the past, the Great Recession may have been declared over by economists, but most consumers are still pinching pennies. Unemployment and under-employment continue to take a toll on consumers. Even the minimum wage has not kept pace with inflation or reality.

Traditional grocers will continue to lose market share unless they clean up their stores, make checking out more convenient, keep their shelves stocked and stop playing pricing games.

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Max Goldberg, President, Max Goldberg & Associates

Middle class income drop and food inflation is not a good combination for traditional supermarkets who have heavily relied on convenience and amenities to overcome the higher prices they charge. Having visited a WinCo recently, I was surprised to see how many seemingly upscale and upper middle income families were traversing the aisles looking for Green Savings Signs. Winco has figured out that there is a viable niche of price plus good perishables that fits the bill for the economic realities of a lackluster recovery.

Moreover, shoppers are not only more mobile and ready to jettison their existing supermarket for price and other factors, they are also much more likely to share their grocery wallet with online retailers and other channels such as drug, mass, and dollar.

National surveys on grocery shopping trends are usually not well suited for taking deep dives into often complicated shopper behavior, but this one does capture the growing importance of price in a marketplace where there are more options for the shopper than ever before!

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Mark Heckman, Principal, Mark Heckman Consulting

There is always irony in the results of any survey. Consumers change where they shop because of higher prices, but then they complain about long waits at the checkout, inadequate selection of products, out-of-stocks, and poor food quality. Does anyone see an ironic connection here?

Supermarkets can't be all things to all people. Each supermarket needs to decide on its real true identity and carry it out specifically and well. That's why Trader Joe's and Costco are always near the top.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Just as in the general merchandise business, food retailers stuck in the middle are losing share to newer, faster-growing alternatives like Aldi and Walmart Neighborhood Market on one end, and Whole Foods on the other end. And there is something to be learned from the smaller footprint and edited assortments offered by Aldi and TJ's, too.

If you are going to appeal to the middle tier (and price your merchandise accordingly), you had better offer better quality, selection and service. The recent combination of Albertsons and Safeway is a barometer of the lack of organic growth in the middle of the grocery business.

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Dick Seesel, Principal, Retailing In Focus LLC

No surprises here. Shoppers have been conditioned (and are continuing to be conditioned) by the frenetic pace of information bombarding them to not tolerate things they don't like. If we don't like a TV show, there are 250 other channels to move to. If a website is disappointing us, we surf to another one. So why should it be any different with physical stores?

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Ron Margulis, Managing Director, RAM Communications

Today's evolving consumers are not as traditional or as loyal as consumers in the past and are quicker to switch grocery stores. Price is the key factor but one unspoken additional reason is probably that they want more diversion in their shopping experiences, i.e., if it's new and exciting, I want to know about it.

Price has become even more important because so many Americans have tight budgets today and many have embraced the retail-inspired concept that one should get more for their money.

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Gene Hoffman, President/CEO, Corporate Strategies International

Technology is empowering today's shoppers, fundamentally changing the way they buy groceries.

In the UK, research has shown that almost a third of shoppers go online before they do their grocery shop to find which stores are offering the best deals; likewise, smartphones have also brought about increased price transparency for consumers.

Competitor price intelligence is therefore critical for supermarkets to make informed decisions on pricing. With price key to attracting today's value-conscious shopper, supermarkets need to deliver consistency in pricing - both in-store and online - otherwise they are at risk of losing customers to another store with a better price.

Jannie Cahill, Chief Marketing Officer, Profitero

There are two factors that are important in my thinking about this type of survey. One is price/cost. Because of the wide variance over the past several years, many shoppers will travel to get the lower price. The other is loyalty. If you know and see the managers and clerks regularly when you shop, the tendency will be to stay a loyal customer. But as in the case of Walmart, where you never see a manager or the same counter people regularly, the tendency is not to be a loyal shopper. Even when you see the same person behind a counter, they have no facial recognition of you. You are just a part of the eight hours they are putting in. That is never the case at a Publix. And I will bet it is not the case when you shop at Tony's.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I would ask the question of this study: who are the customers that are switching stores? We've learned in the last decade or two that different customer segments have very different shopping behaviors, especially with respect to store loyalty.

