Given the staying power of the Value Core of the customer value proposition, in determining which retailers drive better multi-dimensional outcomes, we’ll dedicate much of the special analysis this year to unpacking this Quality / Savings Trade-off.

The U.S. grocery market can be divided into 7 observed customer value proposition groupings:

1. Quality-First Non-Conventionals (6 banners; 3% U.S. grocery sales share)

2. Quality-First Regionals (6 banners; 6% share)

3. Leaning Quality (8 banners; 2% share)

4. Leaning Savings (15 banners; 28% share)

5. Savings-First (9 banners; 29% share)

6. Undifferentiated (28 banners; 15% share)

7. Unicorns (6 banners; 16% share)

Each of the 81 retailers in this study can be mapped into one of these 7 positions.

In this section and the next, we’ll discuss financial outcomes as well as specific customer value proposition strengths and weaknesses of the strategic groups and example retailers within each.

First, let’s compare three groups fighting for similar missions: the retailers focusing more on quality.

Quality-First Non-Conventionals are composed of 6 retailers in our dataset: Wegmans, Whole Foods, Sprouts, Natural Grocers, Fresh Thyme, and Fresh Market.

Their neighbors are Quality-First Regionals and Regionals Leaning Quality, made up exclusively of traditional supermarket banners. Some of those retailers are indicated on the map below.

Between these three groups, who often will try to compete for the same core missions where quality is especially important – like produce, fresh meat, or ready-to-eat/prepared food-driven missions – some trade-offs are clear. The non-conventional group draws only 14% of the population in any DMA in which they operate, versus numbers around 40% of the population for the regionals. The regionals also get higher spend per customer, earning about 25% of each customer’s share of grocery budget.

This means that Quality-First Non-Conventionals have a limited market share ceiling in any single market in which they operate. They tend to be priced out of the market for most shoppers and have limited options from a geography standpoint, since they must build in neighborhoods where incomes are higher. And even when they do, the shoppers who do visit them only give them, on average, 14% of their monthly grocery budgets. This places the burden for growth on two areas: expand the footprint with more store builds or expand reach in current markets by improving overall savings perceptions.

Quality-First Non-Conventionals do achieve clearly better emotional connection with shoppers, as well as higher sales per square foot. Both of these things signal that these retailers likely have better operational health and profits.

In the past year, Quality-first Non-Conventionals are clearly growing faster than Quality-First Regional supermarkets. The second fastest growing customer value proposition group under consideration at this point is the Savings-First retailers, most of whom are national players as well, like the Quality Non-Conventionals. Read on for a discussion of the Savings-focused retailers and how they compare to each other and Quality-focused players.