Grocers must get smarter to fight shopping basket cuts

Bill_Portlock1Every morning the news headlines are enough to make you fold up your paper, switch off your TV or close your laptop. Winter gas bill estimates increase daily; mortgage repayments are going through the roof; and the weekly shop is getting more and more expensive for cash-strapped consumers.

The inflationary pressure on food prices in particular has many supermarket bosses in a sweat. The Consumer Prices Index calculated pricing was almost 10% higher in June 2022 compared to the same month last year.

All of which means grocers have a great need to understand how the cost of living crisis is already affecting consumers, and how their shoppers’ behaviour might change as financial problems progress.

Although prices are rising across the board for all of us, not all price rises are equal – not least in terms of how they impact the individual. To investigate the differing impact of inflation, we’ve conducted extensive research investigating people’s relationship with the cost of living. Combining a large survey with clustering algorithms we have launched StrappedUK: the UK’s only cost of living segmentation.

 Supermarkets starting to be squeezed
Each of the 14 StrappedUK segments has unique characteristics with differing levels of stress brought about by the cost of living crisis and differing attitudes towards taking action to save money.

Scores are used to describe the segments; for example, each segment has an Increase Costs Score and Stress Score. The former is a metric illustrating the extent to which costs have increased for this segment and the latter is a measure of the ability of households to pay for everyday things. Therefore, a household can have a high Increase Costs score while also having a low Stress Score since – due to their wealth and or money-saving mentality – they are still able to pay the bills.

We have used this data analysis to understand the profiles of shoppers at the UK’s biggest supermarkets. People living within half a mile of each supermarket have been used as a proxy for individuals shopping at each supermarket. This produces some overlaps whereby one individual may well belong in the Sainsbury’s, Tesco and Aldi group if they live within the radius of them all. The proxy is useful, since people tend to shop at supermarkets that are close by.

This analytical exercise derived interesting insights, allowing us to compare and contrast the profiles of different supermarket shoppers. Supermarkets tend to attract different customer profiles and this was reflected in the analysis. The strong correlation between levels of stress/ability to pay and wealth was a key feature.

Asda and Iceland are over-represented by StrappedUK segments with the highest Stress scores. For example, Asda shoppers had the highest penetration of the Eat Now Pay Later segment. This group are suffering the consequences of inflation eating into their household budgets. They have a flawed approach towards taking action to mitigate rising prices. They don’t want to save for a rainy day, preferring to consume today and think about the cost implications tomorrow. This segment reveals high levels of deprivation; low levels of disposable income; high levels of universal credit; and low credit scores.

UK consumers switching shopping habits
The findings for other major supermarkets are equally interesting. Lidl shoppers, for instance, have the highest index for Fuel Fatalism. Individuals in the segment live in some of the most deprived areas of the UK. The majority do not own their homes. Levels of food bank usage are very high among this segment, especially since food inflation is an issue due to the already high prices at local convenience stores. What makes Fuel Fatalism’s situation especially precarious is their fatalistic acquiescence to their financial predicament. Despite the massive increase in costs they face they are not engaging in careful financial management.

Meanwhile, Waitrose shoppers are more than three times as likely as other shoppers to belong to the Can Pay Won’t Pay segment. Representing just above 2% of UK this is the smallest of all Strapped segments. They have the financial security to afford the increase in prices and consequently have a very low Stress level. Make no mistake, though, this segment are facing high costs. They are likely to live in pricy city flats and have expensive habits around having the highest Increase Costs Score. Their low Stress Score is indicative of their financial standing and adaptability to engage in money-saving habits.

An interesting feature of the profile of Sainsbury’s customers is their proactive stance regarding the cost of living. They have a large amount of Batch Cookers. Can Pay Won’t Pay and Batch Cookers are both segments making significant changes to their spending habits to save money. Batch Cookers enjoy a very low Stress level and a large part of this is their unwillingness to be taken for a ride. People in this segment are constantly on the lookout for lifestyle changes that will save pennies.

Tesco shoppers are over-represented by Learning to Lidl. This group is a small segment that is skewed towards a slightly younger demographic. They are experiencing moderate Stress levels. Their younger profile means a lot have recently purchased properties with large mortgages, meaning that interest rate hikes will hurt. Consequently, many in this group have to turn to discount retailers like Lidl and Aldi for the first time in their lives.

Our investigation of supermarket profiles demonstrates the differing ways various groups have been affected by the increases in the price of everyday items. With little sign of inflation being brought under control, these trends are likely to have a profound influence on how people shop and engage with businesses.

Understanding the state of play as the cost of living crisis threatens to deepen is the best way to ensure marketing campaigns land well with different groups and shoppers keep coming back for more.

Bill Portlock is founder and CEO of Metrix Data Science

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