Twenty-one months into a global pandemic—and as consumers' holiday prep has collided with surging COVID-19 cases—out-of-stocks are a renewed frustration for U.S. grocery shoppers. In a recent Ipsos survey of 1,000 U.S. consumers, 65% said that grocery inventory availability is worse than it was before the pandemic. In addition, almost half of respondents in households with children said their primary grocery store is out of one or more items on their list at least half of the time.
More than an annoyance, out-of-stocks—as well as poor item substitutions—are driving consumers to shift their buying behaviors, Ipsos reported. (The pollster's findings were mirrored last week in data from market researcher IRI's November monthly sales survey.) Nearly 1 in 5 households with children said they changed their primary grocery because of dissatisfaction with item availability or online order substitutions. "Clearly, the stakes could not be higher for grocers when it comes to staying competitive around inventory," Ipsos' survey report stated.
Mike Murphy, Ipsos' VP of U.S. channel performance, and Silvana Daehn, VP of U.S. mystery shopping, spoke with Winsight Grocery Business about the survey findings and the opportunities that grocers can seize amid continued inventory challenges.
Christine LaFave Grace: What are the biggest deal-breakers for customers in terms of item availability? What issues are most likely to tip them to buying from another retailer?
Murphy: The biggest pain points are things like fresh-food categories—meat, produce, dairy. [Customers] are not interested in substitutes on those. Those are the things that would most draw ire from an out-of-stock perspective. Other things that are a little more commoditized—frozen meals, paper products—consumers are more willing to accept a substitute on those kinds of things.
Daehn: Those are the main things. It’s interesting that younger shoppers and those who tend to be more health-conscious, as well, are least likely to accept substitutions when it comes specifically to meat and dairy.
The point from the survey that almost 1 in 5 consumers with kids at home changed their primary grocery store out of frustration with out-of-stocks and/or poor substitutions—that seems huge. Can you tell me more about that finding?
Murphy: Clearly, people see it as an annoyance when things are out of stock and an inconvenience, but especially when you think about households with children and just the dollars that they spend on a monthly and annual basis on groceries—everybody’s stretched; everybody’s busy, and families don’t have the time or energy to continue going back to the same store if repeatedly they’re out of the things that are deal-breakers for their families. They will spend the time and energy to seek out somewhere they can consistently get those primary items. People are changing their behavior, and that is impacting stores and real dollars.
Daehn: Specifically for shoppers with children in their household, about 60% of them experienced out-of-stocks that caused them to purchase items from another store. That’s a huge percentage. In general, across all consumers, it’s about 45%, which is still pretty high, but for those with children, our assumption is that there could be some specific items that children specifically like to eat that are included in those out-of-stocks that are contributing to [the behavior shift].
When you mention opportunities for retailers to better gauge the customer experience and be more proactive in managing it, what specifically should retailers be looking at?
Murphy: Our first and foremost best practice is to understand your customers in your market, because each one can be a little different. We would encourage the industry to start there, whether it’s [done through] foundational consumer research, exit interviews through geolocation surveys, mystery shops—get a handle on what the current behaviors are, what’s driving behavior, what are some of the drivers of the outcomes that they want in terms of spending more money or continuing to do business with your store.
In terms of specific actions, one thing we have seen that some stores have done is offer more limited selection as sort of a strategic initiative. Thirty-nine percent of grocery consumers have said that they noticed reduced selection, but for a lot of customers, that seems to resonate with them. Not everyone wants to have to select from 25 different varieties of Frosted Flakes. They just want to make sure that the main items that they’re looking for that they need are going to be there consistently. One strategy in dealing with supply-chain issues is limiting selection. And then really the second one is really understand your customers and make thoughtful, intentional decisions around how to deal with it.
In-store vs. online pickup can be a little different, too, because people at least have some flexibility when they go in-store to choose their own substitutes. They can think about another meal that they’re going to prepare. But you’re kind of captive when you’re in the parking lot at curbside pickup—you either like the substitute or they didn’t substitute, and you’re just kind of stuck there. So understanding those channels and what’s going to drive behavior [is important].
Daehn: To add to that, while I definitely agree that limiting selection is something that makes sense, one thing that I’ve noticed that Walmart has done recently with their buy online, pickup in-store user experience is that they recently updated it so when items are not in stock, you can choose to ship them to you. Through their app experience, they’ve changed that dynamic so that the user is more readily able to get those products if they’re not in stock. Obviously that doesn’t work with fresh items, but it does work with things like olive oil.
Murphy: One interesting thing, too, that we’ve seen around buying online and picking up in-store is that one of the things retailers need to keep in mind when they are increasing pickup is making sure that they’re not impeding on the customer experience for those in-store customers. What we’re seeing is that sometimes the pickers are getting in the way of the in-store customers. That’s outside of this study, but if we’re talking about best practices—yes, online orders are important, but so is not getting in the way of the in-store experience, as well.
What about smaller grocers that depend more heavily on the in-store business, or even Trader Joe’s? Trader Joe's doesn't have pickers getting in the way of customers because they don’t offer online ordering, but at the same time, they aren't immune from the pricing and inventory challenges that other retailers are facing and customers are noticing.
Murphy: Thinking about the holistic experience and all of the things that drive behaviors, [smaller retailers] can still differentiate themselves through the customer experience, having knowledgeable staff, efficiency at checkout, making sure items are easy to find, and [things like] ensuring that products on shelves are not out of date or that they're not displaying produce that's not looking fresh. All of those go into the customer experience.
Daehn: Also, I’d add health and safety and sanitization—that is a big opportunity right now for those nondigital grocers. We’re finding that among those who visit grocery stores in person, a sense of safety is actually more important than the customer experience in general.