dunnhumby's Sixth Annual Retailer Preference Index (RPI) for U.S. Grocery
THE GROCERS BEST ‘BUILT TO LAST’
H-E-B, Costco Best Navigate The 2020 – 2022 Pandemic Grocery Market Upheaval, Bumping Amazon From Its Top Ranking
Customers emerged from 2020 – 2022 placing more importance than ever on finding the right balance of savings and quality while placing less importance on saving time.
Pandemic surge in retailer digital capabilities and consumer digital adoption led to greater importance of personalized pricing, promotions, rewards. National and regional retailers are quickly closing the digital gap that Amazon had opened.
At the same time, omnichannel wholesalers accelerated their long-term momentum more than any other formats during this period. So, while national and regional grocery stores may have closed the digital gap with Amazon, omnichannel wholesalers such as Costco (#2 in the rankings), Sam’s Club (#5), and BJ’s Wholesale (#10) will remain fierce competitors.
Table of Contents
Erich Kahner
Author
Eric Karlson
Creator of Original RPI Model
Erich Kahner
Author
Eric Karlson
Creator of Original RPI Model
Executive Summary
- From 2018 through 2022, grocery retailers have lived an entire lifetime in just five years, with all its ups-and-downs: a period of business as usual, a once-in-a-generation-sized shock to consumer behavior that led to record sales, followed by a once-in-a-generation-sized shock of inflation. While this period has been challenging, it has also provided the perfect laboratory for understanding which grocers’ customer value propositions are most resilient and built best for the long-haul. This year’s RPI report is different from previous RPI reports, since it allows us to predict which retailers will last for decades to come.
- The period of upheaval from 2020 – 2022 increased the importance of saving customers money, specifically through leveraging digital capabilities to deliver more personalized pricing, promotions, and rewards. Currently, above the line pricing levers, like base prices and advertising, are similar in importance to pre-pandemic. That said, the history of grocery retail shows that price has always been the main concern among consumers, even among the affluent. That trend is likely to persist, with technology continuing to create pricing pressure on all retailers.
- Personalization’s increase in importance opens the door for regional supermarkets to stall or even reverse the decades-long market share decline their format has experienced as supercenter, club, limited SKU and digital formats have grown.
- Non-traditional formats and national chains tended to display a superior ability to pivot with shifting customer needs from 2020 – 2022, driving the biggest increases in personalization, rewards, and online shopping capabilities. This serves notice to personalization-led regional supermarket chains that they cannot rest on their past or even current capabilities and must instead continue to drive improvements in digital and personalization if they want to gain share against non-traditional formats. Another threat from clubs: reducing the basket size of regionals, as shoppers continue spreading their spend across a mix of preferred stores.
- H-E-B, Costco, and Amazon are the three retailers with customer value propositions best built for long-term success. Most of the rest of the top 15 retailers are non-traditional formats, while spots 17 – 63 in our rankings are mostly regional supermarket chains.
- Over the past 100 years in grocery, customers have gravitated toward grocery innovations that have saved them money, even as real disposable incomes have steadily risen and food’s burden on the household budget has decreased. This speaks to the staying power of saving customers money as a dominant need to fulfill, while other mega-trends in grocery – like values-based consumption, health and wellness, and digital transformation – will remain a secondary consideration in the decades to come. For a deeper look into these mega trends and how we think they will impact the grocery industry for decades to come, visit our dunnhumby Quarterly website in March, for the publication of our “Grocery 2053” article.
Introduction
“The only truly reliable source of stability is a strong inner core and the willingness to change and adapt everything except that core.
- James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies
The Grocery Retailer Royalty: H-E-B, Costco, Amazon, Wegmans. All beloved by their shoppers. All achieving superior grocery industry financial results of one form or another. Imagine a grocery future 30 years from now, and they are the most likely to still be standing tall. On the other hand, some regional supermarkets may eventually need to sell themselves and put the fate of their name in the hands of another.
Which retailers have a murkier future?
Why?
