Introduction to the Retailer Preference Index for U.S. Grocery and the Covid Momentum Metric

In order to reflect on how the grocery world changed in 2020, we have changed how we calculate our overall Grocery RPI score. Given the historically unique metrics we've witnessed in the economy, the restaurant industry and the grocery industry, along with the rare influence a global pandemic has brought to consumer behavior, we're viewing grocery success in 2020 through a different lens than we viewed grocery success in prior years.

Our Methodology

Starting in 2018, our Retailer Preference Index (RPI) score established which retailers' value propositions were best positioned to win with customers long-term. Our rankings were the result of a statistical model that predicted how retailer execution on various customer needs – or Preference Drivers – impact both lasting emotional bonds formed with customers, as well as longer-term financial success:


2018-2020 RPI Approach



By understanding how different Preference Drivers propel overall market share

we understand what it takes for a retailer to scale their offering up to different regions, to a wider variety of consumers, which takes time. Modelling against Five Year rather than Year-Over-Year sales growth ensures we understand what it takes for a retailer to maintain growth that isn't just the result of a trend. Finally, knowing what it takes to secure a strong Emotional Connection with consumers sheds light on what will get consumers to keep coming back to retailers long-term, even in spite of events that would temporarily steer them away – like job loss or illness. This year, we are introducing another element to our calculation: the Covid Momentum Metric. This metric results from a statistical model that predicts how retailer execution on the same Preference Drivers impact short-term financial success, namely market share gains or losses during 2020.



By modelling against Covid Era market share gain or loss

we can understand what is driving changes in consumer behavior during Covid. This does not tell us what it takes to win with customers long-term, since the Covid Era is a unique moment in time. However, we nor any retailer should dismiss the Covid Era changes in consumer behaviors or preferences as definitively temporary, especially given the length of the Covid Era and how long these new behaviors have had to wear new grooves in consumers' brains and lives. Therefore, to understand which retailers are best positioned now and for the future, we must consider how their value proposition is positioned to win Emotional Connection, long-term financial results and short-term Covid Momentum. As a result, the RPI score this year is really the RPI+ score. It blends how well a retailer's customer value proposition is positioned for long-term success with how much short-term momentum that same value proposition generated for the special circumstances surrounding Covid:

2021 RPI Approach


Since the RPIs from 2018 through 2020 delve deeply and exclusively into what drives the overall RPI ranking, this report will devote much of its real estate to understanding which retailers performed higher on our Covid Momentum Metric, and why. Without further ado, let's look at the top ranked retailers for the 2021 Overall Retailer Preference Index, and which retailers best delivered on customer needs to score highest on our Covid Momentum Metric.

2021 Retailer Preference Index and Covid Momentum Metric Ranking: The First Quartiles (Rank 1 - 14)

Based on a combination of how well-positioned a retailer's customer value proposition is for long-term financial success, emotional bonds with customers and short-term Covid Momentum, the retailers who scored in the First Quartile Overall, with the highest RPI+ Scores are:

This marks the first year that Amazon claims the top spot in our study, jumping from third place to overtake last year's winner, H-E-B. Trader Joe's slides from second to third place, rounding out our top three. Target is our only newcomer to the First Quartile Overall, jumping six spots to move out of the Second Quartile, a spot they occupied the previous three years.

When looking at Amazon's strengths, it is clear why they are first this year. Amazon occupies a clear Price-First position, ranking 11th out of the 56 retailers in our study on Price, ensuring a strong Value Core. They also are second in Speed and first in Digital, two of the most important preference drivers for Covid Momentum.

Due to Amazon's performance on Speed and Digital and its value proposition, it also had the most momentum of any retailer in the market in 2020, scoring highest on our Covid Momentum Metric:


Pillars Deep Dive
Price
Quality
Digital
Operations
Convenience
Speed
Discounts
How the Preference Pillars are Changing in the Covid Era
“It takes moments of shock and awe in order to suck it up to the reality of having to pay for major price increases in grocery items all across the food groups during the pandemic.”
Customers’ overall price perceptions for each banner drive this pillar. Price has been the dominant driver of long-term preference in the grocery industry. Over the past three years, the importance of Price was marginally declining as the economy strengthened but was still the most important driver in 2019. During 2020, however, Price was less important as consumers looked to get in-and-out as quickly as possible and scrambled to simply find items in-stock.
More on Price Pillar

Retailer Preference Index 2021: U.S. Grocery Channel Edition

The fourth annual dunnhumby Retailer Preference Index for U.S. Grocery (RPI) sheds light on what makes a retail winner, and how the pandemic has impacted consumer shopping behaviors. Known as retail's equivalent of the Gartner Magic Quadrant, the RPI surveyed about 10,000 consumers to understand what's driving customer preference and rank the top 57 grocery retailers in the U.S.

