Understanding Loyalty, Split Baskets, and Value-Driven Consumers
As the grocery landscape evolves in 2024, retailers are facing new challenges and opportunities to engage shoppers. Consumer behavior is shifting, driven by economic pressures, hybrid shopping, and changing attitudes toward brand loyalty.
As we reported previously in this interview with Alex Trott, Director, Insights, 84.51°, today's consumers are busier and more budget-conscious than ever. A recent article in the Wall Street Journal, “It’s Been 30 Years Since Food Ate Up This Much of Your Income,” reported that food prices are at a 30-year high.
That means grocery shoppers are becoming fickler and challenging to serve. To remain competitive, grocery marketers must understand these trends and adapt their strategies accordingly.
The Era of the "Uncommitted Customer"
One of the most significant shifts in shopper behavior today is the rise of the "uncommitted customer." According to Upside’s Consumer Spend Report, the traditional grocery shopper who once stuck to one or two stores has evolved into a more opportunistic consumer. Price sensitivity, product specialties and convenience have created an environment where shoppers seek the best value, even if it means splitting their grocery purchases across multiple stores and platforms.
The report showed that 81% of grocery shoppers compare prices across multiple stores today. This practice extends beyond brick-and-mortar locations to online grocery platforms. Known as "split-basket" shopping, this behavior is becoming the norm as consumers diversify their spending to get the most for their dollar. The days of loyalty to one grocery store are quickly fading.
Call out: How can grocery stores cultivate loyalty when customers are increasingly driven by price comparisons and convenience, rather than brand allegiance?
Grocery Loyalty: Still Popular, But Fragmented
In spite of split-basket shopping, grocery loyalty programs remain popular. Over half of grocery shoppers (53%) report using a loyalty program “most of the time or always”, however, the effectiveness of these programs is being tested as consumers continue to split their spending across several stores.
While loyalty programs still attract participation, they are no longer consolidating consumer behavior as effectively as they once did. Research shows that the average grocery shopper visits three different stores per month, with some estimates as high as five.
Shoppers are driven by the best value proposition, and while they may remain enrolled in loyalty programs, the programs don’t seem to be enough to entice basket consolidation to one grocery brand. This suggests the need for grocers to rethink how they structure their loyalty offerings to stay competitive.
Understanding the Hybrid Grocery Shopper
84.51°’s Omnichannel Trends Report redefines the “omnichannel” shopper as a “hybrid” shopper in recognition of the blended channel behaviors exhibited by grocery shoppers. But hybrid shoppers are sensitive to product availability and shopping experience.
- Over 80% of omnichannel shoppers state that order accuracy and availability are crucial when shopping online.
- 23% claim they will go elsewhere if items are out of stock.
The trend of split-basket shopping is complicated by Hybrid behavior. The traditional "primary" grocery store relationship is breaking down, and grocers can no longer rely solely on proximity or convenience to drive loyalty. People are impacted by economic pressures and with inflation continuing to impact grocery prices, shoppers are more inclined to search for the best deals by visiting multiple stores or shopping online.
The result: many consumers split purchases between online platforms and traditional stores to maximize convenience and savings.
Contrasting Grocery Shopping Trends in the U.S. vs. Canada
In Canada, grocery loyalty programs like Loblaw’s PC Optimum, Metro’s Moi, and Sobeys’ SCENE+ have garnered significant membership but have yet to fully bridge the affordability gap for many consumers.
We spoke with Lia Grimberg, Principal at Radicle Loyalty, to get insight into the Canadian market. Canada’s grocery landscape differs from that of the U.S., with the major grocery retailers mentioned controlling 70% of the market. We asked about how this concentration impacts consumer behavior and loyalty programs in the Canadian market.
Grimberg explained, "Canadian shoppers have traditionally shown strong loyalty to local grocery chains, but inflation and rising food costs are leading to more opportunistic shopping behaviors, similar to what we’re seeing in the U.S. While programs like PC Optimum remain popular, shoppers are increasingly looking for value across multiple retailers, reflecting the growing trend of split-basket shopping.”
Her comments indicate that loyalty programs, while effective and widely used, are not immune to socio-economic pressures that drive consumers to diversify their grocery spending to stretch constricted budgets and meet basic human needs.
The Impact of Price Sensitivity and Dynamic Pricing
Price sensitivity is another key force behind the shift in grocery shopper behavior. Economic uncertainty has made shoppers more cautious with their spending. As inflation continues to affect grocery bills, shoppers are more willing to switch stores, channels, and even brands to maximize savings.
While consumers are looking for value, they remain skeptical of dynamic pricing models. Upside’s report found that only 25% of consumers favor dynamic pricing, where prices fluctuate based on demand.
Instead, shoppers prefer transparent pricing structures, with 45% indicating that they would rather receive personalized promotions and targeted discounts than have pricing change without their understanding of “why”.
A recommendation for grocery retailers is to adopt this more transparent pricing approach and, rather than relying on dynamic pricing, use consumer data to create personalized promotions that cater to individual shopping habits. Offering tailored discounts and rewards allows grocers to build trust and loyalty while addressing the price concerns of cautious shoppers.
Winning Back the Uncommitted Customer
As grocery retailers grapple with the rise of the uncommitted customer, it’s clear that a new approach to consolidating the share of household basket is worth investigation.
Here are a few strategies that can help retailers reconnect with value-driven shoppers, hopefully making them less “uncommitted”:
- Leverage Personalized Promotions: Personalized promotions are gaining favor over dynamic pricing. Grocers should focus on using shopper data to deliver relevant promotions that align with individual shopping habits. Offering the right deal at the right time helps shoppers feel valued and keeps them returning.
- Enhance the In-Store Experience: While omnichannel shopping is growing, the in-store experience remains critical. Friendly, knowledgeable associates can foster trust and build personal connections with shoppers, which can help offset concerns about pricing.
- Ensure Consistency Across Channels: Consumers are increasingly blending in-store and online shopping. Providing a seamless experience across channels helps retain customers who split their spending between different stores. Consistency in promotions, pricing, and service is essential for building loyalty.
- Communicate Value Clearly: With price sensitivity high, transparency is key. Shoppers want to feel confident that they’re getting a good deal, whether they’re using loyalty points, promotions, or simply comparing prices across stores.
Looking Ahead: The Future of Grocery Loyalty
Grocers should accept that split-basket shopping is becoming the norm. The challenge is to garner as much share of basket as possible from a population of uncommitted, value-driven shoppers.
Instead of relying on pricing strategies alone, grocers are well-advised to invest in loyalty programs to communicate more clearly with cautious shoppers, deliver personalized promotions and value-driven rewards in proximity of purchase, and enhance a seamless omnichannel experience.
Grocers should also adopt a fresh organizational approach to achieve customer-centricity. Meeting the customer challenge impacts the entire organization. Pricing and merchandising, category management, and loyalty program structure all need to be coordinated in a way that serves the needs of the modern grocery shopper.
Planned and executed correctly, loyalty programs can have meaningful impact on the customer shopping experience and consolidate purchase behavior among fragmented shoppers, whether in the store or online.