Grocery

The ‘golden quarter’ is a critical trading period for grocery retailers. A celebratory time of year, grocers typically get a boost from shoppers socialising more and preparing for Christmas. However, this year has brought a fresh set of challenges as consistently high inflation has put a dampener on consumer confidence and tightened wallets.

With interest rates still high, the cost-of-living crisis has continued to impact purchasing trends. But what does this mean for the grocery market? How will overall grocery sales, and shopper habits, affect grocers Christmas draws ever closer?

Our new grocery spending report is based on spending analysis from over 20 million UK bank accounts, as well as polling of over 2,000 UK adults. It offers insight for retailers as we head into the final stretch of the golden quarter and offers strategies for enhancing customer loyalty at this critical time.

Discount Christmas?

Our research shows that consumers are increasingly turning to discounters and loyalty schemes as they face the ongoing cost-of-living crisis.  In fact, our polling suggests that the average shopper has seen their grocery bills increase by £644 this year.

In response to heightened costs, consumers are seeking discounts: over a quarter have turned to loyalty and reward schemes (28%) and online discount codes (26%), while 22% are browsing price comparison sites and a fifth of consumers are using cashback offers (20%) to manage expenses.

This search for value is also translating to what people are buying and from where. Almost two in five consumers are buying more own-brand supermarket products, and a quarter are switching to cheaper brands and discount chains. As Christmas approaches, 26%plan to cut back on presents, while 22% have curtailed big-ticket purchases.

As we approach Christmas, grocery spend is anticipated to rise as families opt for home-based celebrations, driven by ongoing high living costs.

Harnessing the trend of savvy shoppers, discount grocery retailers have undoubtedly benefited from a reputation for value, as well as a focus on deals and personalised offers. As a result, they’ve grown at a faster rate than the traditional ‘big four’ grocers. Discount grocery stores saw transactions increase by 2% between June and September this year, with consumer spend also increasing by 6%.

The big four supermarkets have seen a 5% increase in spend but a 4% decrease in transactions, signifying a shift to cheaper alternatives.

The run-up to Christmas represents an opportunity for the bigger supermarkets to reverse this movement. But doing so will require them to be smart with the way they market their food and drink. Leveraging the data and insights on customer preferences will be important to entice customers back as they start making bigger ticket purchases for parties and the all-important festive meals with friends and family.

Are you a grocer looking to get customers back through the door this festive period? Cardlytics offers extensive insight and marketing support for retailers, with access to spending data from over 20 million UK bank accounts.

By providing this ‘whole wallet view’ to grocers, you benefit from a deeper understanding of the competitive landscape and implement precise, targeted marketing that delivers tangible results. Heading into the final stretch of the Golden Quarter, we’re helping our customers leverage this data to drive incremental sales growth and retention, as consumers look to find the most value for money with their Christmas spending.

Taking a look at 2022 consumer spend patterns

With inflation at an all-time high, have consumers shifted their food shopping behaviors? At CDLX, we have the purchase data to uncover the most relevant insights within grocery and beyond.

Traditional grocers are losing share of stomach in multiple directions (-3pts vs. 2019) – act fast to retain customers.

• Restaurant captured 42% of total ‘share of stomach’ in 2022, up 1.6% from 2019
• Warehouse retailers also ended the year on a good note. Their share of stomach increased from 12.5% in 2019 to 14.5% in ’22
• Interestingly, share of trips is flat for Big Box retailers, but they have lost ground in terms of total share of stomach
• With the exception of Warehouse, which has benefited most from the inflation surge, traditional grocery appears best positioned to recapture share of stomach

Shopping channel preference varies by subcategory, so an omni-channel strategy is imperative.

Online shopping at Big Box retailers is up: 6.5% of total share of stomach in 2022, up from 2.9% in 2019 with the addition of Walmart+ and Shipt to the category.

Conversely, in-store shopping is up within Warehouse, Traditional, and Discount grocery, with increases in both trip and wallet share YoY.

Consumer shopping behavior is more unpredictable than ever, but brands can rely on performance marketing to help drive sales.

Opportunity to reclaim share exists across all grocery categories. Cardlytics can help identify and convert those audiences on behalf of your brand – and we can prove it.

