Quality-Focused Shoppers Drive Additional Growth for Grocers in the U.S. and Europe, While Importance of Price Declines

Symphony RetailAI, a leading global provider of integrated AI-powered marketing, merchandising and supply chain solutions for FMCG retailers and manufacturers, today announced new consumer insights that highlight an industry-wide increase in quality-driven shoppers, with nearly two-thirds of grocery revenue growth coming from this customer segment. Symphony RetailAI’s latest research analyzed 2.2 billion shopper transactions in the U.S. and Europe from July 2020 to June 2021 across the company’s customer base of leading mainstream grocery retailers.

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“It’s critical for grocers today to know precisely which customer segment is driving performance, and that requires a customer-centric approach to the business”

The research indicates that shoppers are nearly 1.5x more likely to migrate up to the quality-driven segment (24%) than down to the segment more focused on price (18%). For customers migrating into the quality-focused segment, their average unit spend increased by 9%, or 9 cents on every dollar. Only a little more than one-fourth (28%) of that increase was attributed to inflation. The remaining (72%) increase in price was driven by product mix, meaning customers purchased more premium products than typically purchased before. Symphony RetailAI’s research highlighted the factors that can affect the mix of products for those quality-focused customers. For some, there is a genuine interest in healthier products or better-quality products by choice, prompting them to spend more. For others, the decision to buy an upmarket product is influenced by the exact mix of products the retailer and CPG choose to offer on the shelf.

Understanding how both price and quality motivate shoppers within particular categories has implications for retailers’ price and promotional investments. Symphony RetailAI’s research identifies clear growth opportunities for retailers to assess whether their investments are reaching the right customer need, and whether they have the right assortment of key quality items (KQIs) and key value items (KVIs) critical to success. Findings include:

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• Baby, soda & juice, and spirits are categories of opportunity for grocers. Symphony RetailAI found that the baby category is growing faster amongst quality-driven shoppers, which suggests the opportunity for retailers to balance their assortment range and not over-invest in promotional spend. Both price- and quality-driven customers are contributing to growth in the spirits and soda & juice categories. Symphony RetailAI recommends retailers promote items in soda & juice that will resonate most with quality-driven customers. For spirits, where Symphony RetailAI saw little promotional activity, retailers should evaluate whether they’re over-investing in price changes and promotions and move those dollars elsewhere.
• Many of the categories that are important to price-driven customers are underperforming. While price-sensitive customers may be in decline overall or more likely to be migrating toward quality, they’re still a third of a grocer’s customer base and are important to understand. When Symphony RetailAI looked at categories important to price-driven customers that haven’t experienced growth since the start of the pandemic, it found the categories with opportunities were meats and poultry, baking goods, canned goods and soups, to name a few. Grocers should review their price and promotional strategies, as well as assortment, within those categories, to determine where investment will garner the greatest success.
• Of the underperforming categories for price-driven customers, outlier retailers seeing growth are successful due to a keen understanding of consumer motivation by both price and promotions. Frozen pizza was one category where retailers are strongly resonating with both price- and promotion-sensitive customers. This doesn’t suggest a need for blanket price cuts and deep promotions, but rather underscores the importance of selecting the strongest, most effective promotions to invest in.

“It’s critical for grocers today to know precisely which customer segment is driving performance, and that requires a customer-centric approach to the business,” said Chris Koziol, CEO, Symphony RetailAI. “Retailers need the ability to segment customers to understand their behavior in relation to price, determining how the distribution of quality-focused or price-focused customers fluctuates over time. It’s not static; it’s a continuum – a more price-sensitive customer may move toward quality for a particular category or product. When grocers have a better understanding of consumers’ motivations, they can optimize their assortments and re-balance corresponding price and promotional strategies to be sure they see valuable return on those investments for their business.”

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