As grocers look to maintain shopper loyalty amid inflation, America can learn from the Brits.
PYMNTS data reveals that, when it comes to driving shopper loyalty, retailers agree that rewards are key, per the study “Big Retail’s Innovation Mandate: Convenience and Personalization,” created in collaboration with ACI Worldwide. The report, which drew from a survey of 300 retailers across the United States and the United Kingdom, found that three-quarters of grocers think consumers would be very or extremely likely to switch merchants if digital coupons and rewards were not provided.
Yet, U.S. merchants are not as convinced about the effectiveness of these offers as their U.K. counterparts. The study found that 81% of U.K. merchants believe in their importance, compared to a smaller 74% of U.S. merchants.
For instance, major U.K. supermarket chain Tesco, the most popular in the country, touts its loyalty program as a key competitive advantage amid inflation.
“We operate in a highly competitive market, and we think that’s a good thing because it keeps us sharp,” CEO Ken Murphy told analysts on a call in the fall. “[We] make sure that we reward [our customers] through our loyalty platform and also make sure that we get to know customers that little bit better through that understanding of customer data. And that’s really paying dividends.”
Meanwhile, the leading grocer in the U.S., Walmart, is more tight-fisted with its loyalty rewards, only offering them to members of its paid Walmart+ subscription and relying on its low-priced offerings to keep shoppers coming back.
“In regard to personalization, our customers are looking for opportunities to save on the products they love,” CEO Rodney McMullen told analysts on a call last month. “Our loyalty programs and personalized promotions allow them to do just that. We continue to use our leading data science capabilities to develop unique customer insights and offer targeted promotions on the products we know they love.”
Yet, with Walmart’s massive lead over the No. 2 grocer, widely available rewards remain the exception rather than the norm.
Part of the disparity between the two countries may come down to the fact that inflation is even more dramatic across the pond than it is in the States. Research from the British Retail Consortium (BRC) found that, in December, food prices were up 13.3% year over year in the U.K. Meanwhile, data from the U.S. Bureau of Labor Statistics (BLS) revealed that, in the same period, food prices were up a lower 10% year over year.
Still, inflation is prompting grocers to work harder for consumer loyalty. With the exception of Walmart, which can rely on its huge scale to offer prices that competitors generally cannot match, most U.S. merchants must prove their worth, as rising prices prompt many shoppers to reevaluate their spending.
Research from the October edition of PYMNTS’ Consumer Inflation Sentiment study, “Consumer Inflation Sentiment: Consumers Buckle Down on Belt-Tightening,” which drew from a survey of more than 2,600 U.S. consumers in September, found that 58% are cutting down on nonessential grocery spending. Additionally, 47% are switching to cheaper merchants. Consequently, U.S. grocers could take a tip from how their British counterparts are responding to inflation, stepping up their digital rewards.