Sign up to receive the next issue of Squeaky Cart straight to your inbox before it hits our site.

The grocery industry is undoubtedly a bellwether for the impact of the cost-of-living crisis on consumers. While costs are rising in many places, the price of everyday basket essentials remains a proxy for inflation. 

That puts grocers at the epicentre of the debate when it comes to how and whether they should be looking after their customers in such challenging times. 

Every grocer is battling rising operational costs, from the increasing energy cost of keeping freezers and fridges cold through to the price of fuel for home deliveries. How can brands still support their customer base through tough times, while still protecting their bottom line? 

Invest in essentials to support tighter budgets

Cardlytics spend data across 24 million UK bank accounts shows that since 2020 the average cost of the weekly shop has increased by 20%. The rising pressures of inflation, supply chain issues and labour shortages are all forcing the price of everyday essentials up. 

A recent Cardlytics poll of 2000 UK adults found that almost nine in ten (88%) consumers have seen a rise in their weekly shop. As wages stagnate, and bills look to skyrocket, they’ll be searching for any way possible to save a little extra cash.

Use loyalty schemes to engage customers

One option is to increase investment in the basics. Asda’s launch of a new essentials range is one example of how a brand is stepping up and keeping the price of essentials low.

But with cost now becoming a clear deciding factor in where to spend, consumers are increasingly shopping around to save the pennies. Our spend data shows that in the past year, total spend at the big four supermarkets fell 7% and spend at convenience stores fell 8%, whilst discount supermarkets managed to uphold their market share in an increasingly competitive industry.

A new basics range might help at one end of the spectrum, but if consumers are then shopping elsewhere to fill the rest of their basket, how much is it really helping?

With over 56% of consumers saying they’re looking to shop with cheaper brands to save money, grocers should consider how they can make customer loyalty the priority. Investing in loyalty programmes that help customers save money on their shop – be it offers on the items people buy most or rewards each time they shop – will go some way to help grocers hold on to their customers and attract new ones.

Cardlytics is able to provide brands with a ‘whole wallet’ view, to understand what share of a customer’s category spend they’re receiving and how much headroom a customer has to make sure they’re targeting the most relevant and valuable customers.

Invest in price, play the long game

Every grocery retailer faces an ongoing battle to support their customers, however, as the cost-of-living ramps up, it’s crucial that additional costs aren’t passed on to the consumers. Otherwise, brands risk losing their loyal customer base and may struggle to defend their market share – especially in the run up to the all-important ‘Golden Quarter’. 

By investing in price now to support customers when budgets are tight, grocers can win longer-term brand loyalty for helping customers when they needed it the most.  

Those brands that step up to support customers now, will reap the rewards in the long term. 

Which industry will take the bulk of consumer spend? 

What used to be considered two separate household budgets, one for groceries and one for dining out, has morphed into one overall food budget, thanks to pandemic-led shifts in how people eat. More dinners are being eaten at home causing restaurants to expand into delivery and take-out options. Meanwhile, grocery stores braced for a surge in traffic as more consumers requested delivery or curbside pick-up. While all industries faced upheaval during the pandemic, there’s no doubt that restaurants and grocery stores were among the most affected, with consumers’ eating habits and routines changing overnight. Both grocery and restaurant industries now face similar challenges in an uncertain marketplace - how to grow revenue and defend wallet share in the face of emerging third-party players.

But instead of working in competition with one another, Cardlytics’ Mike Novosel, industry lead for grocery, gas, and convenience and Matt Drewes, industry lead for restaurant, share how the two industries can peacefully coexist by answering these questions:

• What is your occasion share? Do you know how much you’re losing, gaining, and what you need to defend it?
• How do you want your customers to shop with you?
• What is your biggest opportunity?

In our first ever B2C Marketing Showdown, brands will learn how working with a partner like Cardlytics can help them retain their customers, regain lapsed customers, and perhaps most important to growth, earn customers that shop in-store and online.  

Watch this free webinar to knockout the competition and grow incremental revenue across categories.

https://youtu.be/6dbbXzX4zA4

We’re in an era of enormous change, from shopper behavior and tech innovation to the business environment itself—and those in the gas, grocery, and convenience store markets are particularly feeling the upheaval. Caused by the convergence of multiple factors, the turbulence in the marketplace is expected to continue through 2022 and beyond.

