How supermarkets are winning hearts and minds
It could be said that prior to coronavirus, there wasn’t a lot of love or loyalty for Australia’s major supermarkets. Now that seems to be changing.
It’s no secret that many retailers are struggling right now and are wondering whether to reopen their bricks-and-mortar stores. But given that they are seen as essential, supermarkets are among the few stores that have remained steadfastly open, quickly adapting to change in the face of toilet paper stockpiling, changing social distancing measures and varying customer needs.
And it seems that consumer sentiment may be changing – and perhaps even brand loyalty is on the rise.
Loyalty as deep as your wallet
No, that little plastic card in your wallet doesn’t measure loyalty, it simply measures how frequently you visit a supermarket and what you buy – at best, “behavioural loyalty”. Research firms like Roy Morgan regularly illustrate that more than 90 per cent of average grocery buyers will visit at least three different supermarket brands every fortnight. Shoppers chase specials, and are willing to sacrifice loyalty points to save on their weekly grocery bill.
In contrast, “attitudinal loyalty” is more than just counting transactions. Attitude-based loyalty is a deeply held commitment to consistently repurchase from a preferred supermarket. Customers with highly developed attitudinal loyalty will ignore other retailers or brands, despite situational influences like location and marketing efforts. Attitudinal loyalty can create “brand-stickiness”, “brand love” and encourage positive word-of-mouth advertising and recommendations. So, how does a supermarket build attitudinal loyalty?
Caring for the customer
Building strong relationships with customers is essential to the long-term success of any retail organisation, especially when the service provided takes place over an extended duration. Customers’ perceptions of the strength and longevity of the connection are critical to building and maintaining strong, durable and mutually beneficial customer-retailer relationships.
In pursuit of strong relationships with their customers, supermarkets invest substantial financial and non-financial resources. Evidence suggests that customers’ perceptions of the financial resources alone do not adequately predict their perceptions of the connection they share with the supermarket. It seems that a focus on just the supermarket’s economic investments – weekly specials, collectibles and the like – overlooks the “softer” attributes shoppers consider when forming relationships.
Increased competition and low switching costs in the FMCG sector, combined with decreased differentiation, have led to weak value propositions and positional advantages. Accordingly, supermarkets are doing more than simply offering discounts and specials, they are going over and above to demonstrate they really care.
In times of uncertainty, customers seek normality, regularity and structure. Supermarkets have historically offered habitual, routine shopping experiences that provide this sense of normality and structure. Shoppers are also growing aware of how supermarkets are demonstrating corporate social responsibility, such as how they are treating their stakeholders, including vulnerable customers, suppliers and staff. Supermarkets are now competing not just for shopper’s dollars, but for their hearts and minds.
Response to restrictions
As the COVID-19 crisis began to unfold, and panic buying ensued, all Australian supermarkets responded. While Woolworths has undoubtedly led the way, Coles, Aldi and IGA are all committed to supporting their customers during these unprecedented times. All have rolled out new procedures, such as rotating staff every two hours to ensure face-to-face interactions are limited, asking customers to pack their own bags, having store greeters conspicuously wipe down baskets and trolleys, closing some self-serve checkouts to provide additional space, increasing tap-and-go limits, and increased reminder signage and prompts across the store, including floor decals. These procedures instil confidence in shoppers.
With shelves stripped bare of toilet paper, rice and pasta on Friday, March 13, Woolworths announced it had begun working with Meals on Wheels NSW to deliver toilet paper and other essentials directly to the elderly in the community. Aldi, which has consistently maintained relationships with food charities, then donated an additional $450,000 to OzHarvest and Foodbank, while also partnering with government agencies to coordinate the distribution of food relief among various states. Coles is also donating extra food and groceries (to the retail value of $1 million a week) to help Australians who are facing hardship as a result of coronavirus. All supermarkets then imposed quantity restrictions on most items to ensure shoppers could access wanted products in a fair and equitable manner.
When concerns about job losses and lost wages began to surface, Woolworths immediately announced it would commit to paying its 55,000 casual workers in accordance with their upcoming two-week rosters for any shifts missed if directed to isolate by the Department of Health. For full- and part-time workers, Woolworths committed to topping up leave for a maximum of two weeks if the worker has already used up their personal leave. The group announced it would seek to hire up to 20,000 people across its supermarkets, e-commerce, supply chain and drinks businesses, including up to 5000 short-term workers from Qantas who had recently been stood down. Similarly, Coles and Aldi also found work for thousands of new recruits.
A couple of days later, a small IGA in Altona, Victoria, became the first supermarket to open an hour earlier, giving seniors and disability card holders exclusive access to the store. A day later, Woolworths followed suit; Coles announced its “shopping hour” would start on March 18. By the end of the month, Woolworths had expanded its community hour to include emergency services and healthcare workers. To make it easier to shop, most supermarkets increased their trading hours.
On March 24, Woolworths moved to install protective plexiglass screens at the manned checkouts of each store across Australia. Aldi followed suit, and Coles continues to trial screens in selected supermarkets and liquor stores, with the aim to roll them out to all supermarkets by the end of April.
On March 26, Woolworths announced it would be offering rental relief and employment opportunities to help retail tenants in its shopping centres and other retail assets impacted by the pandemic. Aldi similarly began engaging with dozens of its commercial tenants in order to provide rental relief, and Coles has committed to assessing any requests on a case-by-case basis.
On March 31, the payment terms for eligible small suppliers to Woolworths were aligned across the entire group (including Goods Not For Resale, BIG W, Endeavour Group and New Zealand), meaning payments to suppliers would not exceed 14 days. Coles has had similar 14-day time frames for a large part of their small suppliers and have been since mid-2017.
In stark contrast, Solomon Lew’s Premier Investments, which owns brands such as Smiggle, Peter Alexander and Just Jeans, notified suppliers it would now impose a 180-day payment term on all current and future orders.
And this Easter, Coles donated almost 200,000 hot cross buns to SecondBite, as well as hot cross buns and Easter eggs to patients and health workers in children’s hospitals around Australia and included some Easter treats for no added charge into their Coles Community Boxes. Woolworths similarly has decided to donate 20,000 Easter Eggs and 20,000 Easter Bunnies to a handful of hospitals across Australia.
So, while shoppers are often quick to criticise our big supermarket brands and, in most cases, lack attitudinal loyalty, it’s evident that in a time of crisis, these big organisations step up.
While our major supermarkets will continue to compete on range, quality and price, as Australia moves through these unprecedented times, it is guaranteed many shoppers are already beginning to form strong bonds and a deeply held commitment to reciprocate after the COVID-19 crisis passes. This short-term pain will lead to long-term gain for many of our supermarkets.
Gary Mortimer is a professor of marketing at the Queensland University of Technology.