From 2018 through 2022, grocery retailers lived an entire lifetime, with all its ups-and-downs: a period of business as usual, a once-in-a-generation-sized shock to consumer behavior that led to record sales, followed by a once-in-a-generation-sized shock of inflation. The years 2018-2019 represented relative business as usual. It had been almost 10 years since the Great Recession ended, and customers were settled into their well-worn grocery habits. In the background, retailers were more seriously weighing how grocery eCommerce fit into their priorities, due to Amazon’s entrance into omnichannel grocery, but this had negligible impact on overall consumer demand for grocery eCommerce.
However, the ensuing two years (2020-2021) provided the shock to consumer behavior. Fear of Covid, sheltering in place, lights suddenly shut off for much of food-away-from-home, and grocery retailer Covid safety measures dramatically changed shopping behavior. Anything that made people feel safer took priority. Buying online became a more legitimate channel for half of Americans, and speed, location, and one-stop shopability gained ground against price and product quality. 2022 kept consumers and retailers unsteady, as the market lurched from the pandemic to record inflation, and customers’ need to save money surged back to prominence.
While this period of time has been challenging, it has also provided the perfect laboratory for understanding which grocers’ customer value propositions are most resilient and built best for the long haul. As we noted in an earlier report on inflation, the long-term view takes on even greater importance in light of the fact that grocery spending is one of the few areas where consumers feel they have agency to manage their spending. Which retailers can thrive in a time of business as usual as well as varied forms of market upheaval? What lessons can the rest of the market learn from them? These are the questions we attempt to answer with this report.
In the 1994 business book classic, Built to Last: Successful Habits of Visionary Companies, authors James C. Collins and Jerry I. Porras discuss the core principles that successful businesses have embraced to manage success for the long term. Their study – which coincidentally was also based on a six-year survey – inspired us to frame this year’s RPI to echo the notion that managing for the long term is the most important thing grocers can do today. They need to not only survive the current environment but also need to build themselves for future environments, which come faster than anyone expects.
Approach
To answer these questions, we rely on the grocery industry’s most robust statistical model, the grocery Retailer Preference Index (RPI). The RPI is the only approach to ranking grocers that combines financial results with customer perception. It includes the largest 63 retailers in the industry that sell everyday food and non-food household items. The financial data we use in our model comes from Edge Ascential, and the customer perception data is sourced from our annual survey of ~10,000 American grocery shoppers. Also, while our opinion does not influence the results of the model, dunnhumby’s expertise in the grocery industry ensures that the model design and interpretation reflect lessons learned from decades of serving hundreds of grocery retailers, thousands of consumer-packaged goods companies, and billions of customers, globally.
The model is a prediction. Based on customer perception of a retailer’s value proposition, the model predicts which retailers will have the strongest financial results and strongest emotional bonds with customers over the long term. More specifically, it predicts a composite measure of success, which includes five-year compounded annual sales growth (momentum), U.S. sales market share (size), sales per square foot (efficiency), share of individual customers’ grocery budgets (efficiency) and strength of emotional connection with customers (bonds).
The model also provides a rationale for this prediction. It tells us which dimensions of the value proposition matter the most for driving financial results and emotional bonds. We call these dimensions “drivers” of the value proposition; customers might know them as their needs. With the customer perception data we have on each retailer, we can punch that information into our model to predict which retailers are best positioned to achieve the strongest long-term results.
The dunnhumby Retailer Preference Index (RPI) statistical model tells us which need states have the biggest impact on retailer outcomes. We then weigh customer perception of each need state by these impacts to arrive at an RPI score
Preference Drivers (customer perceptions of the value proposition – i.e. “Need States”)
Price, Promotions, and Rewards
Quality
Speed and Convenience
Digital
Operations
Retailer Results (financial outcomes and strength of bond with customers)
Emotional Connection
Would be sad if this retailer closed
Trust this retailer to do the right thing for me
Would recommend this retailer to friends/family
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Retailer Performance
5 YR Grocery Sales CAGR (growth)
U.S. Grocery Sales Market Share (size)
Grocery sales per sq. foot (efficiency)
Customer share of grocery budget (efficiency)
Emotional Connection
Would be sad if this retailer closed
Trust this retailer to do the right thing for me
Would recommend this retailer to friends/family
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Retailer Performance
5 YR Grocery Sales CAGR (growth)
U.S. Grocery Sales Market Share (size)
Grocery sales per sq. foot (efficiency)
Customer share of grocery budget (efficiency)
Model approach: Factor analysis of 30 performance perception ratings for all retailers in this study was performed to determine the Drivers. Linear regression was then applied, with Factors as independents and a composite metric for emotional connection and retailer performance as the dependent variable.
