Costco Is Canada's Top Grocer, According to Dunnhumby
Costco is Canada's top grocery retailer, according to a new study from Dunnhumby.
The consumer data firm's first Canadian Retailer Preference Index (RPI) study ranked retailers by combining their financial results with customer perceptions.
Metro-owned discounter Super C came in second place, followed by Loblaw Co. Ltd.’s Maxi and Walmart as the nation’s top grocers. The retailers in the first tercile overall (ranked 1-9) consist entirely of banners in club, discount and superstore formats, and grew grocery revenue the most over the past five years.
Retailers with clear and strong customer value propositions — indicated by higher RPI rankings — grew up to 1.5 times faster over the long term and three times faster in the past year than retailers with lower survey rankings.
Conventional grocers, comprising almost 40% of the Canadian market, represent the second and third terciles.
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"The impact of (the) customer’s behavioral shift due to inflation are clear to see across the Canadian market," Chris Thomson, Dunnhumby's senior vice president in Canada and the U.S, said in a news release. "For retailers to succeed over the next 12 months, they need to be clear on how their value proposition meets and connects to customers’ evolved needs in a way which matters to them. Change leads to opportunities, and this change in customer behavior presents opportunities for all Canadian grocers, as long as they are also able to change with their customers."
For the study, Dunnhumby analyzed customer and financial data for the 28 largest conventional, discount, superstore and club banners in Canada, which account for 97% of the market share in these formats. The financial data analyzed included market share as well as near-term and long-term sales growth. The customer perception data comes from the firm’s survey of 6,000 Canadian grocery shoppers.
The five drivers of customer value proposition are:
1) price, promotions, and rewards,
2) quality,
3) digital,
4) speed and convenience, and
5) operations.
Other key findings from the study include:
- "Saving customers money" is the top pillar for stronger, long-term market success across Canada. Forty-four percent of a retailer’s long-term success is based on its price, promotions and rewards proposition. Quality (31%), digital (11%), speed and convenience (8%) and operations (6%) also were cited as drivers for long-term success.
- Costco’s success can be attributed to its strong performance across four out of the five pillars, including ranking first for operations nationally. The data also shows that Costco is moving toward becoming an everyday retailer for customers as it becomes more accessible to customers through third-party delivery channels (such as Uber Eats and Instacart) and as it increases its presence in home meal replacement (HMR) categories.
- Retailers can perform well by focusing on one value proposition lever, such as Metro supermarket banner Food Basics, which ranked third in Ontario overall due to being first for mass promotions and price. Performing well across multiple levers results in the greatest success.
- The top-performing conventional retailers compensate for their disadvantage to first tercile retailers in price and mass promotions with targeted savings through optimized loyalty programs.
- Walmart wins on digital by saving customers time through its app and website, but all retailers should be carefully watching Amazon as three out of 10 Canadian customers shop Amazon for groceries.