Some grocery stores promise high quality, and they have the high prices to match. Others promise plenty of savings, as long as you accept some compromises.
Decisions, decisions – which is the better option? These days, a new survey says shoppers are inclined to tell stores to forget the high-priced quality, and focus on the good deals instead.
According to dunnhumby’s newly-released eighth annual Retailer Preference Index, after two years of record inflation, “hardened consumers” surveyed late last year are turning away from retailers who don’t offer savings. “2024 is the year where the long-term savings/quality equation tilted more in favor of savings than ever,” the report found.
And don’t even get these survey respondents started on newfangled grocery features like omnichannel shopping and artificial intelligence-based experiences. Stores can offer them if they’d like, but only if they focus on their prices first.
dunnhumby surveyed 11,000 grocery shoppers and cross-referenced their opinions with financial results from the largest 72 grocery retailers in the country. That way, they could see not only which features shoppers like, but which are good for business.
What dunnhumby found was that “delivering savings is more important than it has ever been in our model.” Good prices are always important to shoppers, but never as much as they are now. Quality, meanwhile, while still the second most-cited desire among shoppers, “is less important than it has ever been.”
Even less important are bells and whistles like digital capabilities and online shopping. While they’re nice to have and certainly can’t hurt for shoppers who seek those features, “grocery is a basic needs business,” the report stated. The most important thing a grocery retailer can do is provide the “quality a customer seeks at prices that are affordable,” and “make people feel like they are being smart with their money.”
And if they can do both, even better.
H-E-B does, according to dunnhumby’s findings. Thanks to its “superior ability to deliver a combination of better savings, quality, shopping experience and assortment,” the Texas-based grocery chain tops the report’s overall rankings for the third straight year. As a result, dunnhumby declared, “the battle for first place” that took place throughout the early years of the survey “has now turned into a battle for second.”
This year, that second-place slot is claimed by Market Basket, followed by Costco, WinCo Foods and ALDI. All do better than most in offering everyday low prices, and even lower-priced store brands. But only H-E-B layers robust promotions on top of what the others offer. Tellingly, shoppers gave H-E-B top marks when asked which store “has lots of visible discounts/items on sale” and “has discounts/coupons on items I buy regularly” – yet it also performed well in “this store already has low prices, without using lots of coupons or special sales.” So, according to dunnhumby’s findings, H-E-B just might have cracked the code on how to be all things to all people.
The overall importance of savings – whether in the form of promotions, coupons or everyday low prices – is further illustrated by the rankings of retailers who appear further down the list. Lidl is only #17 on the list, but that’s a huge improvement over last year’s #31, and not necessarily because Lidl has made any drastic changes. “The uptick in importance of savings (their strength) and downtick in importance of quality (their weakness), explained their jump,” dunnhumby noted. Trader Joe’s, in contrast, was at the top of the list for the first two years of dunnhumby’s survey but has now settled in at #8, “by being ahead of the market on quality while being about average at savings” – about the opposite of what shoppers today say they’re looking for.
And Kroger and Albertsons-owned stores suffered some steep declines in this year’s rankings, which dunnhumby attributes in part to negative press coverage about their failed merger – particularly the allegations of “price gouging and anti-competitive practices” that made shoppers question the retailers’ real commitment to low prices.
dunnhumby summarizes its findings by saying they “prove that a midmarket strategy meant to appeal to a broad spectrum of consumers” is the winning approach. Go too high-end with high prices, and value-seeking shoppers will flee. Go too downscale and compromise on quality and selection, and even penny-pinchers will balk. In the end, quality is still important. But “saving customers money – through price, promotions, and rewards – is the most important predictor for retailers to have stronger, long-term market success,” the report concludes.
So it turns out that what’s good for shoppers is good for retailers, too. Shoppers just want to save money, while retailers want to make money – and if they can both get what they want, that’s a combination that will make everyone happy.
Image source: H-E-B