The Customer: Like most people, Joe and Jane have a lot of responsibilities. They are employees, spouses, friends, and parents. Money and time are not limitless, but they also have their health and happiness to consider, as well as the health and happiness of others. With either a few clicks of an app or five to ten minutes in a car, they can visit one of several different retailers to buy food items or common non-food items like health, beauty, pet, paper and cleaning products.
Many of these retailers sell most of these things. So, Joe and Jane are well-practiced in the subtle art of balancing all of their grocery needs while balancing their grocery budgets. With the money they saved on non-food products from a low-priced mass merchant, they can spend more to get the produce and meat quality they want from an upscale supermarket. They can also go to a limited SKU discounter for their dairy items since they can get in quickly and save even more money. The local supermarket that their grandparents used to shop has great sales on cereal and soup one day, and another day they need eggs in a pinch so they do not mind paying an extra buck because of the store’s convenient location.
Sometimes they throw produce in their cart while on a non-food mission at a supercenter; and sometimes (though not as often) they throw non-food items in their cart while they are on a food mission to a supermarket. They spread their grocery budget across four retailers, giving one store half of their budget and the others the rest.
Joe and Jane, they are like most people.
There are five drivers of the value proposition, revealed by an analysis of the 30,000 customers we have surveyed between October 2021 and November 2022. In a customer’s own words, they would be called: Price, Promotions, and Rewards, Speed and Convenience, Quality, Digital, Operations. We use these terms to make it clear that this is the perspective of the customer, one of the unique aspects of the RPI model.
Customers seek to maximize their benefits and minimize their costs, across all of their need states. Retailers have a variety of levers they can pull to deliver their customer value proposition
Customer Value Proposition
Benefits
Costs
Customer Value Proposition
Benefits
Speed and Convenience
- Speed to shop the store
- Speed to checkout
- Location
Quality
- Product quality
- Better-for-you/natural and organic offering
- Customer service
- Store cleanliness/ ambiance
Digital
- Online shopping
- Shopping app
- Tech that makes shopping experience better
Operations
- Out of stocks
- Prices are accurate/consistent
Price, Promotions, and Rewards
- Base prices
- Mass promotions
- Personalized promotions and loyalty
- Private brand and bulk packs
Speed and Convenience
- Speed to shop the store
- Speed to checkout
- Location
Quality
- Product quality
- Better-for-you/natural and organic offering
- Customer service
- Store cleanliness/ ambiance
Digital
- Online shopping
- Shopping app
- Tech that makes shopping experience better
Operations
- Out of stocks
- Prices are accurate/consistent
Costs
Price, Promotions, and Rewards
- Base prices
- Mass promotions
- Personalized promotions and loyalty
- Private brand and bulk packs
Saving customers money matters most to driving better long-term results for retailers; among benefits, customers are least likely to trade-off on making products better and most likely to trade-off on saving themselves time
While all drivers factor into a strong value proposition, we know which drivers are more or less important for driving long-term results. Given limited retailer resources, this is critical knowledge, since it helps us understand where retailers need to focus to provide the best return-on-investment.
“I don't make enough money to purchase healthier foods because they are more expensive. I try to get as much as possible without going over the budget I have for food/other household needs but with inflation it’s impossible especially for larger families who don't get any type of public assistance. I would try to purchase more healthier options. I would also purchase more meats or fresh foods rather than boxed meals/frozen meals.”
- 25–34-year-old shopper from the Mid-Atlantic region, two-child household
While all drivers factor into a strong value proposition, we know which drivers are more or less important for driving long-term results. Given limited retailer resources, this is critical knowledge, since it helps us understand where retailers need to focus to provide the best return-on-investment.
During the first year of the pandemic, anything that helped people avoid time in public increased in importance, while product prices and quality took a back seat
“Price, Promotions, and Rewards” is the most important priority for most customers, followed by “Quality” and “Digital.” Since we’ve run our RPI model for six years now, we know how customer needs have shifted from 2018-2022, and we can determine how the pandemic and record inflation has impacted the competitive landscape and each retailer’s position in it.
