lidl shopper bag

The cost of living crisis has turned grocery shopping into a discounter’s market. Lidl reported £10m growth in January. Meanwhile, Aldi is pressing ahead with rapid expansion. This has put pressure on the supermarkets to respond. In recent weeks, the likes of Waitrose, M&S and Morrisons have invested huge sums in reducing the prices of own-label items.

But is this enough? While cutting prices is often a tactical move to win back market share, this may also be considered a price reset in the current inflationary environment. Furthermore, retailers and brands cannot differentiate on price alone. It’s more important than ever to understand consumers, become agile and adapt to them. This means placing more focus on other ways to be distinct.

For example, consumers today are increasingly conscious of issues such as sustainability and social responsibility. At NIQ, we found 76% of global shoppers are calling out for companies to take the initiative to reduce their environmental footprint, while 18% of Brits surveyed say sustainability is an important priority in their daily lives. A reduction in retail food waste and plastic packaging are already top of mind with many grocery businesses. However, it’s crucial to help shoppers along their own journey to be more sustainable too, such as via incentivised options and clearer labelling of sustainable options.

Not every shopper is the same, and polarised shoppers mean it’s important to better understand your consumer and what categories they decide to spend more or less on. In tough times, many consumers will naturally be looking to trade down to manage their spend. However, there will also be occasions when they decide to trade up, such as for a permissible treat. For those looking to pay less for more, focus on what added value can be delivered for your consumer – whether that is through the price and size of value pack options or through private label tiers.

What’s more, delivering a meaningful customer experience is now becoming table stakes for retailers and brands. NIQ’s recent Consumer Outlook report highlights 34% of British shoppers plan to shop at stores with loyalty points to manage their expenses. However, these loyalty schemes must be personalised: offers and product recommendations should be relevant to individual shoppers and their needs. Educating and inspiring shoppers along their path to purchase can also encourage shoppers to interact with and explore different brands, and ultimately provide them with purchasing confidence.

The cost of living crisis is no doubt going to create enormous pressure on consumers when it comes to grocery spend. While it seems a logical plan to focus on a price crunch strategy, customer loyalty will not be won on this alone. Retail businesses must face the price pressures by balancing a value proposition with other ways to be distinct, while remaining consistent to their brand. This means a laser focus on understanding different consumers and their needs, from a sharper understanding of their own values such as sustainability, through to providing them with the confidence and reassurance to make an informed purchase decision.

Retailers and suppliers face more uncertainty in 2023, but those that are agile and adapt to consumers’ changing habits will be the ones that stand out in a crowded market.