Consumers unlikely to be loyal to discounters in age of repertoire shopping, suggests IRI senior VP


Paul Hinds, senior vice president of retail at IRI, considers whether consumers will be loyal to discounters in the age of repertoire shopping

Aldi: quality focus and slicker communications driving penetration

Aldi: no convenience or online presence

It has become the norm to shop at Lidl and other discounters but all fashions do come to an end and, as every brand knows, retaining long-term loyalty is easier said than done.

While shoppers from all social-demographic groups now visit Lidl and Aldi, the test they face is how to grow sales from both its hardcore loyalists and the so-called repertoire shoppers. They make up the majority of consumers who tend to buy their grocery shopping from multiple retailers, locations and channels based on their lifestyle and needs, which will differ by time of day and day of week. Lidl’s six-month £20m media and marketing campaign unveiled in the autumn is strong evidence that it is up to the challenge. It wants to prove to shoppers in 2015 that they can buy more of their weekly shop within its stores.

Its real-life experiential activity, where it set up a market stall in the East End of London selling food and drink, is changing perceptions of the brand as well as raising awareness of the quality of its products. Whether this changes shopper behaviour remains to be seen, but there is no doubt that Lidl is positioning itself as a more modern retailer and is connecting more closely with its customers. The brand already has more than 820,000 Facebook ‘likes’ which is getting closer to the fan base of Sainsbury’s (1.1m) and Tesco (1.6m)

The German retailer is riding a wave at the moment, yet there is a real risk its growth could plateau this year.  Consumers could become bored with the fashion of shopping at a discounter, especially as they start to get more money in their pockets again.

The discounters’ business model was perfect for the economic downturn, where more frequent shopping trips with smaller baskets signified a definitive move away from the traditional ‘big shop’. With a smaller range and competitive prices they took full advantage of the situation and the discounter label but now they are increasingly regarded as just another supermarket by many consumers.

The big players they gave a bashing to are fighting back and Lidl must be careful that by trying to appeal to a wider base of repertoire shoppers to maintain growth and boost loyalty, it does not move too far away from what made it different – and so successful – in the first place.

Tesco, Sainsbury’s, Asda and Morrison are parking their tanks on Lidl’s lawn by cutting prices and simplifying their ranges, while Waitrose continues to follow its own path in this battle for customer loyalty.

The discounters may also lose ground this year because they have not entered the two other key growth channels, convenience and online.

If price is less of a differential in the grocery sector other elements, such as customer service, product innovation and the store environment, will become more important when shoppers are deciding where to spend their money. Lidl and Aldi will need to invest more in these areas to generate long-term loyalty.

The problem all retailers have when it comes to loyalty is that shoppers are driven by different things. This is why it is crucial that stores have a deep understanding of their customers. Even the established retailers can lose contact with their customer base, but the discounters still struggle to track who exactly their customers are because they do not have a loyalty scheme or online offer. Both Lidl and Aldi have smartphone apps but they are passive in nature, featuring  store finders and general offers, so in their current guise will not provide a competitive edge, Lidl really needs to win the loyalty contest because it has an aggressive expansion strategy. It currently has about 600 UK stores but it wants to have 1,500 shops. Aldi, meanwhile, expects to generate 35,000 extra jobs by 2022 and have around 1,000 UK stores as part of its £600m growth plan.

The strength of each grocer’s brand will also become more important.

The discounters have built strong brands and reputations but they have yet to suffer any great PR disaster which would damage their image. Lidl is investing more in marketing while Aldi’s brand is synonymous with its ‘When It’s Gone It’s Gone’ (WIGIG) activity. Aldi took top spot in YouGov’s mid-year list of the top 10 brands in terms of consumer perception, overtaking John Lewis, BBC iPlayer and Samsung.

At Tesco new boss David Lewis has laid out the first phase of his winback strategy, driving efficiencies in the core business, investing in price and focusing on the customer. He is a marketing man through and through and this month the company changed its creative agency primarily to reconnect with its customers and rebuild trust in the Tesco brand.

The discounters have certainly made us all look differently at how we shop, and in a market where price may no longer be the deciding factor it is possible shoppers will change their habits again. Consumers may get bored with Lidl and Aldi as the economy improves and indeed want a more touchy-feeling shopping experience, but all retailers will have to be more creative and constantly innovate to secure long-term loyalty.