Navigating these evolving trends is essential for the distributors, owners, and franchisees who keep our shelves stocked—and for the marketers with their eyes on the numbers. By understanding the changes and finding the opportunities they present, brands can do more than adapt: They can come out on top.

Four Top Trends for Gas, Grocery & Convenience Stores

Even before a global pandemic turned the world upside down, dramatic changes were pressing upon these industries. Each trend creates novel challenges, just as it produces new opportunities.

Trend #1: The Rise of Electric Vehicles & Alternative Fuels

Around 1.8 million electric vehicles (EVs) were registered in the U.S. as of 2020, up from 300,000 in 2016. EV ownership will no doubt increase as more Americans want cleaner cars and lower fuel costs. Gas stations are ideal locations for EV charging facilities, and many are adding electric plugs to their forecourts. And since charging a car takes longer than pumping gas (about 30 minutes), drivers have more time to relax inside the store. Savvy retailers are catering to these customers with enhanced opportunities for shopping, dining, and entertainment. The push toward greener vehicles is also boosting the demand for gas stations to provide other alternative fuels such as biodiesel and ethanol.

Trend #2: Shifting Public Policy & Gas Prices

Eco-aware consumers aren’t just affecting the automobile market, they’re also shaping public policies that will affect the gas, grocery, and convenience store industries. As concerns over climate change continue to mount, so does the likelihood of new legislation that’s designed to combat its environmental influence. Laws to reduce emissions, develop clean energy, and cope with climate change could greatly impact the prices that people pay for gasoline—and for everything else. ​​Because of regulatory and policy changes like these, fuel marketers have started adapting their marketing strategy to focus on more innovative opportunities, such as rewards partnerships with auto parts stores, or increased investments in biofuels.

Trend #3: Ongoing Supply Chain Issues

Since the pandemic began, we’ve all noticed the empty shelves and out-of-stock items at our local stores. Large-scale bottlenecks, the recent omicron variant spike, and other problems with the supply chain have disrupted the global flow of goods, causing record shortages on everything from toilet paper to refrigerators to bicycles. The result: higher prices, annoyed customers, and stressed-out retailers. And it’s not expected to end anytime soon. While covid spawned the supply chain crisis, it’s being exacerbated by the Great Resignation—the record number of Americans quitting their jobs, which topped 4.3 million this past November. Many of them are the minimum-wage earners who kept the wheels of commerce turning, like the warehouse workers and truck drivers that supply chains depend on. They’ll need to be lured back with higher wages and better benefits, which will increase consumer prices even more.

Trend #4: Limited-Assortment Grocers

Months of cooking at home on tight budgets has led to home-chef burnout, and led supermarkets to accelerate and expand their offerings of “limited assortments”—a smaller variety of grocery items and/or pre-prepared meals at lower prices. Discount food stores like ALDI, Save-A-Lot, Lidl, and Grocery Outlet are flourishing by selling their own private label products while eschewing most (or all) perishables like meat and produce. Service and staffing levels are significantly reduced, but shoppers don’t mind when the prices are around 40% less than traditional supermarkets. Inflation will likely drive more Americans to limited-assortment grocers, but supply chain woes may take a bite out of the bargains they offer.

Localized Markets Need Local Solutions

What does all this mean for gas, grocery, and convenience stores? Unlike some industries, these markets are highly fragmented and franchised. Numerous local and regional companies compete in a landscape that looks quite different depending on where you find yourself in America. The distinct, location-based focus of these industries means having localized marketing strategies can be a big step ahead in competitiveness. For brands where hyper-localization isn’t an option, grocery and convenience retailers should focus on minimizing friction for their customers and providing a much smoother and more positive purchase experience, which serves much the same end goal as hyper-localized campaigns. Brand messaging must connect with consumers—and offer specialized benefits that speak to this specialized audience.

National Distributors Feel the Impact

The effects of localization trickle up to national distributors, who sell directly to the retailers in these fragmented markets. To appeal to franchise operators, distributors must position themselves as value-creating entities with novel solutions. In the end, retailers must continue to find ways to create and showcase value to their customers; some may invest more in local, others in expanded partnerships, others in tech all in service of creating value. But change is happening rapidly with incredible tech innovations that are transforming the future of marketing—like Cardlytics.

