Shop Talk: Spending trends in the Grocery sector
Shop Talk is 22seven Insights’ monthly newsletter highlighting spending trends from our Grocery, Apparel and General Merchandise dashboards. We alternate commentary between the dashboards – this month, we’re focussing on grocery spending.
Spending highlights from the Grocery Dashboard
Customers are returning to Woolworths’ stores22seven user spending at Woolworths stores has increased at a faster rate than spending at Checkers, PnP and Spar, leading to a strong increase in market share for the retailer over the past three months.
The chart above shows that Woolies’ gain has mostly come at the expense of a decrease in spending at Checkers. Our data is measured at transaction level, not basket level, so Woolworths’ growth might be padded by a strong performance from their Clothing and General Merchandise (C&GM) division. However, deeper analysis shows that Woolworths did best among higher-earning 22seven users who are more likely to be Food customers than C&GM customers, suggesting that their Food division also performed well.
PnP’s real performance may be revealed next weekOur 22seven data shows that PnP has lost a significant share of grocery spend over the past year. Most of this has gone to Checkers – to Sixty60 in particular. Spar has also ‘funded’ Checkers’ strong performance among 22seven users.
Pick n Pay Group has already disclosed a much better performance than indicated by 22seven users spending at PnP branded stores. However, the group’s performance is influenced by other businesses that are not separately disclosed, such as the less-affluent focused Boxer supermarket chain, that may be performing better than the PnP branded stores.
22seven users are typically urban-based and more affluent, but we can still show evidence of this trend – admittedly on a smaller sample of users. The chart below shows how 22seven user spending at Boxer has grown rapidly, whereas spending at PnP stores has declined.
The impact of weaker sales at PnP might be offset somewhat by a stronger performance at Boxer, something we may not even know for certain after Pick n Pay releases results next week. Nevertheless, it will be interesting to track how its orientation towards the less-affluent consumer market affects profitability if its more-affluent PnP stores continue to lose market share.
Fluctuations in online spendingThe Online data series in our Grocery Dashboard represents transactions through a retailer's website. (On-demand grocery delivery, via apps like Sixty60, is not included in this section.) PnP and Woolworths are the only major supermarket chains to offer an online purchasing option, which includes ‘scheduled’ food deliveries or click-and-collect orders. For Woolworths, it may also include online clothing orders.
As with all online channels, online grocery spending spiked in April 2020 due to Covid restrictions. Both Woolworths and PnP commented that online orders doubled in the periods thereafter – a trend also reflected in our data.
However, Woolworths’ share of online spend remains double pre-Covid levels, whereas PnP’s online share is back to pre-Covid levels.
Of course, it’s possible that Woolworths’ high online spending share might have been bolstered by an increase in online clothing spend, but we think this is unlikely and will explain why in next month’s Shop Talk.
Groceries on demandSpending on the various grocery delivery apps – Checkers Sixty60, Woolies Dash and PnP asap! – has not changed meaningfully over the past quarter. Sixty60 retains a significant lead while PnP and Woolworths tread carefully around the negative effect that these services will have on overall profitability if they simply cannibalise in-store sales.
In Grocery Games, we quantified the spending share gained by food delivery apps like Mr D Food and Uber Eats – roughly one year's growth in total food spending – and we argued that traditional grocery retailers might be forced to accommodate younger consumers' preference for delivered food services or risk losing relevance to this group. Sixty60’s significant customer following – albeit only half that of Uber Eats and Mr D Food – puts it at a significant advantage over its retail peers to leverage this service going forward.
How will the big grocery chains respond to regain their share of food spending? This is another trend that Insights is uniquely positioned to track for its clients.
Stay ahead of the gameThat’s it for this month. If you want to know more about data-driven consumer trends in South Africa, sign up to receive Nugget, our bi-weekly newsletter. You can also follow Insights on LinkedIn and Twitter.
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Simon Anderssen[email protected] 7300 309
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