Worries fade, but some still feel unsafe while shopping
One of the key things tracked by the Customer Pulse is something that we refer to as the "Worry Index" – a representation of how concerned consumers around the world are about COVID-19. Globally, the Index has now fallen to its lowest point, down from 34% in March to just 22% in September. Australia and Korea are the only countries to show a rise since the previous study, with the latter of those demonstrating the sole meaningful increase.
While worries may be dwindling generally, this can change rapidly based on local circumstances, and in-person shopping is still a point of concern for many: one third (33%) of those surveyed said they still don't feel safe from infection while shopping. Although this figure has fallen considerably since waves one (42%) and two (43%) of the Customer Pulse, this does mean it's of critical importance to retailers to keep communicating the efforts and importance of supporting colleagues and customers by focussing on positive drivers of a safe shopping experience and activities supporting vulnerable customers.
Those persistent worries should not detract from the phenomenal work the Grocery Retail industry has done to reassure Customers over the past six months. Stores (48%) continue to outpace the government (33%) in terms of who shoppers believe are doing a good job of dealing with the virus, a trend that has remained consistent across the duration of our study. Retailers in Canada, Australia and the UK are seen to be doing particularly well.
Early changes to shopping habits remain in place
The early months of the pandemic saw major changes to Customer shopping behaviours. Trips decreased, as did the number of stores being visited, while basket sizes and ecommerce usage both skyrocketed.
Six months on from our initial survey, those behaviours remain largely unaffected. While the number of trips that Customers make has slightly risen, it has not done so with any degree of significance. Broadly, shoppers have continued to stay local, and visit stores only when they need to. Only a minority are shopping new stores.
Consequently, many shoppers continue to spend more when they do shop; around a quarter (23%) say they are still spending more each trip. Basket sizes can fluctuate though and some markets saw spikes particularly sharply towards the end of September*, likely a consequence of infection rates beginning to rise once again and many shoppers wishing to stock up in the event that tighter restrictions could follow.
One the most profound changes in behaviour during the outbreak – the upsurge in online grocery – continues apace. Ecommerce now accounts for 28% of weekly shops, the same as it did in May, and relatively stable since the start of the pandemic when it stood at 30%. Many respondents plan to continue to adopt online alongside store shopping with 59% saying they plan to continue using online channel. The tipping point for online is well and truly here.
Although many of the pandemic-based trends have remained consistent during the past half year, some shifting dynamics are worth bearing in mind. In the UK specifically, while the initial outbreak saw large superstores lose much of their trade to both smaller shops and digital channels, much of that custom is now being pulled back in from small and medium stores, as well as convenience locations.
Financial worries have remained constant, and frugal behaviours are rising as a result
In regard to both their personal finances and the economic outlook for their country as a whole, many shoppers are now a little more optimistic than they were when the Customer Pulse began. That said, concern is still rife; around half (47%) of consumers have worries about their own financial situation, and more than two-thirds (67%) say the same about their national economy.
Accurately or not, this prolonged concern has translated into widespread belief that grocery shopping is becoming more expensive. Some 41% of global respondents believe that prices have risen, with many countries showing a significant increase since May. France is the only country in which this figure has declined.
The upshot of this persistent financial worry is that many Customers are now beginning to act more frugally. More than half (51%) are looking to lower-priced stores, with similar numbers increasing coupon usage (45%), opting for the lowest-priced goods (41%), and looking online for the best available sales. As we reported in June, a new age of value perception is here.
Eight important shifts will define the future for Grocery Retail
As Customer behaviours continue to flex around the impact of COVID-19, we believe that Retailers need to continue to focus on eight key shifts and business enablers as they continue to respond and future proof their business for the future. Consumer behaviours
- Value: as discussed above, demonstrating value to Customers will become increasingly important over the coming months with continued pressure on household budgets.
- Local: with shoppers preferring to stay local, range and assortment will need to be tailored as a result across formats.
- Food at home: despite recent increases in the number of people dining out, many shoppers continue to favour recreating meal experiences at home, both in cooking from scratch and food to go solutions from grocers.
- Personal wellbeing: a growing trend towards health, wellness, and better eating habits will need to be catered for.
Retailer adaptation
- Online: while the sharp rise in ecommerce adoption has now begun to plateau, utilisation remains significantly higher than it was pre-pandemic.
- Digital acceleration: with more Customers heading online, a greater opportunity to engage and inspire using digital channels comes into play.
- New revenue streams: with margins growing tighter as the cost of managing the Pandemic and online fulfilment rises, Retailers will need to find new sources of revenue to offset this expenditure. New retail services, and monetising data and media are key opportunity areas.
