Q&A: dunnhumby Talks Private Label Driving Loyalty at Groceryshop 2023
At Groceryshop 2023 in Las Vegas, the grocery world gathered to discuss the state of the industry.
One topic that came up frequently from the speakers was loyalty: How can retailers attract shoppers in an ever-fractured environment with a growing number of retailers to choose from?
At the show, Store Brands spoke with Matt O’Grady, president of Americas at customer data provider dunnhumby, to discuss private brands and how they can play a key role in driving loyalty among consumers.
Store Brands: dunnhumby often publishes reports on food inflation and how consumers are picking and choosing what to buy. How have things changed from the beginning of the pandemic to now in terms of inflation and how consumers are reacting?
Matt O’Grady: I think the overarching or probably most impactful statement about the impact of the pandemic on consumer behavior is everybody now knows they have multiple options. Everybody now knows that there's an e-commerce option, there is a pickup option and there is a delivery option.
And so that's number one. And number two, the desire to save money because of inflation is not restricted just to those that are really strapped. I mean, we published a study that you probably saw recently that said 36% of families are going without a meal or cutting back on food, and that was painful to read… but it's not just them that are looking to save money.
Insult pricing or really high inflationary pricing used to be a thing that you only thought of 20 years ago, you thought about that for convenience stores. Well, there's a reason why they were called convenience stores because they were convenient and they were more expensive. But to see that at a large grocery store and to see the inflation, that has forced savings at retail has become the critical thing regardless of socioeconomic background. So that's the second big change I think that has happened. So everybody wants to save money regardless of whether it's skipping a meal or not.
SB: Have you found that consumers will go to multiple locations to absolutely find the best deals they can on different items?
MO: The retailers that are doing the most successful are the ones that keep the consumers coming back to them. The retailers that are most successful are driving loyalty and driving repeat purchase and through multiple channels. And so the preference index for the most successful retailers have the most satisfied customers. However, not everybody has access to an H-E-B, so people will shop around if they're going to be able to save money.
SB: Of the retailers that are seeing visit growth (Walmart, Aldi, etc.), private label seems to be a common theme. What is the impact of private label on attracting shoppers?
MO: Private label is enormous for all of them. And it’s funny, Good & Gather is a $2 billion business. So yeah, it’s Target’s private label, but I think it becomes a brand unto itself over time. Private label allows you to offer better discounts, allows you to not have to worry about dealing with a vendor or CPG supplier, but you have to spend your own marketing dollars. It allows them [retailers] to create that loyalty because they're spending less money and hopefully they're getting a good quality product.
Private label is not the white label of 30 years ago. It is not that. The quality has improved dramatically and it's created a loyalty factor with customers. I think of it in itself as a brand, it just happens to be the store brand.
Trader Joe's is a perfect example. H-E-B is another example. Costco's another example…Sam's Club. I mean, there's four very different retailers that have very different experiences, that have all driven value for customers with private label.
SB: Do you think that this kind of hunt for value is going to continue for the foreseeable future? And how should retailers view their private label assortments with that in mind?
MO: I think the hunt for value will continue… it [inflation] has come down a little bit, but not immensely. [Salary] increases in the U.S. are certainly not in line with food price increases. We're not Chile or Brazil where there's a mandate that you have to raise salaries to meet the inflation factor. We do not have that here. So people will continue to hunt for value.
Private label will be successful not only because of inflation and the desire to save, but it also drives loyalty and it drives preference. So it's had unexpected benefits that maybe they didn't even know, but because it's really become an in-store brand that they trust. And when a retailer has such a great reputation like an H-E-B or Trader Joe’s, they're not ashamed of having that product visible in their home. That's like, ‘yeah, I got that at Trader Joe's. That chocolate came from Trader Joe’s.’ That's great and acceptable. So it's a completely different experience from what private label was even 10 years ago.
It’s important to note that they [retailers] are going to do well (with private label) in dairy, they’re going to do well in frozen foods, they’re going to do well in health and beauty aids, things like bandaids. But they’re not going to do well with alcoholic beverages. There are certain categories where they’re not going to do well with.
SB: Outside of private brands, how else can retailers drive loyalty?
MO: It's the customer experience, the personalized offers that drive loyalty. So if they're sending me something, I think some of the super regionals, I think Meijer has been brilliant about this, and they're sending out their personalized offer to their best customers on products that they buy.
That is genius because it drives them back. They're getting a discount on something they know they're going to buy, and while they're in the store, they end up buying something else. So personalized offers drive loyalty. Look at the data that's in front of you. And I think the retailers over the past five years have done a really good job at that. And now the world has totally gotten more complicated for them because of retail media.