Grocery shoppers switching supermarkets: Why loyalty is hard to get and keep

Businesses in the retail sector must work harder to keep loyalty alive in their customers, with a consumer survey released this week revealing almost one in four Australian shoppers has switched their supermarket preference.

The Canstar Blue research surveyed about 3000 shoppers across Australia in recent months and found more than half of those surveyed believe they could get cheaper food from other supermarkets.

While 72% said they usually shop at the same chain, in total, 23% indicated they had changed supermarkets in the past year.

Canstar Blue editor Simon Downes told SmartCompany this morning the findings show new entrants in the Australian market such as Aldi have proven disruptive to the existing supermarket duopoly and are “part of public consciousness now”.

Downes says the survey found customers who shop at Aldi are among the most likely to have switched supermarkets.

“The survey found 23%, almost one in four, said we’ve changed the supermarket where we do bulk of our shopping,” he says.

“Consumers are seeing what’s going on at Aldi, but others are actually influenced by what is happening when they go to Aldi.”

Downes says big supermarkets trying to retain shoppers by offering loyalty programs are doing the right thing, but this only worked on existing customers in the first place.

“Of the people who switched, only one in 10 say they did so because tempted by loyalty,” he says.

“Loyalty programs which supermarkets offer are better at keeping customers loyal than attracting new customers.”

Downes says the research highlights smaller businesses wanting to retain loyalty must look at price.

“It is about price – those which have switched are doing it to save money,” he says.

Brian Walker, chief executive of the Retail Doctor Group, told SmartCompany this morning while the findings of the survey are not surprising, he questions the idea that shoppers are loyal to supermarkets.

“Loyalty implies the overall experience so high I will treat it as a destination,” he says.

“What supermarket shopping shows us… is that Australian consumers are generally driven by location, price and does it have what I want.”

Walker says Australian shoppers select their supermarket preference by price, convenience of location and range.

“There is interrelationship between the three that varies according to income and other demographic stats,” he says.

But Walker agrees the rise of Aldi has changed consumer habits at supermarkets.

“There is no doubt Aldi, which is now at 12% of supermarket share, which gained in last three to four years, has changed the duopoly of Coles and Woolworths,” he says.

“It has made Australian consumers become more price sensitive and price aware, but so too has the internet where we have price transparency.”

Walker says the Retail Doctor Group’s own research has shown consumers still move between supermarkets and supermarket preference is more about the “elasticity of variables”.

“I might shop at Aldi, but I’ll pop into Coles or Wools on way home, based on lifestyle, location and convenience,” he says.

He says there are lessons for small businesses based on the three main variables of location, price and range.

“If we pick up on the variables of location, it’s about focusing in on community, supporting the local club, knowing your customers by name,” he says.

“If we pick up on price, it’s about being as price competitive as you can be. Take price leadership on products when opportunity occurs.

“When talking about demographics of community, know what your local community wants.”

Walker says the biggest chains will always make money on volume products and consistent range of pricing, while small businesses will make their money from niche products, individualised and high service focus.