- Efficiency and SKU consolidation: related to the above, the need for Retailers to optimise and solidify their operations will become greater too with heightened focus on optimising and simplifying assortment.
For more information about COVID-19's impact on Grocery Retail, please visit our dedicated resource hub.
* Data from this edition of the Consumer Pulse has been supplemented with recent insights from HuYu, dunnhumby's receipt scanning and rewards platform.
If this is true, then why does Aldi—which borrows a quarter per shopping cart and operates with a small crew that arranges shelves while taking care of customers—have a stronger emotional connection with shoppers than 90% of its competitors?
Yes, that's right. Aldi, known for its cost cutting and low prices, has– an emotional connection that is stronger than nine out of 10 traditional grocery stores.
Traditional grocers may take for granted that they have an advantage over non-traditional channels in the strength of their emotional connection with shoppers, but that doesn't appear to be the case at all. So just how bad is it for traditional grocers?
The inconvenient truth is that the average traditional grocery store has a lower emotional connection with its shopper than the average store in any other major channel where groceries are sold. While traditional grocers have been focused on selling groceries to the same towns for decades, non-traditional grocers have been able to move into those towns and secure a stronger emotional connection in far less time.
How? Well, it appears that emotional connection does have a price, after all. In fact, price perception is slightly more associated with emotional connection than perception of the quality of products and store experience:
And, whereas traditional grocers have managed to hold their own on quality perceptions, they lose on price perception.
So, where does the traditional grocer start if they want to win back the hearts of their local constituents? After all, there are many levers they can pull within pricing, assortment, and store experience to move perceptions. A close look at data from our 2019 Retailer Preference Index: Grocery Channel Edition offers some hints. Stores who have the strongest emotional connection separate themselves from the pack with the following:
- Private brands that customers love
- Leading prices on natural and organic items
- Fast checkout
- Staff who show they value shoppers
Translated into language customers might use, that means:
- Have products I can't get anywhere else, at competitive prices
- Make healthy food affordable
- Don't waste my time
- Treat me like a person
Of the 56 retailers ranked by emotional connection, 24 of the bottom 25 are traditional retailers. And while Aldi, ranked 17th for emotional connection, has been used as a stark example to illustrate traditional grocers' emotional connection issue, many other non-traditional stores have a stronger emotional connection with their shoppers than Aldi does with theirs.
However, 3 traditional grocery stores buck the trend and join non-traditional retailers in the top 10: Market Basket (4th), H-E-B (5th) and Publix (6th). They each check more than one of the boxes on the core ingredients of emotional connection.
These retailers, more than any other traditional, regional grocer, have established with their emotional connection an insurance policy for an uncertain grocery industry future. And the prevalence of non-traditional grocers with superior emotional connection proves the point that this insurance policy is more a product of "what have you done for me lately" than a product of consumer nostalgia. Non-traditional grocers are buying emotional connection with better prices while delivering on some combination of a superior private label, offering the best natural and organic prices and having staff who show they value customers.
Hence, the context and laboratory for these suggestions is the retail store, where the rubber meets the road, so to speak.
1. Who really runs the store?
Walking around a store (or better, walking around several), can give many clues toward understanding a retailer's attitude about its Customers, as well as revealing some of the challenges ahead for installing Customer First. As Customers ourselves, we are qualified to assess an organization's 'readiness' for Customer First, simply starting by walking around.
How a Customer experiences the store shapes their perception of the brand, and there are dozens (even hundreds) of 'moments of truth' for Customers in each shopping trip – opportunities for the retailer to win more loyalty, or indeed to lose it. And it only takes one 'bad' experience to erase all the good.
Leaders can form an opinion about the Customers' true shopping experience by observing 'Who really runs the store?' – a way to put on a Customer lens to assess if the Customer, the retailer, the supplier, or no one is driving shopping experience decisions, like range and presentation. For example:
- Choose three sections across the store (telling categories include yogurt, pasta sauces, milk, and packaged lunch meats). Look to see how the product is organized and presented (remember to try to see through the eyes of a Customer).
- Is the section organized by brand (e.g. all Danone yogurt is merchandised together in a recognizable Danone brand block)?
- By Customer benefit or usage (e.g. all brands of probiotic yogurt are merchandised together, as are all Greek style yogurts, all kid's yogurts, etc)?
- Or, by some hybrid but logical planogram rather random plan, with little recognizable logic at all?
- Would you conclude that the product display / layout logic is influenced more by supply chain, by brands, or by the Customer need states or trip missions?
