Regional grocery banners led by H-E-B are experiencing a resurgence in consumer preference behind a combination of relevance, convenience and value, according to the annual Retailer Preference Index (RPI) released this week by the data science firm dunnhumby.
H-E-B for the first time was rated the top U.S. grocer, bumping Trader Joe’s to No. 2 after two years on top of the RPI, Chicago-based dunnhumby said. San Antonio-based H-E-B, which also grabbed the top spot for the first time in the WGB/Brandspark Most Trusted Food Retailers index, ranked No. 4 in the 2019 RPI.
The RPI evaluates 60 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—tend to have the most financial success as well as the strongest emotional bond with customers, dunnhumby said.
“One of the most important findings is that leading traditional regional grocers are experiencing a resurgence in customer preference, by winning with relevance and convenience,” said Jose Gomes, president of North America for dunnhumby. “If they can compete on price and quality—the value core for grocers—they are especially well-positioned to fend off the growing threat of nontraditional players. This also leaves them better insulated against an economic downturn. In the end, there is no one-size-fits-all approach to winning in this market, and retailers with customer-first strategies are most likely to fare best.”
As in previous years, Dunnhumby revealed only the first quartile of finishers by rank. The 14 chains are as follows:
- Trader Joe’s
- Market Basket
- Sam’s Club
- Fresh Thyme Farmers Market
- Sprouts Farmers Market
- Shop Rite
Publix, Fresh Thyme and ShopRite are new additions to the top quartile from last year’s list. Last year’s RPI, which identified 13 top-quartile retailers, included Peapod and The Fresh Market, which were not ranked among the top quartile this year.
What follows are additional key findings from the study, according to dunnhumby:
• Leading traditional, regional grocers are winning with relevance and convenience. Regional powerhouse H-E-B’s move into first place—due to sustained focus and excellence on assortment relevance and private brand—is consistent with dunnhumby’s findings that some regional grocers are getting stronger and are now going toe-to-toe with leading nontraditional retailers. By focusing on relevance, particularly assortment relevance, leading traditional grocers are leveraging their location advantages and making convenience a bigger part of determining which retailers are winning and losing.
• H-E-B, Fry’s, Smith’s and Kroger, all leading regional grocers, stand out as being just as prepared for the next economic downturn as industry superstar Costco, due to having excellent private brands, highly relevant promotions, better existing price perception, and lower cross-shopping by their customers with Walmart, Aldi and Dollar General.
• Convenience has grown more in importance than any other customer need, due to the efforts of traditional grocers. While still not as important as price or quality, its impact on emotional bond and financial performance has doubled the past three years. Assortment relevance is also becoming a more powerful lever for driving convenience.
• For the third year in a row, price and quality remain the two most important customer needs that retailers must meet. Together, these form the core of value perception. They have the largest impact on retailer financial performance and customers’ emotional bond with retailers.
• Price is the more important half of the value core for shoppers of almost all incomes. The top five grocery stores for price are: Aldi, Market Basket, WinCo, Lidl and Trader Joe’s. It isn’t until annual household incomes reach $200,000 that customers will generally favor quality in the value core. Also, price-first retailers have grown twice as fast as quality-first retailers over the past five years, with Aldi and the big dollar chains growing faster than almost any retailer measured.
• Amazon Go shows that Amazon has strong brick-and-mortar grocery chops. When Amazon opens their branded chain of brick-and-mortar grocery stores, retailers can expect Amazon to offer a strong value core, supported by an excellent private brand; high-quality, ready-to-eat, decent perishables; great price perception; and speed of shopping.
• Not all discounters are faring well. Lidl is living in the space between hard discounter and the typical traditional grocery store and failing to excite customers, the study said. Despite having excellent price perception, Lidl’s price perception isn’t as strong as Aldi’s, and they have operational and assortment relevance issues that Aldi doesn’t. They don’t focus clearly on a few categories like Aldi does, and they have jumped more into promotions and rewards than Aldi.