It’s no secret that consumer behavior changed drastically during the pandemic and is not reverting to pre-2020 norms. By now, grocers know they can’t rely on their old tactics to find, add and maintain customers.
In a recent survey asked nearly 150 grocery executives about their take on the grocery landscape. Only 5% predicted customer shopping behaviors would return to exactly how they were before the pandemic. At the same time, Cardlytics analyzed transaction data from its proprietary platform to see how customers’ purchasing decisions have changed. (Hint: The future lies in the digital marketplace.)
In this survey report, they offer a glimpse at important marketing trends and strategies for brands and grocery chains to capitalize on:
- Focusing on online shoppers and improving operational processes to attract and retain them
- Understanding how they are spending with competitors
- Updating the company’s digital strategy.
Table of Contents
Content Summary
Capturing online shoppers is the top way to build your business.
Attract and retain online shoppers by improving your operational processes.
Recalibrate your digital spending strategy.
Is Your Brand Ready to Capture More of Consumers’ Grocery Dollars?
As the “new normal” gives way to the “next normal,” one thing is certain: Consumers are not reverting to their early-2020, pre-pandemic habits. Cardlytics, a platform that uses purchase intelligence for smarter marketing campaigns to solicit insights from nearly 150 grocery executives for their take on the grocery landscape— and only 5% predicted customer shopping behaviors would return to exactly how they were before the pandemic. Concurrently Cardlytics conducted its own data analysis culled from transaction data from its proprietary platform to see how customers’ wallets have changed and where they are heading in the food space.
These combined perspectives offer a fascinating glimpse at three key trends grocers and brands need to capitalize on today.
Capturing online shoppers is the top way to build your business.
As restaurants closed, consumers turned almost exclusively to cooking at home during the pandemic, causing grocery revenues to surge—up 11% higher in 2020 than in 2019. “Grocers saw significant ecommerce trial behavior early in the first quarter of last year, and this massive influx of new customers was largely what drove the significant outperformance of the vertical as a whole,” says Michael Novosel, industry lead for grocery, gas and convenience at Cardlytics.
Those dollars are being redistributed as people head back to restaurants today and look toward 2022 and a presumably safer environment, thanks to vaccinations.
Grocery and restaurant dollars have returned to pre-Covid distributions, leaving grocers wondering if they will ever steal dollars again
To maintain momentum, grocers need to adapt to capture market share, and the most promising option is online. While in-store shopping may be on the rise when compared with pandemic lows, online shopping is here to stay as consumers embrace its convenience.
In fact, according to eMarketer, grocery ecommerce sales surged 63.9% from 2019 to 2020. And while growth can’t continue at such a heightened rate, they expect grocery ecommerce sales to grow an additional 20.5% in 2022.
In the face of dwindling in-store demand, grocers need to target these digital shoppers to maintain revenue. “It can be the solution to declining sales and margins, given that consumers who shop online spend more than those who shop only in store,” says Andrew Van Aken, manager of marketing analytics at Cardlytics.
Although online grocery options have started to stabilize, they are holding on to share won from impact of COVID
Although there is low customer penetration at online grocers, online basket sizes are much higher than in-store -> since customers will never completely stop in-store shopping, you should get them spending these large baskets at your online channel!
Looking even farther ahead, eMarketer expects the majority of online sales growth to come from existing digital buyers, with the average annual spend per buyer increasing from $856.47 in 2021 to $1,524.84 in 2025.
Some brands are better positioned than others to win these shoppers, based on how well they adapted during the pandemic. Analysis from Cardlytics found that retailers which had commanded preference in-store even before the pandemic and then subsequently positioned themselves well to meet consumers’ expectations for e-commerce fulfillment fared the best. They discovered that while shoppers might have been switching around the channels they use, they were staying with that preferred store. “A customer shopping both in-store and online is more likely to be engaged with the brand and more likely to continue purchasing,” says Van Aken. “You’re driving more brand loyalty and increasing share of wallet with that customer, who is going to become a higher spender in both channels.”
Customers who use Online Grocery are true spenders, while every other customer type spends the same without fluctuation MoM
Basket sizes at Online Grocers hover at the same level, no matter the customer history
On the flip side, many brands found they were exposed to an influx of new customers who trialed them online without first having spent time with them in store. In those cases they often had the opposite experience—while consumers gave them a try during the height of COVID-19, they abandoned them when more options became available.
“Many of those retailers are now calling us to ask why all those new shoppers left because they believed they had developed a strong omnichannel customer. And more importantly they want to know how they can reengage to win them back,” says Novosel. “Our view into per customer spend behavior can help brands figure out how customers are engaging with them relative to their peers, then drive habituation and brand preference through targeted offers in an environment where spending is top of mind – their bank”
In addition, retailers are realizing they don’t have the visibility or ability to target in-store only customers well, even though they are swimming in data from loyalty programs. “We find stores are struggling to reach in-store loyalists in the online environment simply due to the fact that they were behind the curve in properly connecting offline and online data to one holistic customer view. Add in changes to consumer privacy, deprecation of the cookie, and it became even more difficult to effectively reach and build loyalty with this cohort of consumers,” says Novosel. “We can help brands determine the most valuable prospects and where they should focus their efforts to figure out how to stay in touch with them.”
