Grocers confront the fragmentation of loyalty

Discussion
Photo: James Tenser
Jan 26, 2018
James Tenser

New research reveals a more granular picture of the fragmented nature of consumer loyalty in the grocery sector.

In a presentation at the recent National Retail Federation Show in New York, Greg Girard, program director, merchandise strategies, IDC and Graeme McVie, chief business development officer, Precima shared findings from a survey of 3,000 shoppers and 200 retailers that reveal some of the “whys” behind divided loyalty.

“Food retailers presently only provide a third (35 percent) of all the nutrition – calories or meals – that we in America consume,” said Mr. Girard. “The rest is out-of-home meals from restaurants of all sorts, deliveries and more recently, meal kits.”

The researchers asked shoppers where they shop and what drives them to fragment their spending among multiple food stores. “Sixty percent said they would actually prefer to shop at one store if they could have all their needs met, but only 19 percent actually do,” said Mr. McVie.

Asked why they shop multiple stores for groceries, the findings revealed:

  • 75 percent search for better prices
  • 60 percent seek products they want
  • 40 percent want products that suit different shopping missions
  • 23 percent seek more convenience

McVie said that when asked what would move them to consolidate their shopping in one store, the responses were largely focused around assortment topics including product quality, fresh produce and superior, more localized choices.

The survey confirmed that virtually all shoppers want the basics of good prices, quality products, wide assortments, good customer service, and nice stores. It also uncovered insights about factors that differentiate how customers think about retailers.

“Personalized prices stood out in importance for shoppers in all generations. While they don’t expect it, when you deliver it, they love it,” said Mr. Girard.

Younger shoppers indicated more interest in value-added services like prepared foods, plated meals, meal kits and online ordering. They are also indicated less commitment to products from major national brands.

Shoppers may also feel loyal to specific departments in different stores. The research revealed that they value time spent making selections in departments like fresh fruit and vegetables, fresh meats and fish. They are more perfunctory when shopping for home products or HBC.

“Shoppers are fragmenting their spending by department as, well,” added Mr. McVie. While a shopper may routinely shop a favorite supermarket for center store items, they may visit a premium store for produce or meat and use a club store or online service to buy household staples in bulk.

DISCUSSION QUESTIONS: Does it make sense that grocery shoppers might be loyal to more than one store for different reasons? How should food stores adjust their thinking about loyalty to attract younger shoppers and retain split shoppers?

Braintrust
"While retailers cannot be all things to all people, they have to do more to consistently attract shoppers."
"...owning a niche is easier said than done, but expecting shoppers to be loyal for any significant length of time is yesterday’s thinking."
"What’s missing for me in these survey results is the pre-shop planning behaviors of shoppers that lead them to one or more stores."

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13 Comments on "Grocers confront the fragmentation of loyalty"


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Max Goldberg
BrainTrust

It’s frivolous to think that consumers will be loyal to only one grocery store. The key is for grocers to continually attract consumers to their store for specific needs and, using that as a base, try to expand their market basket share. Grocers must fight to remain relevant to each generation of shoppers. Today, that means incorporating technology into stores to save consumers time and money. It means offering different formatted stores to cater to different geographic and socio-economic areas. Loyalty is earned. And grocers need to re-earn it every day.

Chris Petersen, PhD.
BrainTrust

Customers crave choice and convenience. In today’s omnichannel marketplace they have unprecedented opportunities of whenever and however they want to consume. As consumers expand choices across expanding options it also fragments what used to be perceived as loyalty to a store or a channel. While retailers cannot be all things to all people, they have to do more to consistently attract shoppers. Loyalty is now earned through personalizing convenience for each type of customer.

Ian Percy
BrainTrust

Aaaaarrrrggghhh! This has NOTHING to do with loyalty! Why do we keep clinging to that hope? It’s over. Loyalty won’t be back. Red thumbs won’t change that sad reality.

You can’t research a whole bunch of reasons why people shop at different stores and then call it loyalty. It all gets down to cost-benefit analysis. Recently my wife laid out where she was going shopping — Store A because they had ground beef cheap and the ice cream bars were on sale; Store B because that’s the only place that has the sharp cheddar she likes; Store C for produce because it was near where she was going to get her hair cut. Loyalty in action? Absolutely not. Did the benefits outweigh the cost of travel, time etc.? Apparently so.

Next week it will be Stores D through G.

Neil Saunders
BrainTrust

It makes total sense. Our relationship with grocery stores is not based on the monogamous vows of marriage!

We use and like different stores for different reasons. And have different needs on different occasions, which necessitates the use of multiple stores.

This underlines two things. First, the need for grocers to develop points of difference. Second, that it’s very difficult for any retailer to be all things to all people!

Kim Garretson
BrainTrust
23 days 18 hours ago

What’s missing for me in these survey results is the pre-shop planning behaviors of shoppers that lead them to one or more stores. Perhaps there wasn’t time to report on this. For instance, the recipe sites such as AllRecipes show the discounts and deals from a variety of local stores as someone does meal planning. Other stores of course offer order online/pick up at the curb for convenience. I would think these at-home activities play a critical role in store choice, as do factors such as traffic and time savings when a shopper sets out to go shopping.

