are brands keeping up with the ever-changing demands of their shoppers?
With the rise of new entrants like Aldi and Lidl, the times are a changing for the the big four. Read on to discover how they can protect their brand equity and get back their share of the purse.
The times are a changing
If we asked you to name the UK’s go-to supermarket this summer, would you know who it was?
At a time where we’re constantly reminded of the successes of Lidl and Aldi in the UK market, the race for best-in-class has gone beyond value to the pursuit of quality.
So, what does this mean for brands and the shopper marketing space?
British shopping habits are more mixed than ever – gone are the days where the average shopper spent every pound under one roof.
We all know that consumers are becoming far more selective in the way they shop.
People who buy bulky items in Asda (perhaps online?), often drive out of their way to Lidl for items like wine and then on to Waitrose for their favourite Greek yoghurt.
People are visiting stores as often as they were in 2009, but they’re spending less.
As shoppers become savvier, they simply don’t need to spend as much per visit.
The question is, where‘s this going next, and what can brands do to stand out in the face of changing customer behaviour?
THE AGE OF THE PICKY AND CHOOSY CONSUMER
This summer saw no let-up in the fierce competition between the UK’s most dominant retailers – and sales were surprisingly good, thanks largely to inflation.
According to figures from Kantar Worldpanel, published 18 June 2017, supermarket sales growth accelerated to 5.0%. This is the strongest increase since March 2012 and a stark contrast to the 0.2% decline seen this time last year, despite the political and economic uncertainty of the past year.
Fraser McKevitt, Head of Retail and Consumer Insight at Kantar Worldpanel said,
“The market’s robust performance this period is partly down to particularly weak sales growth last year and a continuing increase in like-for-like grocery inflation. At the current rate, that’s an extra £133 on the average household’s annual shopping bill, or the equivalent of seven additional shopping trips a year.”
where next for the big four?
There’s more good news for retailers: people are still visiting stores, in spite of one in five shoppers doing some grocery shopping online convenience is driving this traffic with growth centring around local, inner-city stores.
So, brand marketers still have lots to gain by engaging people in store through brand promotion activity and customer loyalty program tie-ins.
- Morrisons were big hitters with the strongest sales performance of the big four grocers. The retailer increased sales by 3.7%, posting growth for the seventh consecutive period.
- Tesco sales grew by 3.5%, its fastest rate since April 2012, attracting a further 369,000 shoppers and increasing sales across all channels, rising fastest online and through its Extra stores.
- Sainsbury’s had an impressive period of growth online and in its local convenience stores – particularly in London – helping to increase sales by 3.1%.
- Asda who have made recent job losses are still on the road to recovery. As Kantar Media’s Fraser McKevitt explains: “Asda is the only retailer where branded products are outpacing its own label line. Overall sales rose by 2.2%, although its market share fell half a percentage point year-on-year to 15.1%.
EUROPEAN COMPETition is hotting up
While the top four supermarkets have traditionally been referred to as the big four, we doubt that’s set to last.
British shoppers certainly have an appetite for increasing high street competition.
When the likes of Lidl are steamrolling past Waitrose, beating it into the number seventh position in the list of the UK’s largest grocers, you have to ask how the big four supermarkets can continue to dominate the market in the years ahead. And what this might mean for brand promotions and customer loyalty down the line.
Lidl has plans to open 60 new UK stores a year.
The German giant has also pipped Aldi to the title of the UK’s fastest growing supermarket for the first time since March, with sales growth of 18.8% just ahead of the Aldi’s 18.7%. In other words, if you haven’t got a Lidl near you now, you soon will have…
WHat are savvy shoppers after?
CONvenience will drive growth
As we’ve seen from the increase in local convenience stores, the need for instant gratification is flooding all aspects of modern life.
Convenience meals are in demand again but they have to be healthy.
Consumers are getting excited about food in a box delivered direct to their doors. From Deliveroo to Cook! and Graze- even Jamie Oliver has got in on the act with his Hello Fresh offering.
It’s an emerging trend that signals behaviour change and could lead to new brand partnerships as marketers wise up to the opportunities of the fresh food delivery service.
Amazon’s takeover of the upmarket grocery chain Whole Foods will threaten supermarket rivals even more.
Their decision to slash prices of staple Whole Foods groceries will broaden appeal and attract customers used to shopping elsewhere.
Marketers will do well to watch the e-commerce giant’s progress as they step into the supermarket sphere.
“Convenience is especially important these days. It’s a big area of focus. Deli, ready-to-eat and meal kits are all a growing area. But the equation that shoppers use to make their grocery decisions is expanding and starting to include more esoteric values.”David Fikes
VP of Communications and Consumer/Community Affairs
Food Marketing Institute
Naturally, low price, great taste and convenience have always been central to shopper habits.