Before the pandemic, “Price, Promotions, and Rewards” and “Quality” were the dominant customer needs, much like today. Along the way, we saw certain drivers gain and lose prominence in the value equation for customers. In 2020, “Speed and Convenience”, “Digital”, and “Operations” rose in importance while “Price, Promotions, and Rewards” and “Quality” fell. This shift benefited traditional regional grocers, who had a unique combination of convenient locations, smaller stores and one-stop shopability. Their vulnerabilities to more focused national players on either “Money” or “Better” didn’t hinder them as much in 2020. During this period, grocery delivery surged in relevance, and Amazon was a prominent go-to for many since they already had a relationship with tens of millions of customers.
“Price, Promotions, and Rewards” is the most important priority for most customers, followed by “Quality” and “Digital.” Since we’ve run our RPI model for six years now, we know how customer needs have shifted from 2018-2022, and we can determine how the pandemic and record inflation has impacted the competitive landscape and each retailer’s position in it.
Before the pandemic, “Price, Promotions, and Rewards” and “Quality” were the dominant customer needs, much like today. Along the way, we saw certain drivers gain and lose prominence in the value equation for customers. In 2020, “Speed and Convenience”, “Digital”, and “Operations” rose in importance while “Price, Promotions, and Rewards” and “Quality” fell. This shift benefited traditional regional grocers, who had a unique combination of convenient locations, smaller stores and one-stop shopability. Their vulnerabilities to more focused national players on either “Money” or “Better” didn’t hinder them as much in 2020. During this period, grocery delivery surged in relevance, and Amazon was a prominent go-to for many since they already had a relationship with tens of millions of customers.
“Now that I work 100% remotely and am not leaving my house every day for a commute, I am overjoyed to not have to leave the house for grocery shopping either and I take full advantage of ordering online for delivery/shipment to my door. I buy all groceries online for delivery with the exception of perishables which I now don't have to go out for more than once a week.”
- 35–44-year-old shopper from the Midwest, $25k-$50k per year household income
“Working from home means I can grocery shop at my leisure since I no longer sit in traffic for a commute. This means the ability to go to different stores for different items and I no longer plan an entire day just for grocery shopping.”
- 55–64-year-old shopper from the Western region, $150k-$200k per year household income
During the second year of the pandemic, customers focus shifted back toward saving money, and they rewarded retailers who provided better omnichannel experiences
In 2021, as the economy opened back up and vaccines provided people with the confidence to move about, “Speed and Convenience” gave back some of the importance it gained, and people resumed some of their savings hunting behaviors. “Digital” continued to gain momentum though, indicating that the 2020 shock to consumer behavior resulted in some rewiring of habits in favor of the digital channel.
In 2021, as the economy opened back up and vaccines provided people with the confidence to move about, “Speed and Convenience” gave back some of the importance it gained, and people resumed some of their savings hunting behaviors. “Digital” continued to gain momentum though, indicating that the 2020 shock to consumer behavior resulted in some rewiring of habits in favor of the digital channel.
“The biggest challenge is having the same budget, but everything that we normally buy is way more expensive! The price of groceries has gone up exponentially in the last year which makes it hard to stay on budget. I am having to make a lot more food from scratch as a way to save money and still have healthy options.
- 35–44-year-old shopper from the Western region, $75k-$100k per year household income, 3 child household
During 2022, customers shifted their focus back toward saving money or seeking a good overall value (balancing product quality with better prices) while trading off on time savings, and a digital experience and operations
In 2022, “Price, Promotions, and Rewards” gained even more importance, and “Speed and Convenience” dropped, as consumer confidence in the economic future hit record lows and people demonstrated a willingness to drive the extra mile or hunt the extra minutes for a good deal. 2022 was all about finding the right products at the right prices and less about saving time.
In 2022, “Price, Promotions, and Rewards” gained even more importance, and “Speed and Convenience” dropped, as consumer confidence in the economic future hit record lows and people demonstrated a willingness to drive the extra mile or hunt the extra minutes for a good deal. 2022 was all about finding the right products at the right prices and less about saving time.
