The obvious reason for the success of the discount retail channel, particularly deep discount grocers, is that the prices appeal to shoppers. While that is an important factor, it is not the only one. Beyond price and convenience, these grocers are showing themselves to be smart about understanding and connecting with their target audience. They are appealing to shoppers through a variety of effective strategies that can be modeled by other retailers.
Reasons Behind the Growth of Discount Grocers
Discount grocers are popular among shoppers, and sales at these stores are expected to rise from $74.8 billion in 2016 to $101.2 billion in 2021. These stores already show their dominance among grocery retailers. The National Retail Federation (NRF) found that 89% of U.S. consumers patronize a variety of discount retailers. More specifically, 50% of them shop at discount grocers such as Aldi or Lidl, and 43% visit this type of grocer every week.
Many of the shoppers visiting deep discount grocers are in Generation Z. The NRF data found that 52% of Gen Z shoppers visit these stores, and 44% do so on a weekly basis. This type of shopping is also common amongst Millennials. There are a variety of reasons shoppers prefer these stores over others. As could be expected, price is the main factor, with 67% of those surveyed giving the reason that “it’s cheaper or more cost-effective” and 65% saying that they want “to find a deal.”
Nonetheless, other motivations bring shoppers to these stores as well. In the same survey, 40% gave the reason of variety or selection. It also comes down to a store’s ability to cater to their needs and wants. These retailers have understood the desire for having convenience without sacrificing quality. Supermarket News explains that discount grocers are showing success by featuring store layouts that are simple to navigate, providing e-commerce options and offering fresh and high-level products. Shoppers are responding to these attributes by steadily and increasingly visiting these stores.
4 Additional Ways Discount Grocers Attract Shoppers
Deep discount grocers are leading the charge in attracting – and retaining – shoppers. They follow certain strategies that help them drive foot traffic and store loyalty. Other grocery retailers can follow these examples to better serve shoppers:
1. A Supermarket Feel
Shoppers want some of the same modern and convenient features of a supermarket while receiving the benefits of a discount grocer. These retailers can cater to that desire by creating a supermarket-type feel.
Lidl provides a strong example on this front because its stores include features such as fresh produce and an on-site bakery, which many shoppers expect from supermarkets. Since the retailer currently only uses 55% of their 36,000-square-foot stores, there’s an opportunity to add even more SKUs as they learn what shoppers want and expect. A wider selection can reinforce the supermarket feel.
2. Private Label
Much of the reason deep discount grocers are able to keep costs low is through private-label, or store-brand, goods. Shoppers don’t seem to mind purchasing these products and, in many cases, actually seek them out. A recent report found that 85% of shoppers trust private labels at least as much as national brands, and 84% find the quality at least as good. Furthermore, 53% of shoppers shop at a store specifically for its private brands.
Private labels provide these retailers with a unique way of converting shoppers from other store brands to theirs. These goods are not just cheaper, they don’t lack marketing value. Many come with specific features that shoppers want. For example, Lidl and Aldi provide organic, certified, vegetarian and other specialty products through their private labels, all at a lower cost. They also take great measures to provide the highest quality with these brands.
These private goods make up the majority of the products offered by deep discount grocers. In fact, compared to other major retail channels, they have more than twice the store-brand share of dollars, according to Nielsen. At Aldi, for example, 90% of its products are private label.
3. Omni-Channel Experiences
Omni-channel shopping gives shoppers the flexibility to shop when and how they want to. They also have options to combine channels, such as shopping online and then picking up the items at the physical store. The objective is to make shopping at these stores more convenient for shoppers, which will encourage repeat visits.
There are many examples of how an omni-channel experience can work. Aldi has partnered with Instacart to offer online grocery delivery to its shoppers. The service is now available in 75 markets across 35 states, including cities like San Diego, New York City, Miami, Raleigh and Minneapolis. Another example is Sprouts, which offered online pickup and delivery of meats, catered trays and full meals during the holiday season.
4. Products Beyond Food
Shoppers don’t only go to deep discount grocers for the food. They can also enjoy a treasure hunt experience with other types of goods. While shopping for food, they are able to take advantage of deals on home items, toiletries, health and beauty items, toys and even fashion items such as Lidl’s Heidi Klum fashion line.
In addition, many of these stores feature general merchandise special buys that run every week to drive new excitement and expand offerings for shoppers. Aldi, for example, introduces unique and interesting items each week. These premium food and household products are typically themed and tied to a season and available for a limited time, thus encouraging shoppers to come back to see what’s new.
Deep discount grocers find much success by providing low prices on quality goods and focusing on convenience. Yet other strategies have helped them attract repeat shoppers and become a staple for many. These retailers are constantly growing, largely because they can meet shoppers’ needs and expectations with private-label goods, a supermarket feel, a broad variety of products and multi-channel shopping options. Take the examples of successful deep discount grocers and implement these strategies to find similar success in your retailer.