Ian Percy
BrainTrust

You have it exactly right , Kim. See my comment above about how it works in my home.

Tony Orlando
BrainTrust
Consumers are mostly loyal to their pocketbooks around here, and price is the primary driving force. Anyone naive enough to believe any different is fooling themselves. However, there is another, and way better, form of loyalty — that is in the individual touches a store can add that makes the consumer want to be their friend. Building a relationship with customers one at a time, for me, is why I’m still here. That type of loyalty is very strong. It may not be a very large segment of customers, but over time it will grow because of the unique offerings you can provide for them that the big stores simply can not High-quality gourmet delis, Bakery products, custom-cut all natural meats, vintage wines at 50 percent off and the ability to talk to a customer who has very special dietary needs, has been my focus for many years. It keeps me motivated, as every week I can pick out one or two customers who see me in a different light because I help solve their… Read more »
Ian Percy
BrainTrust

I hope this thinking never leaves you Tony! Your comment about a “personal touch” caused me to make up a word — “retailationships.” When all is said and done, I spend my money where and with whom I enjoy spending it. You are so right.

Dave Nixon
BrainTrust

Grocers need to stop thinking in terms of loyalty based on shoppers’ transactional needs. If grocery retail wants to drive deeper loyalty, then they need to move past simply providing products with different delivery models. We still talk in terms of “basket size.” There is dwindling value there, and therefore dwindling loyalty. It’s a commodity mindset. We’re past that.

And as the research states, this approach of retail only addresses one-third of the overall pie. Great grocery retail brands are pushing past shopping and are starting to incorporate innovative new models that will help increase “share of stomach.” Like meal replacement, meal subscription models, prepare-at-home innovations, etc. that will help to take market share from restaurants and will provide nutritional value to the home. These types of initiatives for supporting the family through meals versus simply ingredients will help to connect shoppers with brands in a much richer way. Take care of the nutritional needs of my family, and you are no longer simply a commodity transaction.

Mark Heckman
BrainTrust

Agree with all that maintain that contemporary shopper choice is no longer about loyalty, but rather about being in better position than a competitor to solve a shopper’s problems or serve their needs on a particular trip.

To address the question as to how retailers can leverage this behavior, I believe it begins with understanding what a particular retailer is positioned to do best. Some are conveniently located or more efficiently organized to serve the time poor, less price sensitive shopper, while others on the other end of the spectrum do a better job of providing better prices, albeit less conveniently offered. From there it is a matter of commitment on the retailer’s part to be the best at whatever viable niche they have determined to be theirs. As with all things in retail, owning a niche is easier said than done, but expecting shoppers to be loyal for any significant length of time is yesterday’s thinking.

James Tenser
BrainTrust

I’ve long struggled with the disconnect between emotional “loyalty” and repeat purchase behavior, which can sometimes, but not always, coexist in the same shoppers. If we accept the term for argument’s sake, we can more easily consider some of the points raised by this research.
It is certainly possible for one household to be simultaneously “loyal” to Safeway, TraderJoe’s, Costco and Starbucks (for example), based on each channel’s ability to satisfy a portion of pantry needs or trip missions. Each of those retailers can only view a fraction of the household’s entire purchase behavior, which can make it challenging to understand and respond their preferences.
Those fragmented households may also fall into demographic clusters – life stage, economic, etc. – that may also influence their grocery shopping habits.
These are just some of the reasons why assessing shopper relationships based solely on levels of spending is insufficient in the modern marketplace. Gaining just an incremental 1% of a shopper’s wallet may be the definition of victory in this context.

Michael La Kier
BrainTrust

While we all work in the “retail world,” it’s important to think about this from the shopper perspective. They don’t think about “loyalty.” They are not “fragmenting their loyalty,” the fact is grocery retailers are not meeting their needs. And not a single grocer likely can. So, shoppers seek different things from different retailers. This could mean a shopper believes “Publix has great produce,” “Kroger has lower prices” and “I stock up on a few things at Costco, including prescriptions.” Carving out a niche is important to attract shoppers and be known for something.

Ricardo Belmar
BrainTrust

Loyalty means very different things to consumers when it comes to grocery, and like so many other segments, convenience is king. Whether in the form of product assortment, price, quality, or delivery method, they are all factors in every grocery shoppers decision on where to buy. Grocers need to rethink what loyalty means and identify new ways to drive traffic. What tactics work will, of course, vary by demographic and age groups. Younger shoppers may want better delivery options and mobile order and pickup. Other shoppers may want personalized discount offers. The key is not to rely on just one or two tactics and provide a mix — that will keep shoppers coming back! And don’t forget to think about the quality of the experience in-store once you get those shoppers to come in! One bad experience will certainly turn that customer into a non-loyal customer!

wpDiscuz
Braintrust
"While retailers cannot be all things to all people, they have to do more to consistently attract shoppers."
"...owning a niche is easier said than done, but expecting shoppers to be loyal for any significant length of time is yesterday’s thinking."
"What’s missing for me in these survey results is the pre-shop planning behaviors of shoppers that lead them to one or more stores."

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