Grocery shopping ‘stickiness’ keeps many consumers at preferred store

Though grocery pricing remains elevated, nearly half of consumers would stay with their current food shopping location rather than shift to another retailer to save money, a survey by investment and equity research firm Jefferies revealed.

Of 900 shoppers polled in Jefferies’ U.S. Food Survey, 46% said they wouldn’t change where they shop for groceries in order to find savings. That percentage includes 33% of consumers who would “change what I buy, not where I shop” and 13% who “wouldn’t change where or what I buy.”

“Almost half of consumers surveyed intend to keep shopping at their current food retailer. Consumer grocery shopping behavior appears to be relatively sticky,” Jefferies analysts Corey Tarlowe and Randal Konik wrote in a research note Tuesday on the study’s findings. “When asked how consumers were going to change their food shopping location if trying to save money, 46% of the customers said they wouldn’t change where they grocery shop. We believe this is positive for retailers who gained share with higher-income cohorts (Walmart, Dollar General) ahead.”

Source: Jefferies U.S. Food Survey, April 2023.

To save money when purchasing groceries, 17% of respondents said they would shop more at discount stores, according to the Jefferies survey. Nine percent reported they would shop more at conventional supermarkets for savings, followed by more at club stores (7%), more at mass retailers (7%), more at dollar stores (6%), more at other types of stores (5%) and more a premium markets (3%).

Forty-four percent of consumers polled cited traditional supermarkets as their primary grocery store, compared with 24% naming mass retailers. Shoppers also pointed to discount stores (13%), club stores (9%), premium markets (7%), dollar stores (3%) and other retailers (1%) as their main food shopping destination.

“Seventy percent primarily grocery shop at supermarkets or mass retailers, while 33% would change what they buy, not where they shop if trying to save money,” Jefferies analysts Rob Dickerson and Scott Marks said in the U.S. Food Survey report, released last week. “These results highlight the need for retailers and food manufacturers to invest in price and/or adjust price-pack architecture to meet consumer needs in a possible recessionary environment.”

The top two money-saving strategies named by grocery shoppers surveyed were buying more products on sale (27%) and buying more store-brand/private-label products (22%). Customers also cited purchasing cheaper types of food (16%), buying fewer items (14%), cutting non-grocery spending (9%) and buying smaller amounts of the same items as ways to save.

Source: Jefferies U.S. Food Survey, April 2023.

“With 33% of respondents saying they would change what they buy—not where they shop—if trying to save money, the implications are that they would look for more value, also evidenced by the data point that 27% would buy more products on sale,” Dickerson and Marks wrote. “While 17% of respondents said they would shop more at discount stores (Trader Joe’s, Aldi, Lidl), these retail venues typically offer a smaller selection of SKUs and may not serve all consumer needs.”

Trade-down to private label, in particular, could be a tailwind for value-focused grocery retailers as consumers hunt for savings, Tarlowe and Konik noted.

“According to the survey, consumers are most likely to buy private-label bread, eggs, spices/seasonings, and chips and least likely to purchase private-label cookies, coffee, baked snacks and candy. We believe that food-oriented value retailers with strong, essential private-label offerings could benefit,” they said in their research note. “In addition, promotional rates on food items have not returned to the pre-pandemic average (current 27.5% vs. 33.0% in 2019) but are rising, which could indicate higher vendor promo dollars ahead to support sequentially higher food gross margin for value retailers.”

Store traffic deceleration

Visits to discount, dollar, mass and grocery stores generally waned in the 2023 first quarter, according to foot-traffic analytics firm Placer.ai.

For supermarkets, weekly store visits declined year over year in 12 of the 13 weeks tracked by Placer.ai in its Q1 quarterly index, starting and ending the January-through-March period down about 4%. The Kroger Co. store banners led with a 19% share of visits in the quarter, followed by Albertsons Cos. (11.8%), Ahold Delhaize USA (9%) and United Natural Foods (1.1%).