- How broad is the range (e.g., number of varieties or sizes)? How deep (e.g., number of brands of the same flavor or variety)? Does the breadth and depth feel Customer friendly, or confusing?
Of course, analysing any available loyalty data will later tell us how Customers shop the category and that might well be by brand (or flavour or size, etc., and will certainly vary by section). But this first assessment helps us begin to form our perspective on how tuned-in the business is around its Customers, and about where within the business leaders might need to begin to install insights and the Customer language.
2. What messages are Customers receiving?
Store signage not only delivers a written message, but also a type of 'body language' that Customers tune in to, albeit not always consciously. Look around the store to see both the written and hidden messages, and hear the tone being communicated: ask, do messages speak respectfully to Customers? For example:
- Signage at the entrance rudely telling Customers what the rules are, even though 99.999% of Customers will never even think of shopping without shirts or shoes, or wearing roller blades
- Narrow limits on the quantities of promoted products or services.
- Rules and restrictions, terms and conditions.
- Aggressive security barriers and gates at entrances – although sometimes operationally necessary, these also tell honest Customers that they, the shoppers, are not to be trusted.
- Phony expiration dates for promoted prices – Customers learn that the deal will be repeated soon, if not immediately. Best example is the many carbonated soft drink promotions below shelf price that are repeated frequently, and the innumerable 'roller' prices practiced by many retailers.
- Stupid pricing signs (any stupid sign, really).
3. What messages are Employees receiving?
While walking the store, traveling through stock rooms and the employee break room, note the signage and messaging aimed at staff. What seems to be valued more – numbers or people?
What policies and rules guide employee behaviour?
How are they expected to interact with Customers?
Are the messages respectful of staff? Of Customers?
What do signs say about the culture around Customers?
4. Who has the power to satisfy Customers?
dunnhumby's Loyalty Drivers analysis suggests that Customers exhibit four 'mindsets' in their shopping journey – Discover, Shop, Buy, and Reflect. One element of the 'Reflect' mind-set includes the decision to return, exchange, or to request a refund when the product or service does not quite suit.
On your store walk, observe who has the power to satisfy Customers making a return or wanting a refund: is the front-line employee empowered to satisfy the Customer, or must the Manager be called? Is there one 'service' desk where Customers must queue to get their money back, or can the helpful cashier make it good on the spot?
Examine the return policy to assess its sensibility and ease from a Customer viewpoint. For example, must a Customer act within 7 or 30 days, and is a receipt required and signature under penalty of perjury? Is the taking of an oath necessary, or perhaps a drop of blood? The store's practice says volumes about who deserves trust in the eyes of the business. Requiring levels of approvals and higher management involvement (or some other form of hoop-jumping) is neither trusting of employees nor Customers.
The return / refund policies and practices are strong indicators of a company's readiness for, or progress along the Customer-centric journey. Customer First organizations give front-line employees broader authority to resolve Customer needs, and extend the power to satisfy Customers to most members of staff, in some form. For best practices in this area, please see the policies from Nordstrom in the U.S. and Ritz-Carlton globally.
5. Do the words of your leaders matter?
Senior leaders set the tone for how Customers are regarded and treated in the business both by their words and their actions, of course. And the C.E.O.S – Customers, Employees, Owners, and Suppliers – all take notice. It's widely documented that leaders who walk the walk are more effective than those who only talk the talk.
One simple yet powerful way to assess readiness and progress is seeing how leadership's walk and talk align. A word cloud, like the one illustrated below, makes the point very clear. In this example, recent shareholder statements (same quarter) were compared for two companies on a Customer-centric journey. We can see different progress in a form of 'walking the walk' at Retailer X and Retailer Y. The C.E.O.S are hearing what really matters to the leaders, and are forming the Customer culture accordingly, all the way down to store level.
Implications for retail leaders
The store shapes Customers' perception of the brand; there are hundreds of opportunities for the retailer to win or lose loyalty in each shopping trip. Customers take clues, consciously and unconsciously, throughout their entire shopping experience, and draw conclusions about retailer warmth and attitude toward shoppers. And it only takes one disappointing experience to erase all the good.
Retail leaders must take an objective assessment of the shopping experience using a Customer lens to understand their current state and readiness for customer centricity. Pay close attention to the body language and tone of your policies. Store signage, employee empowerment and communications, and practices around assortment and presentation are clear indicators of the organization's attitude about the Customer.
Who actually runs your store?
This is the first in a series of LinkedIn articles from David Ciancio, advocating the voice of the customer in the highly competitive food-retail industry.