H-E-B Topples Amazon as Top U.S. Grocery Retailer

dunnhumby Retailer Preference Index also IDs BJ’s as biggest mover over last 3 years

1/31/2023

Three years into the pandemic, H-E-B has wrested back its leadership position from Amazon in the dunnhumby RPI.

After two years in the top spot, Amazon has ceded first place to H-E-B in the sixth annual dunnhumby Retailer Preference Index (RPI), a comprehensive nationwide study probing the approximately $1 trillion U.S. grocery market. Three years into the pandemic, H-E-B has wrested back its leadership position from Amazon, with Costco following closely behind in second place. Amazon dropped to third, while Wegmans took the fourth spot for the third consecutive year.

The 11 additional retailers with the highest overall customer preference index scores were 5) Sam’s Club, 6) Market Basket, 7) Amazon Fresh, 8) Trader Joe’s, 9) Winco, 10) BJ’s Wholesale, 11) Target, 12) Aldi, 13) ShopRite, 14) Walmart Neighborhood Market and 15) Walmart.

[Read more: "H-E-B Expands Its Territory in Texas"]

“In 2017, we set out on a journey to understand how customers’ preferences and retailers’ financial results predicted which retailers would last,” said Matt O’Grady, president of the Americas for Chicago-based customer data science firm dunnhumby. “But little did we know that in the ensuing six years, consumers and retailers would have a lifetime of difficulties, including a pandemic that shook consumer behavior and the global economy, a prolonged period of supply change struggles, and a once-in-a-generation inflation crisis. We believe this report can serve as a blueprint to help grocers improve their competitive positions while providing key findings for marketing and consumer preferences.”

The dunnhumby RPI includes the largest 63 retailers in the industry that sell everyday food and nonfood household items. The financial data used in the dunnhumby model comes from Edge by Ascential, and the customer perception data is sourced from dunnhumby’s annual survey of 10,000 U.S. grocery shoppers. Based on dunnhumby’s analysis of 30,000 consumers surveyed between October 2021 and November 2022, there are five drivers of the value proposition: price, promotions and rewards; speed and convenience; quality; digital; and operations.

Key findings from the study include:

Fierce battle at the top between U.S. grocers: Over the history of the RPI, there has been heated conflict among the top retailers. In 2020 and 2021, the pandemic helped propel and then solidify Amazon as the No. 1 grocery retailer over H-E-B, Trader Joe’s and Wegmans, since Amazon’s value proposition saves customers time and provides a seamless e-commerce experience. In 2022, however, H-E-B returned to the top spot due to its ability to deliver a combination of better savings and a better-quality experience/assortment. 
Digital has staying power, but it’s no longer as crucial to driving short-term retailer momentum as it was in 2020-21: The pandemic grew the percentage of Americans shopping online for groceries from 39% to 50% of the country — an 11-point increase — and, in spite of record inflation, more than half of those people remained online grocery shoppers in 2022. As a result, there are 9.4 million more omnichannel households today than there were in 2019, with a combined grocery budget of $4.9 billion.
Retailers in the top quartile outperform the rest of the market in providing superior customer benefits, savings, or both: Top-quartile retailers have an average compounded average growth rate (CAGR) of 7.3%, versus third quartile retailers, with a 3.2% CAGR. Further, 59% of customers of first-quartile retailers have a strong emotional connection with retailers, compared with 45% of customers of third-quartile retailers.
Amazon is still tops in online shopping, but all other online retailers are closing in: In fact, 52% of customers of first-quartile retailers said that they have an easy online shopping experience, a 13% increase from 2019. The top six retailers for digital were 1) Amazon, 2) Amazon Fresh, 3) Target, 4) Sam’s Club, 5) Walmart and 6) Walmart Neighborhood Market.
Club stores are gaining momentum, with three of the top 10 spots in the first quartile now occupied by club stores: Costco (2), Sam’s Club (5), and BJ’s Wholesale (10) reached their high ranks through a combination of top-notch dependability and saving customers money while delivering a seamless experience. In dunnhumby’s 2019 RPI, no club store ranked higher than seventh. 
BJ’s Wholesale was the biggest mover in the RPI over the past three years, climbing from 27th place to 10th place in 2022, a 17-point leap: Schnucks climbed 16 spots and is currently in the second quartile overall. Other big movers not in the first quartile overall but improving were Food Lion (14 spots up), Food4Less/FoodsCo (12 spots up), Weis (10 spots up) and Food City (nine spots up). These five retailers have two things most in common: They showed superior ability to address supply chain issues by improving their ranking in the operations pillar, which measures out-of-stock perceptions among other things, and they have existing strengths or made significant advances in their competitive position on saving shoppers money.