Inflation Is Slowly Eroding Brand Loyalty

Consumers continue to feel the pressure of rising prices and increasingly make purchase decisions based on economics rather than brand loyalty. While inflation slowly recedes from the heights of last summer, it still stands at around 6%, continuing to drive up the cost of goods across the economic landscape.

Nowhere are these rising prices more evident for consumers than in the grocery segment, as they have seen their weekly shop become constantly more expensive over the past two years. According to Grocery Doppio’s recently released “State of Digital Grocery Performance Scorecard, Q1 2023,” over the past three months, consumers have witnessed a 13% increase in spending to maintain ‘parity.’

This increase, coupled with massive increases in 2022, has forced consumers to look for ways to stretch their shopping budgets which is an opportunity for nimble grocers. According to Grocery Doppio’s Q1 Performance Scorecard, 63% of shoppers are actively looking for deals when they shop, and 73% have shopped a private grocery brand since January. Grocers that meet shopper needs with private brands can increase profits while building meaningful consumer loyalty.

Grocery Doppio examined private brands earlier this year in its “State of Digital Grocery Marketing: Unlocking Private Brand Growth” report and discovered that private brand performance is a top priority for grocers, with 83% reporting that it is a C-level priority and 91% having a clearly defined private brand strategy and roadmap. Despite the commitment to private brand success, just 38% of grocers report being satisfied with their private brand performance.

As grocers continue to invest in private brand growth and consumers increasingly make value-based purchase decisions, national brands are losing some of their luster with shoppers. In the Q1 Scorecard, just 17% of shoppers report they are willing to pay a premium for their preferred national brand, highlighting the need for high-quality, economically conscious options. However, it is not all doom and gloom for national brand loyalty as consumers report that, on average, there are four to five items in their baskets that they refuse to ‘trade down’ on.

Fifty-seven percent of grocers report that promoting their private brands is a top lever to blunt the impact of rising prices and preserve margins. Other key levers being deployed include pricing optimization (83%), member-only pricing/discounts (77%), and loyalty points on new categories, e.g., gas (67%).

Download the full “State of Digital Grocer Performance Scorecard, Q1 2023 for free here for more insight on the current state of digital grocery, the breakdown of performance across grocer size, and the effect inflation has on the industry.

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