New ‘Retailer Preference Index’ Puts Trader Joe’s, Costco and Amazon at the Top

Trader Joe’s, Costco and Amazon top a new measurement that’s designed to link consumer preference with a retailer’s financial performance. The Retailer Preference Index (RPI) was unveiled today in New York at the NRF 2018 Show by Chicago-based customer data science company Dunnhumby.

The RPI study surveyed 11,000 U.S. households and analyzed consumer emotional sentiment for 59 food retailers, and then combined the survey data with the retailers’ financial performance to create each retailer’s preference index. The top 10 retailers with the highest preference index scores are 1) Trader Joe’s, 2) Costco, 3) Amazon, 4) H-E-B, 5) Walmart, 6) Wegmans, 7) Aldi, 8) Sam’s Club, 9) Sprouts Farmers Market and 10) Whole Foods Market.

Jose Gomes, managing director of North America for Dunnhumby, said that his company’s new index fills a gap, since the current industry rankings only measure consumer popularity and financial performance separately.

“Our model captures the complexity of customers’ preferences and their actual choices by quantifying the relationship between how they perceive a retailer with their emotional connection and the financial performance,” Gomes noted.

The RPI found that the top-quartile retailers share four effective strategies:

• Price-focused: “Aldi’s laser focus on price and certain high-volume staple categories like dairy and packaged foods secured the discount retailer with high rankings on price and overall RPI,” observed Dunnhumby. “Stores that index high enough on price can often sacrifice on convenience, speed, digital, and personalized discounts and information, and still rank highly.”
• Quality-focused: “Although Whole Foods Market performs below average on prices, it still achieves a high overall RPI because they index so high on quality,” noted Dunnhumby.
• Value-focused: Trader Joe’s, Costco, Sprouts and H-E-B all indexed high on quality and price.
• Price-focused and supported by digital execution: “Walmart’s success in digital translates into a high RPI ranking, and from indexing high on price and convenience,” noted Dunnnhumby. “Target ranked second on digital execution, but ranked only average on the other supporting factors, moving it out of the top quartile of the RPI.”

Summing up the results, Gomes said: “We firmly believe that retailers must differentiate themselves today to be competitive in face of the myriad of options shoppers have. Differentiation begins with the retailer identifying the shoppers that they can serve better than their competition. A solid customer-first strategy, backed by customer data science, will help the retailer focus its finite resources and attention on the customers that are the most important to their success. This study is intended as a first step on that path of understanding.”

Other key findings from the study include:

• Price and quality are the most important preference drivers. Retailers with a weak value core should focus on shoring up that weakness before turning attention to other drivers such as convenience, rewards or speed.
• The top-performing grocers include relatively recent entries into the 100-year-old supermarket business and are more likely to be national banners. All of these banners, except H-E-B, were either established or began to expand around the 1980s, which allowed many of them to carefully select store locations.
• The second-best-performing quartile of retailers include some of the higher-performing, older grocery banners, including Meijer, Publix and Kroger. This quartile has the highest top-of-mind (ToM) recall and the second-highest financial performance.
• Many undifferentiated mainstream banners are delivering minimal value to their shoppers. Even though many have been shopped at for a longer period, they have the weakest emotional connection. They must focus on improving value perceptions and reconnect with their shoppers, or profitability will be a challenge in an increasingly competitive market.

Dunnhumby’s Retailer Preference Index is available on the company's website.