Attract and retain online shoppers by improving your operational processes.
studioID found that 73% of grocery executives say consumers now expect faster and more convenient service for delivery, and 69% say the same for click-and-collect.
How have you seen your customers’ expectations change during the pandemic? Do they now expect: (Please select up to three responses)
You want to make it easy for your customers to buy the things they want and need within the environment where purchase consideration is top of mind. – MICHAEL NOVOSEL, Industry Lead for Grocery, Gas & Convenience, Cardlytics
Brands that realized this wasn’t one of their core competencies often partnered with another company in order to fulfill shoppers’ expectations. However, often a third-party platform isn’t the best answer because those affiliations can erode margins and brand loyalty. “You lose the human touch with a third-party app. Investing in a proprietary system instead can help brands win customers and retain margin,” says Novosel. “They can offer that option to brand-loyal shoppers who prefer to do everything in one place without dealing with the friction of a third party.”
In addition to improving their fulfillment process, grocers also can’t stick with the status quo on their online ordering platform. Brands have increasingly created more immersive ecommerce experiences, adding options that allow consumers to easily create shopping lists that can be shared across apps, find meal planning solutions and tap into shoppable recipes. Winning loyalty is all about contextual commerce, says Novosel. “You want to make it easy for your customers to buy the things they want and need within the environment where purchase consideration is top of mind.
To do that, grocers need to personalize their platform and think of opportunities for suggestion and discovery. For example, while consumers started cooking more during the pandemic, many don’t have the skills or interest to make more complicated meals. So if they’re craving Pad Thai, they might decide to make it easy on themselves by ordering in, rather than trying to figure out what they need to prepare it themselves. But that barrier disintegrates when a grocer enables them to click on a Pad Thai recipe and suddenly their cart is filled with everything they need for preparation.
“That becomes an inflection point where the consumer flips their intentions from deciding to order in to preparing a dish themselves because the planning was essentially done for them already,” Novosel says.
From streamlining pickup options to offering shopping solutions to highlighting accessibility at the store itself, grocers need to optimize every touchpoint for convenience to reap the benefits of online shoppers.
Recalibrate your digital spending strategy.
Grocers rely on a variety of marketing tactics, often focusing on email, SMS, direct mail, push notifications—anything where they own the first-party data and can personalize the message.
Even though these online and offline strategies can help grocers track who’s spending in their channels, they don’t know what happens to them when they disappear. That’s where Cardlytics data comes in, says Van Aken.
“What we see that grocers don’t is how in-store shoppers have also habitually been spending their money with competitors through their e-commerce experience,” he says. “We can use those two ingredients together to isolate exactly the subset that should be most primed to be a high-value customer for a particular brand.”
Cardlytics can then single them out to condition them to exhibit the type of behavior a brand is hoping to incent, such as increasing the amount or frequency of spend. If a brand has a cohort who quickly built loyalty during the pandemic but have since moved on, Cardlytics can help the grocer see how their spending behavior morphed, explains Van Aken.
“We can show them that some people used to spend $50 with them each week, which gave them 80% of that consumer’s share of wallet, and now, they might only spend $20 per week, and another brand now is seeing that 80%. But we can pull them back and return them as a loyal customer.”
The biggest, smartest brands think of us as a lifecycle marketing tool because we see where that given consumer stands with them relatively in a given moment in time. And we can use that insight to incent the customer to change their behavior in a way that benefits the brand. – MICHAEL NOVOSEL, Industry Lead for Grocery, Gas & Convenience, Cardlytics
When retailers see either basket size or habituation dropping, they can create an intervention with an offer that will get them back to their former level. Cardlytics can target these lapsed shoppers with the right offer to recondition them, such as a cash rebate after they have spent at least $50 to encourage cumulative spending or promoting frequency by making it available only after they make three or more transactions within 30 days.
The key distinction is that purchase intelligence provides the ideal answer to the targeting conundrum grocers face, especially in reaching the omnichannel consumer. “Many grocers weren’t set up in the first place to properly capture data, or then to know what to do with it once they collected it to condition the behavior. And then along came the pandemic, which introduced even more variants into their data,” Novosel says.
The answer for long-term success is lifecycle marketing, where brands provide the right kind of communication at the right time to the right customer. “The biggest, smartest brands think of us as a lifecycle marketing tool because we see where that given consumer stands with them relatively in a given moment in time. And we can use that insight to incent the customer to change their behavior in a way that benefits the brand.”
Is Your Brand Ready to Capture More of Consumers’ Grocery Dollars?
As the Cardlytics/studioID survey found, brands are well aware that consumer behavior isn’t going to revert to the pre-pandemic norms—and that means grocers can’t rely on the old tactics to build their business. “Retailers will succeed when they create experiences that feel native and relevant to the consumer, speak to them in a way that builds an emotional connection, and reduce the friction required to engage with the brand directly, making it more likely than ever to adopt and embrace the omnichannel experience,” says Novosel.
“By putting more rigor into analyzing their customer base, how they behave, and where they spend in/out of category, brands can better acquire valuable new online customers, retain and expand omni adoption of current ones, and re-engage ones they’ve lost.”