Low prices driving retail loyalty in recession
Downturn causes change in customer preferences
Walmart dominated the 2010 Loyalty Index from research company Colloquy, in results that reflect how the economic downturn is leading to low prices being the main driver of retail loyalty in the US.
Colloquy says that previous and other surveys have reflected different customer preferences such as reward levels.
The immediate predecessor to the 2010 edition (published in 2008) “showed that loyalty marketers worked within a significantly different retail landscape,” commented Colloquy Partner Kelly Hlavinka.
“Customer service, store environment, and a wide product selection were the underlying factors for customers’ self-professed loyalty (before). But our 2010 index proves that the Great Recession became the great equalizer,” said Hlavinka.
The 2010 index was built from a December 2009 survey of 3,500 US consumers in five regions: Northeast, Southeast, Midwest, Southwest and Northwest. Respondents were surveyed across four retail categories that included Grocery, Personal Care, Department Stores, and Mass Merchants.
“The 2010 Colloquy Retail Loyalty Index shows that customers claimed the highest loyalty to Walmart in many of the Grocery, Personal Care, and Department Store regional categories,” says the firm, adding that Costco had the highest customer loyalty ratings in three out of five Mass Merchant regional categories.
In the 2008 index, shoppers claimed the most loyalty to Costco, which ranked first in nine out of twenty regional and retail categories.
“With the recession acting like a second-stage booster rocket, Walmart has upended the status quo among its national retail peers by chewing into their last remaining frontier: customer-professed loyalty, at least for now,” Hlavinka said. “The glimmer of hope for retailers is that as jobless rates go down and consumer confidence returns, retailers may very well regain their footing; if they continue to work towards customer-centric solutions and more sustainable strategies rather than combating Walmart on low prices.”
While Walmart clearly dominated most retail categories, other chains – including Kroger and Walgreens – did climb up the loyalty chart or make their first appearances, edging out 2008 loyalty leaders. The highlights by category are:
Kroger, which has adopted a customer-centric focus and used a customer loyalty program through the recession, was the loyalty leader in the Midwest. In the Southeast, Publix moved up to first place from its second-place showing in 2008. In the Southwest, regional grocer H-E-B ranked first with similar messaging to Walmart and the continuation of a six-store rewards program in its Waco, Texas stores.
But the highly fragmented Grocery sector, where neither conventional nor discount grocers operate in every state, holds certain advantages for Walmart. Walmart’s message of low prices and value resonates with customers – and its ability to deliver on that promise by leveraging its broad distribution network translated to first-place consumer loyalty ratings for Walmart in the Northeast and Northwest, and third-place finishes in the Southeast, Southwest and the Midwest.
In the highly competitive Southeast region, Walgreens finished in a dead heat with Walmart for the top loyalty ranking, with CVS and Publix tied for second place. In a tight three-way race in the Midwest, Walgreens and CVS edged out Walmart, even though CVS hadn’t been among the top five in 2008.
Walmart easily won the Northwest, maintained the top spot in the Southwest, and finished ahead of CVS and Rite Aid in the Northeast.
The regional chains BJ’s Wholesale and Meijer replaced familiar names such as Sears, Sam’s Club and Big Lots for top loyalty rankings in the important Northeast and Midwest markets (respectively). Costco continued to rank first in all other US regions.
Walmart, meanwhile, came in second in all but the Southeast, where it ranked third behind Target, which itself rated third in the rest of the country.
Several chains that made the top three spot in Colloquy’s 2008 Retail Loyalty Index for department stores fell off the 2010 top-three list – among them J.C. Penney, Dillard’s and Dollar General. As in other retail categories, these names were replaced in large part by Walmart and Target.
Walmart ranked first in customer loyalty ratings in the Northeast and Midwest, and tied with Macy’s for the top spot in the Southwest. In the Southeast, Walmart took second to Target, and in the Northwest it followed top-spotter Costco.