Only one in twenty-five shoppers choose a grocery store based on the loyalty programme it offers, and one in two base their choice on location, according to new research by Mintel.
Recent research from Mintel in the UK reveals that when it comes to grocery shopping, it's still all about location, location, location; convenience is quite simply king for British shoppers. Surprisingly, neither price nor the range of food available rival the basic position of the store.
Today, shoppers are twice as likely (at 50%) to opt for a store which is "the easiest to get to" than be swayed by the prices. Just over a quarter (26%) of British look to purchase their groceries from a store which is cheapest to shop at, while only just over one in five (22%) opt for a store which offers the best range of produce.
Make shopping convenient
According to Neil Mason, Senior Retail Analyst at Mintel, "Although price is of some importance - location is crucial in the battle to win shoppers' trade. The high emphasis placed on the store being close to home shows that it is actually quite hard for grocers to break established shopping patterns. There is so much that can be done with the price, products and overall shopping experience, but it is significantly harder to change the location of a shop. Retailers need to be aware of the importance of accessibility, by considering a variety of store formats, such as local convenience stores, high street shops or out of town supermarkets, to make shopping increasingly convenient for consumers."
Back in 2002 it seemed as if loyalty card programmes were about to fall out of fashion, but two years on, in 2004, the three biggest UK programmes (Tesco Clubcard, Nectar and Boots Advantage card) alone had amassed some 11 million regular users. Once shoppers have located their most convenient store, Mintel's research shows that 65% of consumers claim to regularly use at least one loyalty card operated by a retailer. However, almost half (49%) of adults would prefer to "have lower prices than points or incentives" - this is up from just 34% in 1999.
Not surprisingly, 40% of those participating in loyalty programmes take the rewards as a cash discount each time they shop. Around one in three (29%) only bother with loyalty cards for stores where they shop frequently and a mere 4% claim to have chosen their grocery store based on the loyalty programme on offer.
"The loyalty card, and the rewards offered, are likely to be viewed as an integral part of a retailer's offer", says Mason. "The reason why many participants simply redeem the points for a cash discount is because they have no emotional attachment to the programme. Shoppers often dispassionately collect what is offered and redeem it when they have an opportunity. Retailers' use of loyalty cards has increased, which shows that retailers in general are 'pro' loyalty cards, but they must be aware that clear and simple schemes work best, and need to keep in mind that most people will take rewards as a discount."
Use of information is key
Retailers need to be aware that it is the information gained from trapping consumer spending and shopping behaviour that is the key to the added-value facet of loyalty cards. To get optimum value from these schemes, retailers have to use this information intelligently.
The 'cherry pickers' use discount retailers: today, some 53% of adults shop at discounters, but just 2% use discounter grocery stores for their main shop, again showing that price alone is not the driving force behind choosing a grocery store.
According to Mason, "Although our research shows that discounters are becoming less popular for regular shopping trips, they are clearly becoming increasingly popular for the occasional purchase. There has been a move toward "cherry picking", as the canny shopper simply heads to the discounter for a few selected good value favourites. Ironically it is the more affluent consumers who are most likely to opt for this way of shopping."
Nonetheless, as shopping habits of UK consumers are heavily convenience-oriented, many simply cannot be bothered to make a separate trip to a discounter to get part of their weekly food shop. The temptation of exceptional offers on non-foods as well as very low prices on basic foodstuffs has not radically altered the purchasing patterns of the majority of UK consumers.
"The issue is how discounters can leverage buying strength to attract more shoppers and win a bigger market share. Spending more on marketing communications is essential if they are to convince potential shoppers that the shopping experience can be a positive one, as well as save them money," says Mason.
Store cards: re-think needed
In recent times store cards have received considerable bad press over their often high interest rates, and take up is on the decline. A radical re-think of the business model is needed to restore faith, but a decrease in interest rates does not appear to be on many retailers' agendas. After all, retailers and financial companies ultimately want to make money. Simply adding loyalty programmes to store cards is unlikely to override the bad press and high interest rates.
"Store cards are aimed at high-spending regular customers and it is illogical to try to exploit those customers by signing them up to store cards that are run primarily for the profit they generate in interest charges", says Mason. "Retailers can be expected to attract high-spending regular customers to cards that offer very competitive interest rates if they position them as a service benefit to loyal customers while retaining the benefit of collecting information about behaviour."
The report, Customer Loyalty and Discounting in Retailing in the UK, was published by Mintel in December 2004 and can be bought electronically from Mintel.