But Fikes adds - "Half of shoppers have some values beyond the big three that they now consider important. They’re asking things like: Is it healthy? How is it processed? Is it ethically produced? Are workers paid fairly?”
Simply put, if brands aren’t addressing these issues, they’ll lose out.
It’s another signal that brand loyalty is on the wane as consumer behaviour shifts towards a broader number of retail channels.
QUALITY OVER VALUE
A massive influencer that’s dominating the shopper landscape is the rising trend in wellness and health. Customers are hunting out quality experiences and are often willing to pay more to find it.
Did you know?
Over 65% of people remain loyal to brands which offer consistent levels of quality.
One of the main reasons why Lidl and Aldi have done so well in these challenging times is the perception that their products offer value and quality.
This summer, Lidl was hailed to be selling the world’s best wine for just £7.99. Aldi had one of the world’s best rosés.
How about this?
A further 63% of respondents say high quality products is what they value most.
These headlines nearly broke the internet. Ok, maybe not, but there’s no denying consumers are ready to leap to find high quality products at such low prices.
brand equity relies on consumer trust
This quest for quality is linked with a desire for provenance – if a consumer understands where the product has come from and how it has come into being, brands stand to make gains.
This demand for information comes off the back of a few years of food-related scandals, so building upon consumer trust is key for customer retention.
Any brand worth its salt will have a Corporate Social Responsibility (CSR) initiative in place or at least a guarantee or descriptor online of how they’re giving back to the community.
For example, Costa Coffee’s Costa Foundation works in countries where their coffee is harvested.
Brand desirability is amplified as consumers buy into brands as a lifestyle choice; a sense of corporate responsibility is increasingly demanded to boost brand appeal.
If you talk the talk, you have to walk it too.
where next for supermarkets?
It’s pretty clear that supermarkets will need to build upon a growing desire for more meaningful and memorable customer experiences. Kantar Retail's Diana Sheehan, Director of Retail Insights adds:
"Nearly six in 10 shoppers now rank ‘having a stress-free experience’ among their four most important factors when shopping. For grocery, this equals convenience, having a convenient location, quick in-and-out, one-stop shopping, getting what they want, with no lines.”
Shopper appeal relies on an impeccable shop floor with local and unique products, sustainably sourced and competitively priced.
We could even see the rise of in-store shopping ambassadors, pharmacists or nutritionists being on hand to help bridge the gap between health issues and grocery shopping.
Sheehan says, “Shoppers are looking to grocery stores for more guidance and support to make their lives better.”
Fikes agrees shoppers are looking for a wider package; “Selling food won’t be enough because shoppers want information and an experience,” he said.“They want the retailer to do more curating; help them make the best choice; give them guidance. We expect retailers will invest heavily to up their game in personal engagement.”
taking the customer's trolley to task
In terms of promotional marketing, on-pack promotions still carry marketing currency. If shop staff can be educated about the category with supporting memorable in-store activity, brands can achieve standout. Yet research suggests FMCG brands are still failing to take advantage of the promotional activity options out there:
- A staggering 67% of brands do not conduct promotional offers, so there is a HUGE gap in the market they may be missing out on to catch new customer’s attention, and not just to appeal to loyal ones.
- Of those brands who offer promotions, money-back guarantees and try-me-free products proved to be the most popular.
- The good news – over 50% of those surveyed felt their favourite brands rewarded loyalty, and they like it.
In promotional terms, as stores change their layouts and introduce new marketing ideas such as Waitrose’s kitchen area, designed to keep shoppers in store for longer, promotions can be subtler and not so impulsive.
More campaigns and innovations are to be expected that will make it easier for lower-income consumers to fulfil their healthy ambitions.
We expect to see more apps to help people make use of ingredients that are on sale.
Technology has a huge part to play in helping brands ready to evolve alongside the ever-changing shopper landscape
ACHIEVING brand standout - on and offline
While it might be harder to dictate someone’s behaviour within three seconds as they stand in front of a shelf, new opportunities are appearing for marketers to align the online and offline shopping experience.
Brands trialling beacon technology like Unilever using smartphone apps are reporting the ability to track a customer’s movements in store and send targeted sales promotions direct to their phones.
Packing technology has also made huge advancements.
It’s a hugely exciting space for customer engagement when shopping channels are so diluted.
The basket of the future
Ultimately, brands can no longer rely on customer loyalty as they used to.
It may be true that in general shoppers are very loyal to brands with more than 50% having used a brand consistently for between 5-20 years.
But just over 40% of people have visited a brand’s website and only 10% of people follow their favourite brands on social media.
With promotional activity moving into this space, brands who fail to live and breathe online fail to disrupt and be noticed.
Businesses that reward loyalty can go so far but there is high value in appealing to new customers and targeting different demographics if they want to grow and achieve success in future.
It’s a brave new world, but one where brands and shoppers stand to gain. Here’s to the basket of the future...
And clicking below is how to make sure you're in it...