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05 Oct 2024 16:27

Advertising & Marketing

Consumers Want More Than Low Prices From Retailers

Listen up! Only about half (53%) of global respondents believe that retailers always or mostly understand their grocery requirements, meaning that nearly half of those surveyed feel somewhat underserved. A core element in increasing share of wallet is understanding and responding to local consumer needs. It makes sense then, that differentiation from your competition could be an important way to build a competitive advantage. So what are consumers looking for?

It’s no surprise that price is important; it always has been and always will be. In fact, for many consumers, deal seeking is the thrill of the chase. Globally, 59% of respondents say they enjoy taking the time to find bargains. This is a particularly strong motivator in North America (68%) and Latin America (64%).

But, as smart retailers have long known, price and value aren’t the same thing. When it comes to attributes that consumers say are influential to store selection, price-related attributes fall below several others that are geared toward assortment and convenience. High-quality produce (57%), convenient location (56%) and product availability (54%) are rated as highly influential in determining where to shop, while fewer say good value for money (52%), the lowest prices overall (48%), great sales or promotions (47%), and good sales or coupons in the weekly circular (37%) are highly influential. In fact, when global attributes are ranked, those related to price/value only made up three of the top 14 most frequently selected factors. Regionally, however, price-related attributes are more influential in Latin America and North America than the global averages.

“While intense promotional activity among retailers and manufacturers has created an expectation among consumers that low prices should be the norm, some consumers are recalibrating their spending—and increasingly, value is about more than the lowest price,” said Matthesen. “Consumers are often willing to pay more if they think the benefits outweigh the price. One of the most effective ways retailers can avoid pricing wars and unsustainable promotion strategies is to increase the perceived benefits they provide. To keep shoppers coming back, however, brands must exceed shoppers’ expectations and convincingly demonstrate that the higher price is truly justified.”

For example, in Southeast Asia, a Nielsen retail sales analysis of 16 categories in six markets shows value sales in the premium segment grew at twice the rate (21%) of the value and mainstream tiers (10% and 8%, respectively) between October 2012 and 2014. China shows a similar trend, with even greater growth (23%) in the premium tier. And in many places, the retailers that are winning are positioned at opposite ends of the price spectrum. While many consumers remain price conscious, driving growth in value channels, some consumers are trading up for what they perceive to be additional value and quality. In the U.S., a Nielsen analysis of supermarket value sales reveals that two niche retailers appealing to very different customer bases—discounters and natural/gourmet supermarket chains—are expanding store counts and grabbing share from mainstream supermarkets. Between 2015 and 2020, growth in these niches (projected at 2.6% and 6.8% annually, respectively) is expected to outpace that of mainstream supermarkets (projected at 1.4% annually). Together, these trends have put pressure on big-box retailers.

Other findings from the global Think Smaller for Big Growth report include:

Nearly half (46%) of global respondents say that grocery shopping is something they try to spend as little time as possible doing.

Health and wellness is a top priority for consumers around the world, with 67% saying they actively seek products with healthful ingredients.

In-store add-on services that are the most widely available and used by global respondents include banking (42%), fast food (40%), prepared food (40%) and pharmacy (39%) services.

When materials costs go up for manufacturers of food and personal care products, a quarter of respondents (26%) say they prefer larger economy sizes with a lower price per serving.

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