What We Learned from the Grocery Edition of the 2020 Retailer Preference Index

by Andrew Hoeft | Mar 5, 2020 12:00:00 AM

In the third annual Retailer Preference Index (RPI) for the U.S. grocery stores, Dunhumby  looks at the $700 billion grocery industry to answer what drives customer preference for grocery retailers, which retailers are winning and losing and why, and what grocery retailers can do to improve performance and win more trips.

Dunhumby provides a new perspective on the emotional connection behind what customers think and feel and why they shop at certain stores, all with the goals of understanding how these perceptions affect financial performance and helping retailers better understand their customers. 

Here are the most impactful things we learned from the 2020 Grocery Edition of the Retailer Preference Index. 

Customer Needs: 

While a few pillars of retail move spots in customers hearts and wallets, the price pillar is undoubtedly the most important pillar for shoppers of almost all incomes. Behind price comes the quality of product freshness and accessibility to private brands, prepared goods, product variety, the store experience, customer service, and the look and feel of the store. 

After price and quality comes digital, with easy ways to shop online or with a mobile app and the usefulness of the information provided. Operations follows with managing out of stocks, price consistency, stocking the right products and providing clean stores. 

Convenience, coming fifth in order of importance, represents having the right variety of products and convenient locations that allow shoppers to buy everything they need at one store. Speed both in efficiency of shopping and checkout comes in sixth place, and discounts and rewards including the ease of redeeming discounts comes last in seventh place.  

Top Grocery Stores:

The following grocers have a value core that is most aligned to their customer’s needs, delivering them in a way that is most relevant to their emotional connection and financial situations:

  1. H-E-B 
  2. Trader Joes 
  3. Amazon
  4. Market Basket 
  5. Wegmans 
  6. Costco
  7. Aldi 
  8. Sam’s Club 
  9. Walmart 
  10. Publix 
  11. WinCo Foods 
  12. Fresh Thyme 
  13. Sprouts 
  14. ShopRite

When asked what word came to mind when these retailers were mentioned, customers said convenient, cheaper, fresh, good, bulk, and great. 

Changing Value Consciousness: 

Following the last recession in the late 2010’s, consumers based their purchase decisions on price more than any other pillar of retail. Shoppers bought more sale items and got used to buying at lower prices. Shoppers also spent less on food, not only by seeking lower prices, but by buying less food.  

Shoppers also ate out less and cooked more meals at home and made bigger strides in curbing their impulse purchasing tendencies. They brought more private label brands, leading to an increase of shopping at more club warehouses, super centers, dollar stores and limited assortment stores. 

The “Fun” Factor:

With the hype of micro-experiences only on the rise, it’s no surprise that more shoppers are embracing the “fun” factor of getting their groceries. Leaders in the fun factor include Trader Joe’s, Fresh Thyme, and The Fresh Market. 

The “Fun” Factor is typically associated with grocers who capture a low share of their customer’s grocery wallet and  who provide a limited set of categories and products. Their limited categories allow them to deliver a well-aligned value core and focused innovation, but limit how much the customer will and can buy at a given location. 

How Traditional Retailers Can Win:

With big box stores and retailers topping the list of favorite grocers, how can traditional, regional retailers win? The equation is simple. 

Strong private brand + highly relevant assortment + highly relevant promotions = success

Quality is driven not so much in store experience, but more so through an assortment that meets their needs and allows shoppers to get all of the right products at a convenient location. While Walmart, Aldi and Dollar General have strong competitive advantages in price perception, private brands give traditional, regional grocers a resource to compete with. 

While they tend to trail in price advantage, traditional, regional grocers have a clear competitive advantage in promotion, information, and assortment relevance. When surveyed, discounts and rewards scored most important for those in late retirement and those that are empty nesters, but the numbers were high all across the board with little variation segment to segment. 

The Retailer Preference Index provides sixty pages of valuable information for grocers, retailers, and shoppers alike. To download the report, visit here.

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