I would be very surprised if "high-value" customers switch stores with the frequencies reported in this article. There is always a large (by simple customer count) fraction of the customer base that is continually modifying its shopping preferences. While retailers would like to keep all their customers happy and engaged, the successful retailers have learned that it is the high-valued segment that is fruitfully rewarded by its loyalty programs and other dimensions of outstanding service. Such customers, when treated well, do in fact return the favor with lasting loyalty.

This study seems to fall into the trap of viewing customers as being the same, and its conclusions therefore may lead retailers who don't understand their customers to counter-productive actions.

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Dr. Paul Helman, Chief Science Officer, KSS Retail

Consumers are loyal to chains that deliver consistently on shopper expectations. Everyone is price conscious to some degree, and since the Great Recession there is higher sensitivity to prices paid - and it's not going away, so I'm not surprised at that result. But it's not the only factor to consider in the mix. Keep in mind that customers preferences and how they define value changes with their adoption of technology, social media chatter and comparing notes with neighbors as well as exposure to new stores and formats in their community.

I'm not so sure that consumers are necessarily quicker to switch grocery stores so much as doing so when they have other credible options. Anytime you can bring together low prices (high quality private label certainly helps in that area), a differentiated shopping experience with pleasant visuals, easy to shop layout, happy and helpful employees, consistently high quality and healthy selection of products you will have a chance on building a loyal customer base.

In our valley in southern California we have the usual suspects and I'm always amazed at how busy the Trader Joe's is in comparison to any other store, yet the checkout lines move at lightning speed: consider a 9,000 square foot store with 7-10 lanes open vs a traditional grocery store with 45,000 square feet and two lanes open.

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Mohamed Amer, Vice President, Global Integrated Retail Unit, SAP

I think the small, "independent" produce, deli and meat markets are offering fresher produce at a lower price than the big chains with crazy supply chains. I am not surprised by lower price being key motivation. Nothing is releasing consumers from the grip of an unpredictable future. The Russian bear emergence from hibernation is not helping.

'IMRetail'

Seems to me that this data needs to be taken with a grain of salt. After all, the survey is entirely limited to Consumer Reports subscribers and that reflects a critical psychographic and demographic skew.

The key to the skew should be that true supermarkets are very low on this list while specialist stores like Trader Joe's rank so highly. Yet if we consider where the largest mass of consumers shop...it's not at Trader Joe's.

So the data makes for an amusing read. But CR inappropriately concludes broad population findings like "Price, according to Consumer Reports, is becoming a much bigger factor in where consumers choose to shop." The only possible conclusion from this data is that it's true among the unusual market that is CR subscribers.

Among the general population, is this also true? Maybe. And maybe not. We simply cannot project from these numbers to general population.

Doug Garnett, Founder & CEO, Atomic Direct

When we moved to this area two decades ago the choices were basically Sunset, Jewel and Dominick's. Today Dominick's is gone, but there are (if I counted correctly) 12 more store names who sell groceries within easy driving distance. *Of course* shoppers switch stores and vary their shopping more frequently now. More choices. More competition. More "stock up" specials to be had. Sure, people may have a preferred grocery stop, but the concept of store loyalty is dead dead dead.

'Liatt'

Hello everyone. Time for my 2-cents worth today.
In my town the price factor probably jumps to 85%, and if you can not compete in their minds, call the morgue. There are too many areas like ours with little or no income per capita, and bottom dollar discounts really matter. Loyalty is the extreme fringe today, and in spite of Walmart not being great on service, their parking lots are loaded.
Quite simply, you must offer fantastic value in some way, or hang it up and go home. It is critical to be aware of how you can work the magic of a great deal, and make sure the masses see the offers, through print, e-mail, mobile, or social media, in order to capture some of the business. Great customer service is just expected, so I say "forge ahead" and stay focused on the many crazy deals that are out there if you choose to find them. Hey it's Friday for those who have weekends off, ENJOY.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Our research among supermarket shoppers illustrates that it is the interplay of fun, fast and value that is important. So while value is one component, the other factors are also important to overall satisfaction with a store, and to some shoppers, more important. Also not surprising that out of stocks are an issue that will cause people to switch - this is one of the top factors in overall satisfaction with a store. The bottom line is that if you don't stand for anything in particular, or don't match what your shoppers are looking for, they will certainly switch to someone who will meet their needs!