Quality pillar is the most complex preference driver in our study because it includes many different attributes. The two underlying customer needs are the Quality of the store experience and the product assortment. The Quality pillar composition is very similar to previous years, but the importance of Quality dropped from the second most important pillar in previous years to the second least important in 2020.
More on Quality Pillar
The Digital pillar is defined as: easy ways to shop online or with an app, Top Quartile & High Risers 2020 and usefulness of information provided. During 2020, Digital increased in importance to drive short-term financial performance. Walmart Chief Financial Officer Brett Biggs said the shift in customer buying behavior at the start of the pandemic amounted to “three to five years of acceleration in eCommerce, really in a period of weeks and months.”
More on Digital Pillar
Operations combines the in-stock availability of products that consumers purchase regularly and price consistency. Unlike other amplifier pillars such as Digital, Operations became only slightly more important in driving retailer preference during the Covid Era compared to pre-Covid. Meaning, Operations maintains the same tertiary level of importance in contributing to both the long-term success and short-term Covid gains or losses for grocery retailers.
More on Operations Pillar
Convenient locations, one-stop shopability, and right product variety make up the Convenience pillar. Convenience is the least important factor for explaining short-term market share gains, and retailers in each of the four Covid Momentum Quartiles performed similarly on Convenience.
More on Convenience Pillar
For this study, speed is defined as getting in and out of the store quickly and a fast checkout. In the Covid Era, Speed became synonymous with Safety, more strongly correlated than any other driver. Shoppers wanted to avoid crowds and get in and out fast to stay away from germs. But Safety also threw unprecedented hurdles at shoppers to execute a quick shopping trip with the safety measures that stores enacted, such as one-way aisles and lines to get in the store.
More on Speed Pillar
Discounts, Rewards & Information is defined as relevancy and ease of redeeming discounts and coupons, rewards for shopping, and providing relevant Information. Like Speed, which shot up from least to most important in the Covid Era, this pillar also became much more associated with success in 2020 than in previous years – sitting behind Speed and alongside Digital.
More on Discounts & Rewards Pillar

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Walmart versus Target
Kroger versus Food Lion versus Safeway
BJ’s Wholesale Club versus Costco
You don’t have to look too deeply to understand why Target is projected by Edge Ascential to pick up 0.271% of the national grocery market share, thanks to estimated 2020 grocery sales growth rate of 15.9%, while Walmart is projected to lose -0.77% of the national grocery share with only a 5.1% projected grocery sales growth rate, behind the national average of 8.8%.
The clear difference-maker is Speed:
Target is solidly above the market average on speed to shop their stores, while Walmart is far below average. On top of that, Target edges Walmart out in customer perception of Digital capabilities as well. Lastly, in Discounts, Rewards & Information and in Operations – the other two Preference Drivers that contribute to positive Covid Momentum – Target also has a slight edge.
Also, looking at where Walmart and Target shoppers’ cross-shop provides additional clues as to why Target grew faster in grocery than Walmart in 2020. Walmart and Target are each other’s most cross-shopped stores, and, outside of each other, they both share Amazon and Aldi as two other leading competitors. Target, Aldi and Amazon all are leaders in Speed. Now, Walmart’s biggest competitive disadvantage that was much less relevant to driving financial performance in previous years created stiff competitive headwinds multiple times over during 2020.
Why would Target have a higher Overall RPI Score Ranking than Walmart? Walmart has a clear Price Perception advantage, and Target and Walmart are on par with each other for grocery Quality perception. Shouldn’t Walmart’s stronger Value Core give it a higher Overall RPI Ranking? The reality is that they are both in the First Quartile Overall, so they are both doing something very right when it comes to their long-term customer Strategy.
Target might just be a little bit better aligned to their customer base than Walmart. Target has nearly twice as many customers as Walmart with annual household income over $100k per year, while Walmart has about twice as many customers as Target with annual income less than $50k. Target’s Price perception – still better than most just not as good as Walmart’s – is just good enough for their higher income customer, and the superior Speed and Digital elements of their customer value proposition – two areas which over index in importance with higher income customers – amplify this good enough Value Core to deliver unique advantages in those areas their customers’ value most.
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Thank you for your interest in the latest dunnhumby Retailer Preference Index.

Retailer Preference Index 2021: U.S. Grocery Channel Edition

The fourth annual dunnhumby Retailer Preference Index for U.S. Grocery (RPI) sheds light on what makes a retail winner, and how the pandemic has impacted consumer shopping behaviors. Known as retail's equivalent of the Gartner Magic Quadrant, the RPI surveyed about 10,000 consumers to understand what's driving customer preference and rank the top 57 grocery retailers in the U.S.