Although consumers may have a favourite supermarket, more often than not convenience and location win out. In fact, new research finds that around one in six shoppers have switched their main supermarket over the past 12 months calling into question loyalty in the grocery sector.
The study, of over 1,500 shoppers by retail marketing agency TCC Global, reveals that 16% of shoppers have switched their main store over the past year and 39% say it wouldn’t matter to them if their usual grocery store closed.
This is compounded by the proliferation of stores, which means shoppers are spoilt for choice. Shoppers have access to five ‘very easily reachable’ stores on average, as well as 10 ‘easily reachable’ shops and 11 ‘reachable’, meaning it is easier than ever to switch between retailers.
This is not good news for the big four supermarkets, Asda, Morrisons, Sainsbury’s and Tesco, at a time when market share is being lost to discounters. Latest Kantar figures show that Aldi overtook The Co-operative to become the fifth largest supermarket in Britain for the first time, with sales up 12.4% year on year in the 12 weeks ending 29 January.
Aldi’s success is at the expense of many of the top four grocers, and while Tesco, Morrisons and Sainsbury’s have returned to sales growth, according to Kantar Worldpanel, their market shares continue to falter.
But both Aldi and Lidl are growing at their slowest rate since 2011, though still significantly faster than the overall market.
Retailers aren’t connecting with consumers
So can loyalty exist in the grocery sector? “The short answer is probably not,” says Bryan Roberts, global insight director at TCC Global. “What the research suggests, and what we have seen in recent years, is that there are very few retailers that can demand a genuine emotional bond between themselves and their shoppers.”
That connection is important “given the big four supermarkets all lost a decent amount of their shopper base to the discounters,” Roberts adds.
But low prices do not always equate to high value. Roberts says value for money is “a succession of trade-offs”. A retailer might have lower prices but the perceived quality could take a hit in terms of what’s on offer or the level of service.
A supermarket has to be really bad for you to drive past it to get to another.
Bryan Roberts, TCC Global
It is an assumption Lidl has been working hard to combat. Its latest campaign featuring new strapline ‘Big on quality, Lidl on price‘ sees the discounter directly compare its products on both price and quality with those of its rivals.
Aldi’s communications director, Mary Dunn, says the discounter offers “comparable quality to other premium retailers” while keeping prices low and that has “led to attracting 826,000 new customers in the last quarter”, according to the Kantar Worldpanel data in the 12 weeks up to 29 January.
She says: “It’s something that we will keep building on in 2017, as we continue to expand our estate and offer more shoppers access to our quality products and ranges.”
On the other end of the scale, Roberts says: “Waitrose is demonstrably more expensive yet it generates a loyal audience and has succeeded in attracting shoppers over the past five years by opening new stores.”
Meanwhile, Asda has consistently been the cheapest of the big four supermarkets, yet it has “haemorrhaged market share” to the discounters and the other competitors, according to Roberts. He says: “Even though Aldi and Lidl can be cheaper than other supermarkets, for some people that trade off isn’t worth making. What you gain in price you lose in range, service and experience.”
Low everyday prices and better value for money are the top two reasons people switch retailer, according to the study. This price focus is largely irrespective of household income, with 51% of high-income households, 60% of medium-income households and 64% of low-income households shopping where they can find the cheapest prices.
But price is only one component of value. The study explores the idea of loyalty in terms of the effort put in by a shopper to get to a store.
Respondents were asked when they think it’s worth driving or walking past a store to get to another to determine what makes an inconveniently located store attractive enough to overcome the lure of convenience and proximity.
Only 3% of all shopping trips involve getting to a store that is less conveniently situated than others though. This 3% average holds true for Tesco, Morrisons, Sainsbury’s and Waitrose, though only 2% of trips to Asda involve putting extra effort into the journey.
The discounters fare slightly better as 4% of Lidl shoppers go out of their way to shop there and 5% of Aldi shoppers forsake convenience in exchange for low prices.
“A supermarket has to be really bad for you to drive past it to get to another,” says Roberts. “Or the destination supermarket has to be incredibly impressive to incentivise that behaviour.”
He says the big four are beginning to correct this but “as discounters open new stores it makes it easier to disregard your traditional supermarket to get a 20% saving on your bill”.
The one retailer that merits a longer journey is M&S, with 14% of trips to the premium retailer involving extra effort, perhaps due to quality on offer and that 95% of M&S products are unique to the retailer.
But price worries could increase as consumers begin to show concern over rises post-Brexit. Separate research from Aimia, which operates Nectar, shows that 53% of people say they are worried about food and drink prices rising following the Brexit vote and 50% say they will be more mindful of ways to make their money go further in 2017.
Falling out of love with rewards
The research by TCC Global reveals the third reason people switch retailer is the offer of better rewards. However, only 22% of respondents say they would spend less at a shop if it no longer offered loyalty cards, and the research finds shoppers have an average of 3.3 cards, but use only 2.5.
“The overriding sensation we got through the research was that a lot of shoppers are jaded by these schemes,” says Roberts. “They have lost a lot of their impact. What they are looking for is more of a thank you above and beyond endless vouchers – something more personal, a bit more emotional.”
Marc Allsop, senior vice-president and head of global business development at Aimia, agrees that rewards should be more personal. He says: “In today’s uncertain economic climate and with inflation set to rise, customers are tightening their purse strings. However, supermarkets should see this as an opportunity, not a threat. Grocers have a chance to not only win on price, but also show they understand their customers.
He adds: “By providing personalised offers and discounts on products they know individual shoppers need and love, supermarkets can help them stick to stricter budgets.”
Grocers have a chance to not only win on price, but also show they understand their customers.
Marc Allsop, Aimia
However, while 61% of UK grocery shoppers are of the opinion that “I want to feel rewarded for my loyalty by more than just another loyalty card”, they are still popular for some.
The TCC Global study asks shoppers what, if any, action they might take if their supermarket loyalty programmes were withdrawn. Only 6% say that they would stop shopping with a retailer if their loyalty card was halted, 44% state that they would either visit that particular retailer less frequently or decrease their spending there. Half of shoppers say that the cessation of a loyalty card would not impact their shopping behaviour at all.
Setting out to highlight where and how retailers need to improve to remain competitive, the report also ranks retailers on perception of their loyalty offering. Sainsbury’s (46%) is recognised as the best for rewarding loyalty, while Asda (7%), Lidl (4%) and Aldi (3%) perform the worst.
With an uncertain climate lying ahead retailers need to make sure they do more to resonate with shoppers on a deeper level to help ensure they remain loyal. Otherwise consumers will simply go wherever is most convenient.