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.
customers favored Speed during Covid, which correlates negatively with larger format stores where customers can do all their shopping at once. Moreover, evolving commuting behaviors from people working from home and limited mobility due to stay-at-home orders shifted which stores were now considered Convenient. While people were adjusting to new ways of shopping for food, and making trade-offs on Price and product quality and variety, they were being hit with out-of-stocks, which affected their ability to easily buy their typical brands.
Despite stay-at-home orders, changes in commuting behaviors and erratic outof-stocks (or perhaps because of these things), basket sizes were up and visits per customer were down for every retailer we studied. At the time we surveyed, the average basket size was ~30% higher for shoppers in the market. Additionally, the average share of wallet that customers were giving to their current grocery retailer was ~14% higher. Translation: customers consolidated their shopping to fewer stores, giving more money to each store. This occurred even for stores that were competitively less well-positioned for one-stop-shopability heading into Covid. In fact, stores that scored in the lowest quartile on "I can do all my shopping at this one store" had the largest increases in basket size and share of wallet during Covid. In other words, during Covid, shoppers were more forgiving of a retailers' faults in their quest to fulfil their short-term shopping needs and get home quickly and safely.
Convenience and Covid: Voice of the customer
"With work at home - I cannot shop at the grocery stores I usually shop at because they are in the town where I work - 30 minutes away and feel wasteful driving that far just for groceries."
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.
Price perceptions are also correlated with how far shoppers will travel and how emotionally connected they are to the store. Simply put, shoppers will travel longer distances for better prices and are more likely to be satisfied with retailers with strong price perception. Additionally, Price perception is much more likely to be positively impacted by better base prices than by relevant discounts and promotions.
So, how has Covid changed the competitive dynamic? As mentioned above, the Price is the top driver in explaining long-term performance in previous reports, but for driving short-term financial performance during the Covid Era alone, Price dropped behind Speed, Digital, and Discounts, Rewards & Information. This shift in customer needs aligns nicely with traditional banners, who have historically done well on Speed and Discounts, Rewards & Information, but poorly on Price. This also helps explain why traditional banners like Food Lion, Albertson's and Winn Dixie performed well in 2020, while powerhouse banners like Walmart, Costco and Trader Joe's have stumbled a bit.
Also, in a year of rapidly growing prices and the chaos resulting from the virus, we saw traditional banners improve their Price perception scores more than any other channel. We don't expect that traditional retailers did anything much different, but we hypothesize that their Speed and Safety scores helped to create a Price perception halo and that customers felt EDLP competition had less reliable and consistent pricing than they typically had. More relative value was delivered by traditional banners and that translated in improved Price perception for many shoppers. However, we expect Price perception across banners to return to their pre-Covid levels once the dust settles in the back half of 2021 and 2022. The two tables on the right highlight the gains made by traditional grocers with regards to Price perception. The first table below shows the First Quartile banners for Price. Only four of the fourteen banners are traditional banners, and they include Market Basket, H-E-B, ShopRite and Fareway. The remaining ten banners fall into mass, warehouse, or discount channels which is consistent with the three previous RPI studies. However, when we look at the notable gainers in the second table, all those jumping more than five ranks are traditional banners. Although Price was less important this year, these gains by traditional banners also helps to explain why they did so well in 2020.
We also expect that, long-term in a post-Covid world where supply chains are back to normal and pricing signals are once again clear, Price will be the dominant driver for choosing a preferred retailer. This could also be amplified if the much of the country experiences economic struggles and government stimulus is delayed or non-existent. The structural damage to the economy is still not fully understood and the more damage that occurs during the virus, the longer it will take for the economy to fully bounce back.
Price and Covid: Voice of the customer
"I only buy where I can pick up groceries without leaving my car, but I must purchase minimum $35. If I only need a carton of milk, I just have to wait until I need 5 or 6 cartons, or enough other things to add up. I almost always end up spending too much."