Consumers are having a visceral, belt-tightening reaction to economic uncertainty. This May, inflation-adjusted spending dropped 0.4%, but fortunately, jobless claims have only risen slightly. This proves that the most pressing concern for customers isn’t losing income, but the dollars they spend aren’t going nearly as far as they did before.
When profits dip, your natural first reaction is to cut costs wherever possible or pad your margins with some price hikes you hope won’t scare customers away. But these traditional, penny-pinching strategies are not designed with long-term goals in mind. Instead, they leave your once loyal shoppers thoroughly underwhelmed and more likely to look elsewhere.
As bold as it seems, the key is to focus on growth. Rather than thinking about it in terms of big investments and burning through resources, consider how you can achieve growth through a tactical, cost-savvy approach — bucking those traditional, broad-based strategies by avoiding upfront costs and shrinking margins. Let’s dive in and see how you can save both your grocery store sales and your loyal customers (regardless of the economic climate).
Lower consumer spending power impacts the types and quantities of products shoppers buy. When consumers spend the same amount of money at your stores but get less in return, typical grocery buying behavior shifts, and consumers look for better prices at value stores. While grocers juggle compounding supply chain issues and fleeing consumers, today’s strategies of offering blanket promotions to keep consumers in-store leave grocers unable to maintain current margins or prevent loss of market share ahead of this potential economic downturn.
Read on for a few common strategies you and your competitors may have already tried or are actively considering.
While establishing new stores might attract a broader customer base, the capital-intensive nature of expansion can outweigh its benefits. Moreover, expanding your reach without improving sales performance per location is not a sustainable growth strategy.
While critical to any growth strategy, large advertising campaigns during economic downturns can be cost-prohibitive and lack clear return on investment, making ascertaining a reliable growth strategy challenging.
The digital boom has captured millions' hearts and minds, and popular apps like Instacart and Uber Eats saw some big returns throughout the pandemic. Whether you had initially planned to or not, your stores probably embraced digital expansion through marketplace partnerships or your own apps due to COVID-19.
While a strong digital presence is crucial, it's important to note that online sales can often result in reduced profits per product sold, negating cost-saving efforts.
Inflation will force price increases along the way, but assuming consumers will go along with hikes without hesitation is a flawed strategy.
One of the goals throughout this recession-proofing process is to keep long-time customers from turning away. While inflation may necessitate price increases, passing these costs onto consumers can alienate loyal customers and drive them to explore other options.
While effective in retaining existing customers, traditional loyalty programs might not attract new consumers. Without clear measurement of each incentive's impact, they may even lead to profit cannibalization.
Rather than focusing on broad-based strategies, adopt a targeted approach to addressing key issues affecting grocery retailers during uncertain financial times. This three-tier approach involves capturing new customers, increasing shoppers' trip frequency, and converting sporadic shoppers into loyal customers.
The key is focusing on a three-tier approach:
These three levels pinpoint the critical buyer behaviors that profitably drive your grocery store sales and keep the dollars coming in. Within each are actionable strategies to increase your likelihood for success with attributable and profitable investments that will grow your business.
When applied together, these winning strategies are essential to powering your stores for immediate and long-term sales growth. The key is to put these tactics into practice with the right tools and platforms that set you up for success.
Your solutions may help some of these important factors, but likely won’t address them. They also come at a high cost that may compromise your bottom line. In a high-margin environment, an expensive, incomplete approach is risky.
With a comprehensive tool like Upside, you can tap into a digital marketplace with a proven track record for influencing buying behavior, putting grocers in front of hundreds of thousands of customers daily. The marketplace helps you acquire new shoppers and increase trip frequency, plus money spent per visit.
To make that happen, Upside uses transaction data to generate personalized promotions at scale without needing POS integration, IT input, or even staff training. On average, 20% to 25% of customers who find retailers through Upside are new to those businesses. Through performance-based pricing at no upfront cost, grocers only pay a portion of the attributable, proven profit that Upside brings in.
Most importantly, Upside complements existing strategies without hurting margins or cannibalizing your own rewards programs. The platform works harmoniously with and elevates each aspect of your system.
Using a simplified shopping process, the app’s massive customer base, and personalized cash-back promotions, Schnucks saw strong results in a matter of months:
The Upside platform can help you strategize for long-term growth by both increasing existing customers’ shopping frequency and drawing in new shoppers to maximize your overall grocery store sales.
Economic downturns are not kind to businesses or consumers, but that doesn’t mean you’re defenseless against them.
Remember, the goal is to break out of instinctive cost-cutting habits to find more tactical ways to drive grocery store sales. We’ve discussed helpful strategies when the economy tanks, but these strategies can benefit your stores indefinitely. While investing in growth (instead of cutting costs) might be a fundamentally different approach than what your business is used to, it’s business-critical to think about your shoppers through a personalized lens and harness new digital marketplaces.
However you strategize to protect your store from economic downturns, remember the forward
thinking it takes to survive economic waves. By taking an innovative approach, you’ll come out on the other side stronger than before, with loyal, happy consumers and proven strategies to grow your business into the future.
Contact our team today for a personalized consultation on how Upside's digital marketplace can help you grow your business.
To celebrate and contemplate the achievement of reaching a significant milestone of $1 billion in new, incremental profit for retailers, we spoke with Alex Kinnier, the co-founder and CEO of Upside.
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