Due to this extended period of uncertainty, customers are more conservative with their grocery budgets than ever while also seeking ways to make their experience more seamless; they’re trading off more than ever on dependability and time savings
What have these ups and downs amounted to?
“Price, Promotions, and Rewards” and “Digital” are more important than ever. The rise of “Digital” likely has staying power.
What have these ups and downs amounted to?
“Price, Promotions, and Rewards” and “Digital” are more important than ever. The rise of “Digital” likely has staying power.
45% of grocery shoppers are omnichannel today, versus just 39% in 2019. This amounts to 9.4 million more omnichannel households, with a combined grocery budget of $4.9B
The pandemic increased the percentage of American’s shopping online for groceries from 39% to 45% of the country – a six percent rise – and, despite record inflation, over half of those people that migrated online during 2020 remained online grocery shoppers in 2022.
The pandemic increased the percentage of American’s shopping online for groceries from 39% to 45% of the country – a six percent rise -- and, despite record inflation, over half of those people that migrated online during 2020 remained online grocery shoppers in 2022.
Format and channel proliferation has been the long-term trend in grocery retail, starting over 100 years ago and continuing through to today
“Price, Promotions, and Rewards” has always been the most important need in our model, and it likely has been the most important customer need for much of the past 100+ years. The story of who has won and lost is also a story of the consumer’s insatiable appetite for a better deal. Absent a robust RPI dataset prior to 2017, we can simply trace the rise and fall of formats over the decades to identify the staying power of “Price, Promotions, and Rewards.”
Until the digital format, newer formats entered into food retail with value propositions that saved customers more money than any previous format
While price differentiation is clear between formats, quality differentiation, outside of limited SKU discounters and specialty formats, is less apparent for shoppers
Over time, Americans have seen disposable income steadily rise, which has reduced the strain of food on household budgets. Despite this, retail formats that deliver better prices on food continued to take share
Throughout modern grocery history, formats and retailers who brought ever lower prices slowly but steadily gained share, reshaping the grocery landscape. They carved chunks of share away from those that were not as competitive on price. They did so even as consumers’ real disposable incomes steadily grew and food as a percentage of household budgets fell.
While price sensitivity likely declines as household income increases, grocery prices still matter just as much as product quality for even the highest income ranges
In other words, while people grew richer in real dollars and food became less critical to balancing the budget, they still shifted their business to retailers that saved them money. People love saving money on groceries, even those who are wealthier.
“The biggest challenge is the cost of the groceries. We like to buy high quality food, but we need to stay within our budget.”
- 45–54-year-old shopper from the Western region, $100k-$150k per year in household income, 3 child household
“The grocery store I like best doesn't have the best prices, especially for paper products, cleaning products and other household items, so as prices have risen I am forced to shop at different stores. This is something I do not like.”
- 55–64-year-old shopper from the South, $150k-$200k per year in household income
Before 2020, mass pricing levers drove most of a retailer’s competitive position; after the pandemic and a year of inflation, personalized levers have 3x as much impact relative to mass levers
So, if you are a regional supermarket, make no mistake, supercenters, club stores, limited SKU discounters are your main competition for your customers grocery budgets, even their food budgets. If you are mostly focused on outgunning other supermarket chains, you may win a battle but lose the war.
For more detail on which levers you can pull to most successfully save customers money, see our RPI Special Report: Inflation Edition, published in September 2022.
With the prominence of “Price, Promotions, and Rewards” as immutable as a law of physics, this implies that that the rise of other needs are limited by the trade-off they require on prices. If eCommerce costs more than a brick and mortar only experience, it has a ceiling. Customers and retailers are savvy though, and both have appeared to recognize the synergy provided by “Digital” and “Price, Promotions, and Rewards.” There is a shared lever to both, not the most prominent lever in either but capable for fulfilling both need states at once: personalization of pricing and rewards. Considering the rise in importance of “Digital” over the past few years, it is no coincidence that this lever explains most of the rise in importance of “Price, Promotions, and Rewards” during that same time.