Top-performing banners in generating store visits during the quarter were Metro Market ( 17.9%), Grocery Outlet ( 11.6%), Trader Joe’s ( 8.8%), H Mart ( 5.3%), WinCo Foods ( 3.6%) and Market Basket ( 3.4%).

“The pandemic brought grocery visits to record peaks, as interest in elaborate home cooking skyrocketed and many consumers clung to any reason to leave the house. But the category has experienced particularly steep price increases, and as inflation replaced COVID as consumers’ primary concern, grocery traffic fell,” Placer.ai explained in its Q1 index report. “But as more grocers build out their private label options—which are typically priced lower than better-known brand names—consumers who shifted some of their food shopping away from traditional grocery stores may return and bring traffic back up.”

Source: Placer.ai Quarterly Index, Q1 2023.

Traffic at superstores reversed course during the first quarter, beginning the period with visits up around 4% year over year but finishing down more than 6%, with decreases in 11 of the 13 weeks. Walmart dominated with visit share of 57.8%, and its Sam’s Club warehouse club unit held a 7.6% visit share. Other visit leaders included Target at a visit share of 21.6% and Costco Wholesale at 11.4%. Target was the only superstore retailer to increase visits in Q1, posting a 1.5% gain, Placer.ai reported. Visits decreased on an annual basis for Walmart (-5.3%), Sam’s Club (-5.4%), Costco (-5.9%) and BJ’s Wholesale Club (-6.7%).

“Target, the second largest superstore chain, saw its visits and visits per venue grow relative to Q1 2022,” Placer.ai noted. “The chain’s success could be partially due to its appeal to younger shoppers, its expanding portfolio of brand partnerships and shops-in-shop, and its assorted private labels appealing to a variety of customers.”

For the most part, discount and dollar stores saw an up trend in Q1 store visits, with year-over-year gains in 10 of 13 weeks. Still, traffic growth tailed off by and large as the quarter progressed, as this retail segment started the period with visits up roughly 9% from a year ago but ending at less than 2% visit growth, Placer.ai’s report said. Dollar Tree edged out Dollar General in visit share for the quarter—37.9% versus 35.5%, respectively—followed by Dollar Tree subsidiary Family Dollar at 13.9% and 99 Cents Only Stores at 6.5%. Banners seeing visit gains included Dollar Tree ( 7.4%), Ollie’s Bargain Outlet ( 7.2%), Bargain Hunt ( 5.2%) and Family Dollar ( 3.1%), while Dollar General (-3.8%) and 99 Cents Only (-7.9%) experienced declined.

“Many discount and dollar store chains—including visit share leaders Dollar Tree and Dollar General—have expanded significantly in recent years, with foot traffic to the category consistently ahead of pre-COVID numbers. Now, visit data indicates that growth is beginning to slow down, with March traffic remaining close to 2022 levels,” according to Placer.ai. “Still, the sector’s success in maintaining its pandemic-era visit gains despite the volatile economic environment indicates that discount and dollar stores are now embedded in many consumers’ regular shopping routine.”

Source: 84.51° April 2023 Consumer Digest.

Inflation not expected to disappear soon

Since late 2021, rising prices for groceries and other consumer goods have disrupted shopping behavior and spurred many consumers to switch stores and retail channels in search of savings. But flux in consumer shopping patterns could settle down if inflation continues to ease.

The Consumer Price Index (CPI) rose 5.0% year over year in March, the lowest 12-month increase since May 2021 and the ninth straight month of declining inflation growth on an annual basis. Meanwhile, the food-at-home CPI continued a steady decrease from yearly growth in 2022 and dipped 0.3% on a month-to-month basis in March, the first decline since September 2020.

In its April 2023 Consumer Digest, Kroger’s 84.51° data analytics subsidiary said that shopper concern about inflation stands at its lowest level since October 2022. As of this month, 65% of U.S. household expressed concern about inflation, down from a high of 73% last June and 68% in April 2022.

Nevertheless, many consumers think inflation will hang around. According to the 84.51° April Digest, 32% of shoppers believe the current high level of inflation will end in 12 months or less, while 28% think that will take one to two years.