How 2020 shifts in customer behaviour could influence 2021 trends

Dr. Hugh Barker, Price And Promotions Director - Intelligent Shopper Solutions

Due to COVID and its associated impacts, there were undoubtedly huge changes in customers’ grocery shopping behaviours in 2020. Let’s consider three of the most significant shifts and how they interacted – then look ahead into 2021 to see how they might continue to play out.

  1. Shopping mission change
  2. Price sensitivity
  3. Internet shopping

Shopping mission change

We can clearly see the key change in shopping missions during 2020 in the chart below, which features averaged and anonymised data across multiple ISS clients in Europe and the USA.

Our clients tend to be market-leading traditional/mainstream grocery retailers, operating the larger stores that customers would instinctively turn to for a ‘one-stop’ full weekly shop. Along with many grocery retailers, they saw strong sales growth in 2020.

The growth was driven almost entirely by basket size (Units Per Visit in the chart), offset in part by declines in both customer counts and visit frequency (Visits Per Customer).

The changes can be largely attributed to three factors:

  1. Internet shopping (see below) has grown in importance, with typically larger basket sizes.
  2. Closure of/reduction in hospitality industries has meant many more meal occasions at home.
  3. Customers are consolidating shopping missions into fewer, larger occasions, avoiding the ‘risk’ of visiting stores during the pandemic.

We’ve also seen growth in Price Per Unit (above). This is driven partly by genuine inflation but more often by mix change, as customers put larger pack sizes in their baskets, reflecting their reduced shopping frequency.

What’s also noticeable is that these changes have become well established during 2020, even while different markets have come in and out of lockdown or other restrictions.

Price sensitivity

Everything from the common sense your grandmother taught you, through to academic research, says that more customers will be more price sensitive during a time of lower economic growth or recession. And that is exactly the situation in many countries right now.

The behaviours of more price-sensitive grocery shoppers are well understood:

  • Preference for (budget) private brand options over national/manufacturer brands
  • Higher promotional participation
  • Shopping at more fascias, seeking value

We can clearly see the first two behaviours in internal data from many of our clients. The latter requires a reading of market-wide data. Following the financial turmoil of 2008, as we headed into troubled economic times, there was a huge shift in customer behaviour. Almost overnight (in customer behaviour terms) millions upon millions of midmarket customers started shopping like price-sensitive customers, doubling the average number of different grocery retailers visited each week.

During the spate of price guarantee schemes in the UK in recent years, store manager feedback was that shoppers on a budget would tell them frankly, “It’s all well and good comparing the total basket cost, but I know that product X is cheaper across the road”.

Some readers might feel a distinct lack of resonance with the above. There may well be less price sensitivity among people who’ve been lucky enough to stay employed (often with reduced commuting costs) and with forcibly reduced opportunities to spend on travel, hospitality and other service industries. For instance, we certainly see more indulgent items creeping into baskets to compensate for a lack of eating out.

So, in some senses, divergence in price sensitivity may be temporary

This is an interesting factor that’ll play out in 2021. But make no mistake, a lot more customers are a lot more price sensitive right now.

Internet shopping | Grocery home shopping

Online shopping saw a huge growth in demand in 2020, due to shielding customers staying at home and others simply reluctant to ‘risk’ a store visit.

Studies in the USA suggest that online penetration of the grocery shopping market achieved the equivalent of five years pre-pandemic growth in the space of just a few months in 2020. This growth is set to continue as customer acceptance combines with retailer investment and expertise in the channel.

Are we looking at contradicting trends?

The sharp-eyed reader will have spotted the glaring contradiction in the three preceding trends… Fewer, larger shopping occasions (and online shopping growth very much fits this description) is at odds with the practice of price-sensitive shoppers who shop multiple fascias as they seek value.

The evidence suggests this aspect of price sensitive behaviour in particular was dampened in 2020 by the other key trends at work.

How has Covid affected discounters?

One topic that’s been near the top of many grocers’ C-suite agenda in recent years is the continued growth of discounters such as Aldi. So what does the pandemic mean for them?

Clearly, discounters have benefited from increased price sensitivity. However, they typically have a weaker internet offering and smaller store sizes which customers may not associate with a single-trip full shop.

February 2021 was the first month in a decade that Aldi and Lidl both lost UK market share, due to erosion of their shares over several months. Perhaps it’s telling that Aldi ran UK TV adverts in 2020 extolling the benefits of doing a full weekly shop there… Join the dots!

Looking ahead: What trends could we see in grocery retail in 2021?

Price sensitivity will be high for some time. But how will these factors and trends interact in 2021, and beyond?

It’ll be fascinating to watch things play out as vaccine roll-outs remove some of the fear and risk of shopping in-store. Shopping behaviours may well not bounce back – indeed, commentators don’t expect the internet trend to reverse – so where will the new equilibrium be? Will we see even more polarisation around price sensitivity?

However, as customer behaviours continue to evolve, the fundamentals do not

It’s more crucial than ever to measure and understand customer behaviour. Then retailers need to translate that insight into a simple, accessible form that helps decision-makers steer their businesses through the turbulent waters ahead.

Like to find out more?

If you would like to discuss any of the topics raised in the article above, please contact us here.