A more seamless experience unlocks better personalization. Leaders in leveraging digital for better personalization are Kroger Co. banners
Better base prices enable more effective personalized promotions / rewards. Leaders in driving the best combination of base prices and personalization are Fry’s, ShopRite and Food Lion
Mass pricing, largely driven by base price, is still most important to customers in fulfilling their need for savings, but personalized levers have risen in importance. With the staying power of seamlessness, this increased need for personalization has staying power as well. It is worth repeating though that, if you are a retailer trying to appeal to the majority of your customers, your base prices have to be competitive or the ROI of any promotions – personalized or otherwise – will be stunted.
H-E-B, Market Basket, WinCo and ShopRite join a host of national and super-regional retailers in the 1st Quartile, with the strongest customer value propositions
H-E-B. Costco. Amazon. These three retailers headline a group of fifteen retailers whose value propositions are currently most aligned to what matters most to customers. They provide the best combination of customer benefits while minimizing customer costs. As a result, they are best positioned to grow over the long-term.
H-E-B. Costco. Amazon. These three retailers headline a group of fifteen retailers whose value propositions are currently most aligned to what matters most to customers. They provide the best combination of customer benefits while minimizing customer costs. As a result, they are best positioned to grow over the long-term.
The top quartile retailers tend to outperform the rest of the market on benefits, costs or, even more commonly for them, both. Overperforming on both sides of the value equation leads to superior financials rather than overperforming on just one side of the equation
Top quartile value propositions earn top quartile outcomes , either in emotional connection or on some financial metric
Top quartile value propositions earn top quartile outcomes , either in emotional connection or on some financial metric
“I find shopping in stores where the employees are well taken care of offer a better shopping experience so I like to mostly shop at stores like [H-E-B]. However their price also matters as well as great products that are offered.”
- 25–34-year-old shopper, $50k-$75k per year household income
“I love [H-E-B] because of their store brand and all of the different things they make and have to offer. They truly put pride in their work.”
- 18–24-year-old shopper, $50k-$75k per year household income
With the exception of H-E-B, WinCo, Market Basket and ShopRite, regional supermarkets – even those under the umbrella of Kroger, Albertsons-Safeway or Ahold – are looking up at these 15. Most of the 15 are national chains, non-traditional formats that together earn more grocery dollars than supermarkets. If you are a regional supermarket chain not named H-E-B, WinCo, Market Basket, or ShopRite, you want to be in the second quartile because your customer value proposition will provide a better defense against national chains than the defense provided by a third or fourth quartile value proposition.
One surprise in the 1st Quartile may be Amazon Fresh, given the recent news headlines regarding the pause in their physical store expansion. It is important to remember that the vast majority of Amazon Fresh customers are still online only, given they only have ~40 physical stores. We estimate that around 10 million households in the U.S. shop the Amazon Fresh banner specifically, either online or in store, which makes it one of the 12 largest grocery retailers in our study, with a greater reach than big retailers like Wegmans, Food Lion or Safeway banners. They get high marks from customers on product quality, prices and private brands. If Amazon Fresh can figure out how to carry that equity forward into the right brick and mortar experience, they will be formidable. For a deeper analysis of Amazon Fresh, see the eCommerce Retailer Preference Index study we published in June of 2022.
Retailers who have better RPI scores (i.e., achieve a rank in a higher quartile) have better results on multiple critical outcomes
To better understand how the impending Kroger-Albertsons merger might impact the grocery industry, in light of long-term trends and the position of these retailers grocery propositions, see Kroger’s Big Buy: A Move 100+ Years in the Making.
First quartile retailers not only have the strongest value propositions today, they have also made steps in improving upon their vulnerabilities. Typically, first-quartile retailers have not relied as much on personalized levers for saving customers money, mostly because they did not have to, given their strong position on mass levers. However, as seamlessness has grown as a need and has heightened expectations for personalization, first-quartile retailers demonstrated an ability to keep their finger on the pulse of shifting consumer needs and respond accordingly. In 2019, first-quartile retailers had a deeper disadvantage on elements of personalization like making customers feel rewarded than they do today.
From 2019 to today, 1st Quartile and 2nd Quartile retailers both drove improvements in the perception that they reward their customers, while 3rd and 4th Quartile retailers were flat to negative
And when much of the market was ramping up eCommerce amid unprecedented demand, first-quartile retailers, already better than other retailers, excelled at driving a better seamless experience. This paved the way for them to close the gap on personalization.