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Brian Numainville, Principal, The Retail Feedback Group

These days, consumers are quicker to switch stores of any type in order to see a benefit. With price transparency through the web, it is difficult to disguise what you are charging consumers for a specific item or group of items. That is true in the grocery business as much as it is true across retail.

While consumers claim that price is a more important factor in their decision to switch stores, our research suggests that what consumers call price is actually what we would call a failure to connect and demonstrate value in your retail brand. In the absence of any differentiation, consumers will always fall back on price - after all that is how we train them through excessive discounting. Trader Joe's is not the lowest priced grocery store on the block; rather, their products are well packaged and provide high value to consumers.

As we start to see the recession end, the group of consumers who became price-sensitive during that time are starting to become less so as they have more economic certainty, as well.

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Mark Price, Managing Partner, M Squared Group, Inc.

Consumers change stores more easily now than previously. For many Americans, the recession changed shopping behavior permanently. Many shoppers realized that they could get more for their food dollars when they compared retailers, and new value standards emerged. There are many choices out there, and technology just makes it so much easier to find a more satisfying experience. Shoppers will continue to search for better value for their dollar across stores and channels.

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

I don't know how credible those ratings are. Winn-Dixie got a higher rating for perishables than Safeway. Really?

Pretty poor standing for the Safeway/Albertsons chains all around. Kroger did fairly well, but still not as well as the well run regionals like Stater, Publix, etc. that they do compete with.

But the survey includes a fairly small sample and I'm not sure it is too indicative of the population as a whole.

'storewanderer'

Absolutely - not surprised. Rise of value conscious consumers over the last decade is a reality. Pricing is even more important than before. Of course, other factors are important (especially out-of-stocks and assortment), however, the power of internet and options to select different stores and channels is bringing down loyalty. I would have expected price elasticity to have gone up in past few years....

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AmolRatna Srivastav, Asst. General Manager, Analytics and Insights, Tata Consultancy Services

Grocery shopping remains largely undifferentiated over many years and hence price invariably is the key differentiator, so it is not very surprising.

Yes, shoppers find it easy to switch since now even private labels are also more or less undifferentiated; they come from the same producer and often have the same ingredients.
Unless supermarkets truly differentiate themselves, it is going to be a pricing war.

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Shilpa Rao, Practice Head - Merchandising, Tata Consultancy Services

This is not a new phenomenon. In this and previous down economies we have seen price become more important and a greater reason for switching stores, or for shopping multiple stores.
Stores who win customers on price can lose them just as easily to someone else with a lower price. Those stores that have the highest scores for service and courteous employees with fair prices with hold on to their customers for a longer time period.

Stores need to know what they stand for (strategy) and then execute that strategy. They also must know who their customers are, both primary and secondary and that their strategy will meet the needs of those customers. As was stated earlier, you can't be everything to everyone. Price is not the only reason most consumers use to select a store.

'PricemanGuru'

The survey results are not surprising. People are price sensitive in times of high unemployment and they will go "down market" in many buying categories including grocery. That said, the complaint about long wait times is a function of our busy lifestyles. The pain is only made worse as consumers work longer hours and, in some cases, need to take multiple part time jobs. We do a lot of work in queue management with grocers and the impact of providing consistent, reasonable wait times pays off in improved customer satisfaction, loyalty and increased basket size. Better labor utilization is key to improving wait times without increasing costs.

Christina Ellwood, Vice president, Marketing, Brickstream

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