1. Shopper & Customer

dunnhumby’s Sixth Annual Retailer Preference Index (RPI) for U.S. Grocery
THE GROCERS BEST ‘BUILT TO LAST’

H-E-B, Costco Best Navigate The 2020 – 2022 Pandemic Grocery Market Upheaval, Bumping Amazon From Its Top Ranking

Customers emerged from 2020 – 2022 placing more importance than ever on finding the right balance of savings and quality while placing less importance on saving time.

Pandemic surge in retailer digital capabilities and consumer digital adoption led to greater importance of personalized pricing, promotions, rewards. National and regional retailers are quickly closing the digital gap that Amazon had opened.

At the same time, omnichannel wholesalers accelerated their long-term momentum more than any other formats during this period. So, while national and regional grocery stores may have closed the digital gap with Amazon, omnichannel wholesalers such as Costco (#2 in the rankings), Sam’s Club (#5), and BJ’s Wholesale (#10) will remain fierce competitors.

Executive Summary

  • From 2018 through 2022, grocery retailers have lived an entire lifetime in just five years, with all its ups-and-downs: a period of business as usual, a once-in-a-generation-sized shock to consumer behavior that led to record sales, followed by a once-in-a-generation-sized shock of inflation. While this period has been challenging, it has also provided the perfect laboratory for understanding which grocers’ customer value propositions are most resilient and built best for the long-haul. This year’s RPI report is different from previous RPI reports, since it allows us to predict which retailers will last for decades to come.
  • The period of upheaval from 2020 – 2022 increased the importance of saving customers money, specifically through leveraging digital capabilities to deliver more personalized pricing, promotions, and rewards. Currently, above the line pricing levers, like base prices and advertising, are similar in importance to pre-pandemic. That said, the history of grocery retail shows that price has always been the main concern among consumers, even among the affluent. That trend is likely to persist, with technology continuing to create pricing pressure on all retailers.
  • Personalization’s increase in importance opens the door for regional supermarkets to stall or even reverse the decades-long market share decline their format has experienced as supercenter, club, limited SKU and digital formats have grown.
  • Non-traditional formats and national chains tended to display a superior ability to pivot with shifting customer needs from 2020 – 2022, driving the biggest increases in personalization, rewards, and online shopping capabilities. This serves notice to personalization-led regional supermarket chains that they cannot rest on their past or even current capabilities and must instead continue to drive improvements in digital and personalization if they want to gain share against non-traditional formats. Another threat from clubs: reducing the basket size of regionals, as shoppers continue spreading their spend across a mix of preferred stores.
  • H-E-B, Costco, and Amazon are the three retailers with customer value propositions best built for long-term success. Most of the rest of the top 15 retailers are non-traditional formats, while spots 17 – 63 in our rankings are mostly regional supermarket chains.
  • Over the past 100 years in grocery, customers have gravitated toward grocery innovations that have saved them money, even as real disposable incomes have steadily risen and food’s burden on the household budget has decreased. This speaks to the staying power of saving customers money as a dominant need to fulfill, while other mega-trends in grocery – like values-based consumption, health and wellness, and digital transformation – will remain a secondary consideration in the decades to come. For a deeper look into these mega trends and how we think they will impact the grocery industry for decades to come, visit our dunnhumby Quarterly website in March, for the publication of our “Grocery 2053” article.

Given the staying power of seamlessness as a customer need, the increased need for personalization has staying power as well. It is worth repeating though that if you are a retailer trying to appeal to the majority of your customers, your base prices have to be competitive or the ROI of any promotions – personalized or otherwise – will be stunted. Over the past 100 years in grocery, customers have gravitated toward grocery innovations that have saved them money, even as real disposable incomes have steadily risen and food’s burden on the household budget has decreased. This speaks to the staying power of saving customers money as a dominant need to fulfill, while other mega-trends in grocery – like values-based consumption, health and wellness, and digital transformation – will remain a secondary consideration in the decades to come. For a deeper look into these mega trends and how we think they’ll impact the grocery industry for decades to come, visit our dunnhumby Quarterly website in March, for the publication of our “Grocery 2053” article.

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