Published: October 29, 2023

Breaking down changing consumer behaviors with Kroger’s data science arm 84.51˚

At Groceryshop, Kroger CEO Rodney McMullen noted that consumers have begun to fall into two buckets of premium and budget-conscious shoppers as more consumers experience economic stress, but their behavior is changing quickly, even within the month.

Its VP of strategy & acceleration shares how constrained budgets have impacted how and where consumers shop for groceries.

We already know that the tricky economic environment has led many consumers to shift their shopping habits—but when it comes to grocery, these changes can be tough to track.

At Groceryshop, Kroger CEO Rodney McMullen noted that consumers have begun to fall into two buckets of premium and budget-conscious shoppers as more consumers experience economic stress, but their behavior is changing quickly, even within the month.

This “increases the need to leverage data and make data-driven decisions,” according to Barbara Connors, VP of strategy and acceleration, at 84.51˚, the retail data science company owned by Kroger, which provides shopper insights to the grocery giant along with other CPG companies and agencies.

“Not only do you see differences across customer groups, but given the frequency in which macroeconomic factors are hitting us, behavior can change pretty quickly, and preferences can change and constraints can change,” she told Retail Brew. “What was true a year ago may not be true anymore today.”

Connors broke down how consumers’ tighter grocery budgets are impacting brand loyalty and channels where consumers shop, and how brands and retailers can adjust to these. The loyal treatment: While the return of student loan payments will definitely have an impact on spending habits, grocery may be a bit more resilient than other retail categories, Connors noted. The amount of consumers willing to cut back on out-of-home food and entertainment is twice as high as those willing to reel in their grocery spending, she said, indicating that food-at-home consumption will continue.

But when consumers are looking to save $$, they’re trading down—48% of those 84.51˚ polled in September said they switched to a lower-cost brand as a response to inflation. They’re more likely to make that switch in certain categories like for shelf-stable goods and household cleaning products, while in pet, baby, beauty, and beverage, consumers are likely to stick with their preferred brand. Pet and baby are driven by more “emotional” reasons, according to Connors, while categories like bevs and cleaning have done a more solid job of building brand loyalty.

The concept of what brand loyalty actually means is changing, too. Only 5% of consumers say that being brand loyalty means that they only ever buy that brand, which means that “if you want exclusivity, you have to work harder for it, because customers aren’t thinking of loyalty as meaning exclusivity anymore,” Connors said.

Connors said brands in those less loyal categories looking to get exclusive with consumers should have a full-funnel marketing strategy to engage consumers. That includes retail media, as 42% of clicks on Kroger’s paid product listing ads are from new or lapsed brand buyers, she noted.

Bricks or clicks: Just as consumers are divided into two different categories in terms of their budgets, they’re looking at in-store and online grocery shopping for two different reasons. Particularly, they’re turning to e-commerce to avoid impulse purchases and stay on budget, Connors noted, getting exactly what’s on their list without being distracted by, say, an end cap filled with pumpkin spice-flavored treats. Alternatively, customers shopping in brick-and-mortar grocery stores are seeking out more discovery and exploration, Connors said.

  • While the e-commerce channel didn’t originally appeal to price-sensitive shoppers, they’re “coming on board quickly,” Connors said, as this group is seeing some of the highest trip-per-household growth.

That doesn’t mean that they aren’t doing any impulse shopping online, though e-commerce impulse purchases have looked different from those in store. While in-store customers will likely grab something displayed in the checkout line, online, many consumers are buying products like ice cream (typically housed in the back of the store) as a final add to their carts. That gives an opportunity for brands to market themselves as impulse buys online when they typically wouldn’t be in brick and mortar, Connors noted.

Aaand speaking of treats, there is one unifying factor across consumer groups: They’re all still looking to grocery for a small indulgence, whether it be chocolate or snacks or any kind of little pick-me-up.

“As a brand, you can connect with both ends of that spectrum with food because people like to indulge with food,” Connors said. “So it can be a unifying message and benefit and connection.”

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