How Cardlytics Helps Brands Navigate New Trends

Massive fluctuations are pressing on businesses today, from the broadest global trends to the tiniest local details. In a complex marketplace where each little snack purchase is connected to the worldwide economy, the right knowledge—and the right partnerships—can make all the difference. That’s where Cardlytics comes in. Our native ad platform works within banks’ digital channels to provide our partners with purchase insights, a powerful tool for driving marketing results. Together, we can pilot the seas of change and drive the results that bring success. Want to know more about Cardlytics? Please contact us today.

We’ve seen a dramatic shift in how people spend. One of the larger takeaways is that online spending among consumers has increased and remains high even as lockdown restrictions have been lifted. Compared to pre-Covid behaviors, online retail and restaurant delivery are both up 131% and 244% year over year respectively, showing customers have moved online and are staying there. However, the question on most marketers’ minds is: how do we maintain this momentum?  To help answer this question, Michael Novosel, Grocery Industry Lead, shares some tips on how grocers can capitalize on the opportunity in front of them and accelerate omnichannel grocery adoption to maximize customer lifetime value. 

Convert those ‘bricks’ to ‘clicks’

We know that 75.1% of customers are in-store only – converting these shoppers through an omnichannel grocery plan to an online channel means opening net new lanes of revenue. Online shoppers spend more and do so more often than shoppers that primarily shop in store. 

Through Cardlytics’ view into observed consumer spend, we have seen online basket ranges in excess of $15, greater than the typical in-store basket size –likely because consumers are now using online retailers to ‘stock up’ on every day or repeat items.  

Implementing a digital shopping experience is your opportunity to connect with your best customers, in a new format they’ve yet to experience. You can meet more of your customers where they are, increasing basket size, trip frequency, and revenue. For many of our grocers, it starts first with investing in owned and paid personalization strategies to ensure that when your habitual in-store consumer considers online trial, they’re presented with the products and pairings that they most frequently consider when spending in-store. 

Then, through a partnership with Cardlytics, we work to identify: 

1. Habitual in-store shoppers 
2. Shoppers that have not yet spent with you online but show consistent online spend at your peer set 

Target declining shoppers

Did you experience a lapse in customers once restaurants started reopening? Or maybe you gained new customers that tried your brand once but did not return. You are not alone. Grocery dominance was eclipsed by restaurant re-openings earlier this year and dollar share is being redistributed back to pre-pandemic times. Consumers haven’t stopped spending in this category, they’ve just shifted their money elsewhere, either to a new grocer or to restaurants. We help client brands grow market share by giving them a “whole wallet view” into how their ideal customers are spending with competitors and in untapped categories that may have stolen your customers away— like ready to eat meals, meal kits or even non-food items. Cardlytics identifies where these lapsed customers and trialists went, whether they’re worth re-engaging, and delivers a targeted marketing campaign to bring them back to your brand. 

Online adoption is in the early innings. But there’s plenty of opportunity for growth

Total penetration of online shoppers remains below 10%. Even if you are a brand that saw strong and sustained adoption of your investment in e-commerce, don’t get comfortable, because the trend has barely started and there is plenty of room to grow. The right omnichannel marketing strategy will unlock huge opportunity to continue this momentum by analyzing where residual opportunity remains that may have been inadvertently overlooked during the surge of early Covid.  

Investing in the customer experience to boost revenue

According to this recent survey, half of [grocery] shoppers abandoned the e-commerce channel after one online purchase but those who stayed engaged became more loyal. And according to our insights, customers that engage in omnichannel behavior typically spend between 2 and 2.5 times more than regular customers.  In turn, retailers able to retain online and omnichannel shoppers — and nudge in-store shoppers to make online purchases — will gain long-term loyalty. 

With Cardlytics, you can drive tangible revenue thanks to our ability to ‘align the stars,’ by connecting the right people to the right rewards. Our insights-led approach to identifying, targeting and converting your ideal buyers can jumpstart new marketing-attributable incremental sales and position your omnichannel grocery strategy as an important driver of your broader customer and growth initiatives.