1st Quartile retailers drove the biggest customer perception gains in easy online shopping while grocery eCommerce surged in importance for customers
Lastly, as we transition from 2021 to 2022 – when consumers heightened scrutiny of base prices amid inflation – first-quartile retailers performed the best at minimizing the damage done to base price perception.
1st Quartile retailers, who already had a base price perception advantage before inflation, were better at minimizing perception losses during the challenges of the past 2 years
Battle at the top. In 2019, H-E-B’s value proposition ranked first, due to its superior ability to deliver a combination of money savings and better quality, despite vulnerabilities in saving customers time. In 2020 and 2021, market context shifted enough to create more momentum for Amazon’s value proposition, which excelled at both saving customers time and providing a seamless eCommerce experience. This propelled Amazon from the second spot in 2019 to first through 2021. With the importance of time savings receding in the value proposition, this allows H-E-B to reclaim the top spot. Additionally, H-E-B’s superior position in “Quality” and “Price, Promotions, and Rewards” counts now more than pre-pandemic. Finally, while Amazon is still superior to all other retailers in “Digital,” H-E-B, like many in the market, has managed to close the gap.
H-E-B beats Amazon on the two most important pillars, “Price, Promotions, and Rewards” and “Quality”, while minimizing the gap in the third most important, “Digital.” It loses on “Speed and Convenience”, but that matters less to customers than other pillars
The rest of the market and especially H-E-B have made progress in closing online experience gap with Amazon, pre-pandemic to today
Winning with Trade-Offs. H-E-B is unique in the sense that, aside from an average ranking in the “Speed and Convenience” pillar, it ranks in the top quartile in every pillar. It delivers many benefits without asking its customers to trade-off. Market Basket is the next highest ranked mainstream regional supermarket chain, at fourth. They, like every other retailer in the market, win with trade-offs. They rank in the bottom quartile on certain benefits, presumably because they have chosen to focus their limited resources at driving competitive advantage in other pillars. Market Basket ranks highly in “Quality” and “Price, Promotions, and Rewards” pillars while ranking in the bottom quartile in “Digital” and “Speed and Convenience.”
Contrast this with Kroger who has a solidly average ranking in “Price, Promotions, and Rewards” and “Quality,” which lead them to fall in the second quartile of the RPI overall. They are not clearly among market leaders in any single pillar. Albertsons exists on the border of the third and fourth quartile overall, with a ranking of 47, due to vulnerabilities in “Price, Promotions, and Rewards” and “Quality,” despite being strong at both saving customers time and seamlessness. A take-away from those for Albertsons is perhaps they are over-investing in a seamless experience and saving customers time and should be shifting some of that focus toward investing in base prices, better promotions and in identifying the right assortment for their shoppers.
Market Basket demonstrates the power of trade-offs and not over-focusing on elements of the customer value proposition that are less important toward driving long-term results
The impact of not focusing on the right elements of the value proposition for your customers is clear for the retailers in these examples. For supermarket chains that offer grocery products in most departments, securing a high percentage of a shoppers’ grocery wallet is imperative. Additionally, with proliferation of non-traditional grocery channels in their footprints, regional supermarket chains need to have a strong emotional connection with customers to mitigate share of wallet leakage. H-E-B and Market Basket – the two highest ranked mainstream supermarkets – beat Kroger and Albertsons on both fronts.
H-E-B and Market Basket, with superior overall customer value propositions, earn a strong emotional connection with more of their shoppers than Kroger or Albertsons
H-E-B and Market Basket, with their stronger value proposition, capture more share of customer wallet than other mainstream retailers Kroger and Albertsons
Club momentum. Three of the top 10 spots today are occupied by club stores, with Costco second, Sam’s Club fifth, and BJ’s Wholesale tenth. In 2019, no club store ranked higher than seventh. Club as a format has been on a winning streak for more than a decade. Since 2010, club formats, limited SKU discounters and digital formats are the only three formats to have gained share, at the expense of supermarkets and supercenters. These three club retailers achieve a high rank through a combination of top-notch operations, saving customers money while delivering a seamless experience. Another threat from clubs: reducing the basket size of regionals, as shoppers continue to spreading their spend across a mix of preferred stores.
