How consumers’ forensic focus on prices is driving cross-shopping
Australia’s leading supermarkets, Coles and Woolworths, delivered their third-quarter results to shareholders this week along with new consumer insights.
Both retailers reported that the current economic environment has challenged consumers’ discretionary spending and that households have evolved their buying habits to seek out value.
This includes cross-shopping, where consumers actively purchase their groceries from multiple stores.
It’s not a new phenomenon for retailers but Coles and Woolworths are witnessing an uptick as grocery shopping becomes less habitual with consumers researching products extensively before heading to their local store.
A new wave of cross-buying
On a call with investors on Tuesday, Coles CEO Leah Weckert said, “There’s definitely a lot of cross-shopping that’s occurring to help people to meet their budget.”
Woolworths’ CEO Brad Banducci echoed that sentiment, noting that customers have adjusted their budgets and spending in the cost-of-living crisis.
“Customers are looking for more ways to save, are cross-shopping more, buying more own brand and buying more product on promotion,” said Banducci.
The rise of consumer cross-shopping is top of mind for supermarkets as they strategise how to remain competitive.
“We have found that customers are willing to drive further in the current economic environment to access value – we’ve actually just done a fairly large piece of survey work, which actually shows that Australians shop on average between two to three supermarkets, then different supermarket brands,” explained Weckert.
In addition to Coles, Woolworths and IGA – independent grocers, Bunnings and Amazon are benefitting from the cross-buying trend and seeing their market share increase.
Craig Flanders, CEO of advertising agency Spinach, believes the cross-shopping trend is here to stay for the foreseeable future.
“We’ve known there has always been a cohort of shoppers that shop two or more brands of supermarkets, we’ve seen this grow exponentially over the last year as more shoppers chase value for the stretched dollar – this growth will continue while the commentary about the financial squeeze continues,” Flanders told Inside Retail.
However, cross-shopping is not the only consumer buying behaviour that is top of mind for supermarkets; Banducci also noted the frequency of store visits in Woolworths’ Q3 report.
“Customers shop our stores multiple times a week, are budget savvy and grocery price increases are very visible to them,” he said.
“This, together with customers feeling that they have some control over their food and grocery budget, brings grocery price increases into sharp focus.”
The digitisation of grocery shopping
The purpose of supermarket e-commerce platforms now goes well beyond the value proposition of convenient delivery with consumers using the sites and apps to find the most competitive deal.
“Cross-shopping is alive and well in Australia, and more customers are using digital channels to help them cross-shop as well,” said Weckert.
“Interestingly, 20 per cent of customers will research the products they want to buy online before they go and then purchase it in a physical store – and we are actively making it more convenient for them to do this,” said Weckert.
According to Coles’ findings, customers are more willing to drive further and shop across multiple retailers to manage their budgets based on their independent online research.
“In fact, almost one-quarter of our physical store sales can now be linked to customers starting their research, through the Coles app or website,” she added.
This is motivating supermarket giants Coles and Woolworths to keep providing value to customers with promotions, specials and offers.
Consumers are adjusting their buying habits to stretch their dollars even further, and after low shelf prices, supermarket promotions seem to be the biggest attraction.
“I actually think it starts out as chasing the best deal to drive their decreasing spending dollars further, as non-discretionary expenses rise,” said Flanders.
“The longer the prices stay up on the shelf, the deeper the pain, which is when people look a bit more forensically as the rising cost inputs supposedly driving the stubbornly high prices,” he concluded.
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