By Andrew Arnold, New Zealand Country Manager
The psychology of shopping is what fascinates me most in this industry. Learning why New Zealand liquor shoppers do what they do. Why they make the decisions they make. Why they choose to go there and not somewhere else. What their needs are and are they being met.
That’s not an exhaustive list by any stretch of the imagination!
One question I often get asked is how best to compete when what you sell can be sold by someone else. In the case of the traditional New Zealand liquor channel, how do you compete with those big box grocery guys?
In New Zealand liquor, we have to start with price, right?
The natural default position is to look at what they charge for their products and what you charge for yours. Next step, figure out your margin. Then, can I afford to match it or not? Is it worthwhile matching or bettering it for some products and not others? Do my promos stack up with theirs?
Throw all that into the pot, and what you come out with is hopefully a sound strategy where you compete on some things, but not on others. But this often leads to a spiral you cant get yourself out of and you probably cant make any money from.
But this approach neglects one crucial aspect. Quite simply, does price matter more to a shopper in traditional liquor than it does in Grocery? And if it does, where does it matter most, i.e. what categories should I focus on?
The answer may surprise you. Price is not more important in traditional liquor than it is for alcoholic beverages in grocery, nor is it less important. It’s exactly the same. What implications does this have? You don’t need to try to be cheaper than grocery for a start, and when you start going deeper into the individual categories you can be very selective on what you do from a price perspective.
Just because the Pak n Save down the road has a hot deal on a 24pk of mainstream beer, doesn’t mean you suddenly need to match it or beat it. Your shoppers don’t expect you to be cheaper, and value means different things to them than a cheap price or a hot deal. And here’s the clincher – shoppers in traditional liquor are more satisfied on price than shoppers of alcoholic beverages in grocery are. If it ain’t broke, don’t try to fix it.
Takeout #1 – Price is no more important to shoppers in either Traditional Liquor or Grocery, and shoppers in Traditional Liquor are happier with price than they are with Alcoholic beverages in Grocery. There is no significant reason there to need to compete on price, so don’t worry if you’re slightly more expensive.
Its a question of loyalty in New Zealand liquor
Another factor that doesn’t get thought about explicitly but matters a huge amount is one of shopper loyalty. There are numerous studies you can find on the internet showing how much more valuable a loyal shopper is than one who flits around from store to store. But often an assumption is made that if a big box grocery retailer is close by then it will get the lion’s share of that shopper because of convenience, price, and so on.
Time for another myth to be busted! We have a metric at Shopper Intelligence called Retailer Does Well (Loyalty). This is a measure that asks shoppers how likely they are to be loyal to a specific retailer if they do a good job in the category the shopper bought. At a total store level, alcoholic beverages in grocery doesn’t even compare with the traditional liquor channel.
17% of shoppers say they are likely to be loyal to a grocery store, but that number climbs to a net 38% of shoppers in traditional liquor. Like I said, its not even close. If you are in the traditional liquor channel, you have a shopper that wants to be loyal to you far more than they want to be loyal to a grocery store. How do you keep them loyal? Well, you meet their expectations – more on that next.
Takeout #2 – Traditional liquor shoppers are far more likely to want to be loyal to a store than an Alcoholic beverages shopper in Grocery is, so it is key to use the natural inbuilt advantages the Traditional Liquor channel has to nurture and grow that loyalty.
Different channels, different priorities
Traditional liquor is different to grocery. There are some obvious differences – grocery stores are bigger, have more staff, sell food, probably more parking, better “buying power”… But there are others which make a difference for shoppers. Six in particular are worthy of mention because these are all significantly more important for shoppers in traditional liquor than they are for shoppers of alcoholic beverages in grocery.
The first three are more about the products themselves, how they are messaged in store and how they are communicated pre store: Premium, Authenticity, and Healthy Options. Traditional liquor shoppers want to see more premium options, its not just all about a race to the bottom. They want to see authentic brands with authentic stories behind them. Not brands they don’t know or care about. They also are far more likely to want to see low alcohol, low carb, and low sugar options. Their expectations in these areas are significantly higher than those seen in grocery.
The second group of three is more about the instore experience itself – Innovation, Range and Availability. Shoppers expect to see new things in traditional liquor. The tried and true is what they expect to see in grocery. Range is absolutely crucial.
Grocery is limited in what they can sell, so naturally shoppers will come to traditional liquor for needs in RTDs and spirits, but this expectation also holds true in wine and beer. Anybody can buy a ten-dollar bottle of wine, but the niche products? That’s where traditional liquor can stand out.
And availability is significantly more important in traditional liquor. Shoppers care more if they cant find their favourite in a traditional liquor outlet, so don’t disappoint them if you can avoid it. The best way to sum all this up? Excite, delight, entertain and inform. That’s something grocery just cant match.
Takeout #3 – Shoppers in Traditional Liquor have different priorities to those who shop for alcoholic beverages in grocery. These factors – Premium, Authenticity, Healthy Options, Innovation, Range and Availability – are what traditional liquor needs to focus on to differentiate itself from grocery.
The key message here is traditional liquor is not grocery. So why try to compete with them when you don’t actually need to? Shoppers go to traditional liquor because they want and need different things. So build on those. Focus on what you’re good at.
Delighting shoppers with range, authentic brands and interesting experiences.
Shopper Intelligence interviews over 45,000 shoppers in New Zealand across the supermarket, P&C and traditional liquor channels, to drive strategic shopper-led commercial decisions at retailer, category, segment and brand levels.
If you want to understand your shoppers better, contact us today.
This article was originally published in The Shout NZ and reposted here with permission.