Club stores common strengths are in “Price, Promotions, and Rewards,” “Digital” and, especially, “Operations”
WinCo, Food 4 Less/ Foods Co., and Market Basket are the top 3 in our “Price, Promotions, and Rewards” pillar, due to the strongest combination of mass and personalized pricing levers. Fry’s wins on personalized levers. ALDI extends its winning streak on mass levers to 6 years
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Wegmans, as it has every year since our study began in 2017, holds the top spot in the “Quality” pillar. H-E-B, Publix, Lowes Foods, Big Y Foods and Raley’s stand out among a host of regional supermarkets
Amazon, Target and Walmart banners take the top 6 spots on “Digital.” H-E-B and Kroger / Fry’s are the regional supermarkets best positioned to hang with these digital goliaths
WinCo wins on “Operations” and becomes the only retailer in the history of our study to occupy the top spot in 2 separate pillars in a single year (also 1st in “Price, Promotions, Rewards”)
Fareway, Publix and ALDI lead on “Speed and Convenience.” Publix is the only retailer who scores in the top 10 on both Speed and Convenience levers
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These retailers are getting most credit from their customers for improvements in their customer value propositions from pre-pandemic to today. Their scores and rankings have improved the most in each of the areas below, typically moving up 10 spots in ranking or more
Most Improved:
Overall RPI Rankings (all pillars considered)
Most Improved: Price, Promotions, and Rewards
Most Improved: Quality
Most Improved: Speed and Convenience
Most Improved: Operations
Most Improved: Digital
Most Improved:
Overall RPI Rankings (all pillars considered)
Most Improved: Price, Promotions, and Rewards
Most Improved: Quality
Most Improved: Speed and Convenience
Most Improved: Operations
Most Improved: Digital
Key Takeaways
- As we have noted throughout this RPI – the first to cover a critical span of years, the 2020-2022 pandemic grocery market upheaval – our model has evolved into a prediction of which retailers are best prepared and positioned to succeed in the future. While this period has been challenging, it has also provided the perfect laboratory for understanding which grocers’ customer value propositions are most resilient and built best for the long-haul.
- The period of upheaval from 2020 – 2022 resulted in an increase in the importance of saving customers money, specifically through leveraging digital capabilities to deliver more personalized pricing, promotions and rewards. Above-the-line pricing levers, like base prices and advertising, are similar in importance to before the pandemic compared to today.
- Personalization thus opens the door for regional supermarkets to stall or even reverse the decades-long market share decline their format has experienced as supercenter, club, limited SKU, and digital formats have grown.
- However, non-traditional formats and national chains tended to display a superior ability to pivot with shifting customer needs from 2020 – 2022, driving the biggest increases in personalization, rewards, and online shopping capabilities. This serves notice to personalization-led regional supermarket chains that they cannot rest on their past or even current capabilities and must continue to drive improvements in digital and personalization if they want to gain share against non-traditional formats.
Retailers in this study
Retailers included in the RPI that are interested in receiving their individual banner profiles can speak with their dunnhumby account executive, or contact dunnhumby at: https://www.dunnhumby.com/contact/.
Reactions from retailers
Banner
ACME Markets
Albertsons
ALDI
Amazon
Amazon Fresh
Big Y
BJ's Wholesale
Brookshires
Commisary
Costco Wholesale
CVS Pharmacy
Dollar General
Family Dollar
Family Fare
Fareway
Food 4 Less / Foods Co
Food City
Food Lion
Fred Meyer
Fresh Thyme
Fry's Food Stores
Giant Eagle
Giant Foods
The GIANT Company
Grocery Outlet
Hannaford
Harris Teeter
H-E-B
Hy-Vee
Ingles
Jewel-Osco
King Soopers
Kroger
Lidl
Lowes Foods
Marc's
Market Basket
Meijer
Price Chopper
Price Rite
Publix
Ralphs
Rite Aid
Safeway
Sam's Club
Save A Lot
Save Mart
Schnucks
Shaw's / Star Market
ShopRite
Smart & Final
Smith's
Sprouts Farmers Market
Stater Bros.Markets
Stop & Shop
Target
The Fresh Market
Tops
Trader Joe's
Vons
Walgreens
Walmart
Walmart Neighborhood Market
Wegmans
Weis
WinCo
Winn-Dixie