Eroding Brand Loyalty, Data Shortages, Digital Experience: Grocery’s New Reality
Grocers are facing a steady erosion of brand loyalty due to consumer behavior shifts resulting from the pandemic. But, by addressing the last-mile data challenge and improving the digital experience, grocers can create a 'digital flywheel' to help them win today and secure long-term loyalty.
Prior to the pandemic, grocery stores enjoyed some of the highest customer loyalty of any brand in any sector. The act of grocery shopping for most Americans was at least habitual, if not deeply ingrained into daily and weekly routines.
Today, all of that has been thrown up for grabs, and grocers face challenges from every angle.
- Supply chain issues and ingredient shortages are increasing stock-out rates.
- Labor shortages are leading to longer lines.
- Inflation is driving up the price of everyday items.
- Last-mile delivery is cutting into already thin margins.
- And the frequency of brand-switching is at an all-time high due to the rise and ease of e-commerce.
This confluence of factors has led to a steady erosion of brand loyalty, once a hallmark of the grocery sector and the envy of most other verticals.
Let’s look at the numbers.
According to a study conducted by Blis and WBR during the summer of 2021, a majority (57%) of North American top 100 retailers stated that during COVID-19, consumers were more focused on price and convenience, and 59% of retailers saw a significant drop in brand loyalty among their customers.
A recently published McKinsey study backs up these numbers as rampant habit-switching and brand-trial has occurred during the past 18 months.
And one survey in particular captured grocers’ new and current reality perfectly.
The survey, “eGrocery’s New Reality: The Pandemic’s Lasting Impact on U.S. Grocery Shopping Behavior,” surveyed nearly 60,000 American shoppers during summer 2020 at the height of the pandemic. It found that among the total of 43% of respondents who had shopped online in the past six months, just 26% shopped online at their preferred brick-and-mortar grocer.
“With close to 60,000 respondents across the U.S., we analyzed more than 48 million data points and found that shoppers are still highly satisfied and loyal to their preferred grocery store, but this loyalty does not extend to the online channel,” said Amar Mokha, chief operating officer and benchmarking lead for Incisiv, in a statement.
While every grocer is building their own unique playbook to address these challenges head-on, two areas, in particular, are rising to the top as most pressing for virtually every brand: addressing the last mile data challenge and improving the digital experience.
Let’s briefly look at each of these individually.
Addressing the last-mile data challenge
Every company today is a digital company and data quickly becomes the lifeblood of every organization.
Grocers were one of the earliest pioneers of developing vast data strategies based primarily on point-of-purchase data. Customers are rewarded with coupons and price discounts, and retailers use that data to inform everything from store layouts to demand forecasting.
The pandemic threw a hitch into those norms. With close to 70% of grocers partnering with third parties to facilitate last-mile delivery, all of this rich data is in the hands of the technology firms, and often not the retailers themselves.
During winter 2020, the media started noticing this dilemma. Headlines such as
“Instacart Looked Like a Savior. Now Stores Aren’t So Sure” in the Wall Street Journal and “To own or not to own delivery? Grocers reassess the Instacart dilemma? in Grocery dive began appearing online.
Through this process of self-reflection, many grocers realized that going cold turkey and dropping Instacart, Shipt, or other third-party delivery vendors wasn’t viable yet. They did, however, come to the realization that owning at least a part of the online experience is critical.
The Grocery Dive article highlighted one brand’s smaller victories in particular stating, “Sprouts Farmers Markets, for example, recently began accepting online orders directly through its website even as it continues to court business through Instacart's platform.
The arrangement allows the retailer to "keep people in our own ecosystem who just want to experience Sprouts," Denise Paulonis, chief financial officer of Sprouts, said recently during the company's third-quarter earnings call. “But we also don't lose the benefit of a good partnership with Instacart and good traffic to an Instacart site where people are just looking for that convenience every day. So now what we're really able to offer folks is a choice between them that they can make that we don't need to make for them."
As the pandemic at some point moves to an endemic and consumers continue their online and e-commerce ways, there’s little doubt that brands should and will strive to own as much of the end-to-end shopping experience as possible.
Their data depends on it.
Improving the digital experience
Grocers also need to improve the overall digital experience.
A 2020 Grocery Digital Maturity benchmark report from Mercatus assessed grocers across four areas of the digital buying experience: research and discovery, ease of ordering, fulfillment, and customer engagement and service.
As you can see from the red and yellow, the grocery sector was significantly lacking its retail peers heading into the pandemic.
The good news for many groceries is a shift in shopping to online not only shown the spotlight brightly on these areas for leadership but made investments into the online shopping experience far more viable.
Today, it’s a whole new ballgame and small improvements are making a massive impact on the bottom line.
Egen works closely to build and improve digital and e-commerce solutions for clients across the retail sectors. Our clients have experienced as much as a 3% increase in topline revenue from their online channels by improving nothing more than their product search experience.
"Good enough" used to be the mantra when it came to the online experience but that has quickly given way to best-in-class. Working closely with leaders from all departments, we’ve witnessed firsthand how these significant economic improvements have started to pay dividends and in the process, are changing hearts and minds.
Data + Experience: Separate but equally important.
While these two areas are inextricably linked, they’re also significant enough challenges that require focused dedication in their own right.
What continues to strike our teams at Egen working alongside our clients is how much investing in one of these sears: owning and better utilizing data and improving the customer experience, impacts the other.
When you have better data on what customers are buying and searching for, you can improve loyalty programs. When you have an opportunity to draw customers back into your site through improved loyalty programs, more usage and data create a better experience.
In this way, these areas create a digital flywheel that will not only help grocers win today but better control tomorrow.
Interested in learning how to tackle your last-mile delivery data challenge? Download our new playbook!
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