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).

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Understanding the Impact of Economic Uncertainty on Consumer Behavior

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. 

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Evaluating Current Strategies: Shortcomings and Drawbacks

The High Cost of Store Expansion

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.

Advertising and Marketing: A Double-Edged Sword

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 Hidden Costs of E-commerce

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.

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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.

The Dilemma of Price Hikes for Consumers

Inflation will force price increases along the way, but assuming consumers will go along with hikes without hesitation is a flawed strategy.

Passing off costs may help in the short term, but you risk changes in consumer behavior that will cost you in the future.

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.

Traditional Loyalty Programs: Are They Enough?

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.

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Creating Customer-Saving Strategies: A Three-Tier Approach

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:

1. Capturing new customers
2. Increasing shoppers' trip frequency
3. Converting infrequent shoppers into loyal customers

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.

1. Capturing New Customers

• Meeting them where they are with digital platforms to entice new (and especially younger) shoppers. New mobile marketplaces aren’t just for e-commerce and shopping online — they can also be tools to get eyes on your brand and shoppers in your store. Keep an eye out for the platforms that can cast a wide net for potential new consumers but don’t charge you just for views or clicks that don’t impact your bottom line.
• Incentivizing them to choose you with personalized promotions. With the right third-party platform, you can consider your available margin and historic customer purchasing data from your stores to craft individualized offers. These offers help bring in first-timers, showing them the quality and attention you put into your shopping experience. They kick off the three-step process, leading to primary shopper conversion and, finally, the title of “loyal customer.”

2. Increasing Shoppers' Trip Frequency

• Reaching them all along their consumer journey, like when they're running errands and deciding where to buy groceries. The goal is not just to win a sale here and there but to fundamentally change how and when they shop at your stores. If you can become a regular part of their routine, you’ll win yourself a loyal customer.
• Keeping your business at the top of their minds even when they're not necessarily shopping for groceries. With a strong digital presence across the right multi-use marketplaces, you can keep your brand in the customers’ peripherals, even if they’re just out to grab a bite to eat or fill up on gas. These quick, one-off impressions build a lasting footprint in your shoppers’ minds.

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1. Recruiting them to your store's "loyalty base" by converting those infrequent customers into fans. Though investing solely in loyalty programs is a limited solution, pushing your in-house platform as part of this three-step shopper conversion process is a major asset in boosting buying frequency.

3. Converting Infrequent Shoppers into Loyal Customers

• Changing their buying behavior through personalized promotions that target these shoppers and win them over from competitors. Consumers who have come into your store once or twice are not loyal, and will shop at a rival business if they see a better price or find it more convenient. To get ahead of this, use your consumer data to see how and why each of these consumers shop and give them the offers that will win over their wallet. 
• Driving shoppers to the center of your store toward your staple, private-label items. Store-brand-heavy baskets are integral to boosting your grocery store sales and widening those margins. Incentivizing a deeper exploration of your store’s offerings means more shopping time, bigger overall basket size, and higher margins.

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.

The Power of Upside for Sustainable Growth in Grocery

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.

In a high-margin environment, an expensive, incomplete approach is risky. And in these pre-recession days, it's economically tumultuous.

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.

Case Study: Schnucks' Successful Partnership with Upside

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:

• Greater than 1% incremental sales lift
• 20% of Upside users joined Schnucks’ loyalty program
• 40% increase in trip frequency
• 60% increase in monthly spend
• 10% increase in basket size

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.

Securing Your Profitable 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.

Ready to innovate and secure your grocery store's sales against economic uncertainties? 

Contact our team today for a personalized consultation on how Upside's digital marketplace can help you grow your business. 

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