As consumers grow worried about rising costs, grocery giant Kroger is keeping them shopping with personalized offers through its ecommerce platforms. In its second quarter of 2021, the grocer’s digital sales fell 13% year over year by remained 114% above 2019, driven by data-informed digital messaging.
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“Overall, one in three people have noted that groceries have gotten more expensive in the past month,” Kroger CEO Rodney McMullen told analysts on a call on Friday (Sept. 10). “Kroger customers benefit from our personalization, as we offer highly relevant savings at a household level, allowing them to further stretch their food dollars.”
He noted that Kroger’s rewards program captures data from 96% of the grocer’s sales, encompassing 16 million households. Additionally, he said that about six in 10 items added to consumers’ online baskets were found through the grocer’s personalization technology, and these recommendations allow the grocer to reduce shopping time by almost 70%.
In fact, PYMNTS research from the study “What Consumers Expect From Their Grocery Shopping Experiences,” a collaboration with ACI Worldwide, which surveyed over 2,300 U.S. consumers who had recently purchased groceries, found that over half (54%) were members of grocery rewards programs. Of these members, 63% said that these incentives affect where they choose to shop for groceries, and 60% of respondents said that loyalty rewards lead them to spend more at grocers that offer them.
Loyalty programs also present the opportunity for grocers to capture spending from other eCommerce businesses, drawing customers into stores. Almost half (48%) of grocery loyalty program members said that loyalty programs would encourage them to purchase items that they now purchase online at their favorite grocery store instead.
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These personalized deals could have a negative impact on sales, allowing shoppers to spend less on the items they purchase most. However, Kroger believes that this calculated risk is worth it, enabling the grocer to keep shoppers coming back.
“We are … continuing to invest in price where we think it makes sense,” said Kroger CFO Gary Millerchip. “Sometimes that might be in areas where we’re seeing inflation. Sometimes it might be we’re investing because we believe it’s the right thing to do to grow customers’ long-term loyalty in other places through our personalization strategies.”
He added that these investments are a bid to grow the grocer’s market share, contending that they will be “important to grow share over the long term.”
Another advantage of the grocer’s personalization capabilities is that they allow Kroger to bring in more revenue from consumer-packaged goods (CPG) brands looking for marketing opportunities on the grocer’s eCommerce channels. Knowing that their products will be surfaced with data-informed recommendations to the customers who are most likely to purchase them, CPG brands are encouraged to spend more on these opportunities.
“The value the CPGs get from … our ability to use our data to make sure the right customers are seeing offers is substantial and significant, and we believe that it’s a significant opportunity to continue to grow,” said McMullen. “I won’t get into specifics, other than we would say that we feel like we’re just getting started.”