In a recent analysis by dunnhumby, Costco Wholesale Corp. emerged as the leading grocery retailer in Canada, according to the Retailer Preference Index (RPI). This recognition reflects Costco’s consistent success in combining strong financial performance with favorable customer perceptions—a vital formula for long-term growth in the competitive grocery market.
Costco claimed the top position in the RPI ranking, followed by other prominent names such as Super C, Maxi, and Walmart. Notably, every retailer in the top tier comprises club, discount, and superstore formats, indicating a clear preference among Canadian consumers for these types of shopping experiences. Conventional grocers, which account for nearly 40% of the Canadian market, occupy the subsequent rankings in the index.
One of the fundamental aspects of Costco’s dominance lies in its exceptional performance across four out of five customer value proposition pillars identified by dunnhumby. The key drivers influencing customer loyalty and satisfaction include price, promotions and rewards; quality; digital capabilities; speed and convenience; and operational excellence. Costco has notably excelled in operations, ranking first nationally in this pillar, which is increasingly important as consumers demand more efficient and enjoyable shopping experiences.
The study highlights that price remains the most crucial factor for long-term success in the grocery retail landscape. A staggering 44% of a retailer’s success can be attributed to favorable pricing strategies, promotions, and rewards programs. Quality follows closely behind at 31%, while digital integration accounts for 11%, speed and convenience for 8%, and operations for 6%. This data underscores the importance of a well-rounded value proposition that resonates with consumers.
Costco’s ability to pivot and adapt to customer needs is also noteworthy. The retailer is moving towards becoming an everyday destination for consumers by enhancing accessibility through partnerships with third-party delivery services like Uber Eats and Instacart. Furthermore, its growing presence in the home meal replacement (HMR) category aims to attract customers seeking convenient dining solutions. By aligning its offerings with the changing habits and preferences of shoppers, Costco strengthens its market position.
However, the competitive landscape includes formidable players such as Walmart. The latter has shown significant prowess in digital retail, topping the RPI in this category through its user-friendly app and website. Efforts to streamline the grocery shopping experience have paid off for Walmart, saving customers time and ensuring ease of access to their products. Moreover, surprisingly, Amazon is a competitor to watch closely, with three out of ten Canadian consumers utilizing the platform for grocery shopping.
The RPI reveals that the retailers achieving the highest growth in grocery revenue over the past five years share a common trait: a clear and compelling customer value proposition. The data indicates that those with strong RPI rankings grew up to 1.5 times faster in the long term and experienced three times faster growth in the past year compared to those with lower rankings. This finding highlights the direct correlation between understanding customer needs and successful business outcomes.
Chris Thomson, dunnhumby’s Senior Vice President in Canada and the United States, stated that the shift in consumer behavior driven by inflation is evident across the market. He emphasized that for retailers to thrive in the coming year, they must adapt their value proposition to connect with customers’ evolving needs. Successfully managing this change can open up opportunities, allowing retailers to capture greater market share in Canada’s grocery sector.
To compile the RPI, dunnhumby assessed both customer perception and financial performance across the 28 largest conventional, discount, superstore, and club retailers in Canada. This comprehensive analysis accounted for 97% of market share in those formats and involved a survey of 6,000 Canadian grocery shoppers.
In summary, Costco’s ascendancy to the top of the Canadian grocery retail hierarchy is no mere accident. Its focus on customer value propositions, along with strategic adaptations to meet changing consumer preferences, substantiate its market leadership. As the grocery landscape continues to transform in response to economic pressures and digital trends, other retailers must take consumer feedback seriously and innovate accordingly.
Costco’s impressive trajectory serves as a model for grocery retailers striving for sustained growth in today’s dynamic market.