Supermarkets have always been notoriously competitive, with each company using its own unique methods to draw in shoppers. But as the marketplace becomes even more crowded, shoppers are gravitating towards those that can offer the lowest prices.
There are numerous signs that the industry is shifting in accordance with these changing consumer demands. For example, Tesco is looking to form its own discount chain as it comes under increased pressure from cost-cutting German giants, while Aldi (one such discount retailer) recently claimed the top spot in an annual UK supermarket satisfaction survey for the very first time.
Commenting on the Aldi story, Alex Neill, managing director of Which? Home products and services, said: “With food costs rising it seems as though shoppers have felt the pinch and are voting with their feet and wallets.”
However, the situation is more complex than the simple fact that shoppers are prioritising cost over anything else. More than this, they are realising that low cost does not always equal low quality – in fact, the truth can often be quite the opposite.
Many of us will have seen or read blind taste tests in which the budget supermarkets like Lidl and Aldi come out on top. These same retailers invest huge amounts of money and resources into championing high-quality, local goods and produce – a move that seems to have worked wonders.
This winning combination of low cost and high quality has competitors stumped. How on earth are they supposed to go shoulder-to-shoulder with these budget retailers when they are selling goods of a similar quality for a much higher cost?
The truth is that there is no universal remedy to this problem. But one thing that can turn the fortunes of retailers around is reassessing the ways in which they utilise their customer data.
Despite the wealth of information available to retailers nowadays, many of them are still relying on discounts offered on a one-to-many basis, which are relatively ineffective and fail to take the unique habits and behaviours of individual shoppers into account – a vital aspect of modern retailing.
Instead, all retailers need to be considering what customer information they have at their disposal and how it can be used to deliver a customer experience that keeps them coming back (all while remaining compliant with the likes of the General Data Protection Regulation, of course).
This effective utilisation of customer data can serve many purposes. It’s important to use it not just to reward loyal customers for their frequent and continued patronage, but also to encourage those that are lapsing to increase or maintain their spend/loyalty through personalised offers.
Despite the potential afforded through personalised offers, they are not currently being offered on a widespread scale to capitalise on the price war between supermarkets. The reasons for this are unclear: perhaps it’s due to a lack of budget, a sense of trepidation around implementing the technology into existing systems, or maybe simply a lack of awareness around the benefits on offer.
What is clear, however, is that personalised offers can be an effective secret weapon in maintaining loyalty among your entire customer base in a challenging retail environment. The sooner these retailers take the plunge and embrace personalisation, the more of a competitive advantage these supermarkets will be able to enjoy.