Propelled by a pandemic that radically altered how consumers shop for food, raising speed and safety to critical aspects of their trust in grocers, Amazon emerged for the first time at the top of Dunnhumby’s fourth annual Retailer Preference Index (RPI), a nationwide survey that ranks retail brands based on drivers of customer preference.
Amazon eclipsed last year’s winner H-E-B and runner-up Trader Joe’s to take the top spot in the ranking. And Target, due to strong COVID-driven momentum, broke into the top quartile for the first time. Target is the only newcomer to the first quartile, jumping six spots to move out of the second. Winco fell from the top tier of the rankings from last year, and Walmart fell five spots to 14, largely because of its relative struggled in COVID momentum.
“COVID has led to record highs and lows in economic metrics, along with huge shifts in where and how consumers shop food retail, changing the competitive trajectories of retailers who were winning and those who were struggling before the pandemic. As a result, we viewed 2020 through a different lens than we’ve viewed the grocery industry in previous years,” Grant Steadman, president of North America for dunnhumby, said in a release. “Amazon accelerated past every other retailer on our COVID Momentum Metric and customer safety ratings, due to its speed to shop and virtual store format.”
The RPI queried more than 10,000 U.S. households. It evaluates U.S. retailers based on performance in seven categories: price, quality, digital, operations, convenience, discounts/rewards and speed. The retailers who focus their business on superior value perception—defined by the strongest combination of price and quality it calls the “Value Core”—tend to have the most financial success as well as the strongest emotional bond with customers, dunnhumby said.
This year, the firm also included a “COVID Momentum” metric to its calculation, resulting from a statistical model that predicts how retailer execution impacted its short-term financial success, namely market share gains or losses during 2020. That metric highlighted advantages unique to the pandemic beyond the traditional price and quality drivers, giving a particular lift to retailers that delivered on speed, with price somewhat less important—at least for the time being, dunnhumby said.
“As we begin to emerge from the pandemic, we should expect value perception to come back strongly,” Steadman added. “Beyond COVID, retailers with customer-first strategies will best adapt to changing behaviors and deliver what matters most to their customers.”
The top 14 grocery retailers with the highest overall customer preference index scores are
- Trader Joe’s
- Market Basket
- Sam’s Club
- Fresh Thyme
- Sprouts Farmers Market
The report ranked 56 retailers overall but, as in previous years, did not specify the overall rankings of all of them below the top
“When looking at Amazon’s strengths, it is clear why they are first this year,” the report reads. “Amazon occupies a clear price-first position, ranking 11th out of the 56 retailers in our study on price, ensuring a strong value core. They also are second in speed and first in digital, two of the most important preference drivers for COVID Momentum. Due to Amazon’s performance on speed and digital and its value proposition, it also had the most momentum of any retailer in the market in 2020, scoring highest on our COVID Momentum Metric.”
Dunnhumby called speed “the common denominator for grocery retailers with superior COVID Momentum.” Speed was especially important to survey respondents this year, who cited the pain point of slower shopping brought on by safety measures retailers put in place during the pandemic; and speed to shop being synonymous with safer to shop.
Each of the 14 retailers ranked in the top quartile of the COVID Momentum ranking “had their own special recipe for driving momentum during 2020,” dunnhumby said. Target ranks second in digital and ninth in speed, while also ranking decently in operations (16th). Fry’s Foods and Kroger rank first and second, respectively in discounts, rewards and information, while also securing a competitive position in digital (17th, 10th) and operations (seventh, 18th). Fareway and Publix leaned on speed and operations as their strengths for success during COVID.
The momentum COVID created for retailers’ customer value proposition led to some thought-provoking changes in overall rank from 2020 to 2021. For instance, Target made one of the biggest increases in the overall RPI ranking, thanks to a COVID Momentum Metric second only to Amazon.
The top quartile in COVID Momentum are as follows:
- BJ’s Wholesale
- Food Lion
- Harris Teeter
Additional Key Findings
- EDLP retailers are more likely to be well-positioned for long-term success than high-low retailers, but high-low retailers saw momentum swing in their favor. Price volatility and relatively dramatic price increases brought on by supply chain disruptions and increased demand made “everyday low prices” a less reliable claim for customers, who perceived grocery prices to be 12% higher in 2020 vs. 2019. Additionally, many of the most successful EDLP retailers like Market Basket have very large formats, which runs counter to the need for speed customers preferred during COVID, whereas many high-low banners like Fry’s Foods are neighborhood grocery stores with average to smaller footprints.
- Digital actually became less important during COVID in driving long-term emotional bonds with customers. While sales of e-commerce tripled in 2020, for some customers it may have been purely transactional and not something they wanted to do or enjoyed doing, the study maintained. Only retailers delivering a positive digital experience will retain them post-COVID, dunnhumby added
- Execution on price and quality still matter for long-term success. Retailers who are above average on both quality and price have a five-year sales compounded annual growth rate of 6.9%. On the other end of the spectrum, retailers who are below average on both quality and price have a CAGR of 2.3%.