The Rising Cost of Living in Canada is Eroding Brand Loyalty as Consumers Seek More Cost-Effective Alternatives [Op-Ed]

Date:

Share post:

As Canadians grapple with the rising cost of living, many consumers are reevaluating their daily choices and purchase habits. The cost of groceries is forcing many households to make difficult decisions, like having to choose between food quality and affordability.

Amid these economic pressures, the concept of brand loyalty — the preference consumers have for a particular brand over others — is undergoing a significant shift. Brand loyalty is the result of a mix of factors, including trusthabit and the perceived value of goods.

Brand loyalty significantly benefits retailers by boosting sales. Not only do existing customers spend more money than new customers, but brand loyalty also reduces the amount brands need to spend on advertising. Effective loyalty programs increase customer retention and result in positive word-of-mouth, meaning companies can spend less on marketing.

Losing loyalty, on the other hand, can result in a competitive disadvantage for retailers. It can lead to revenue loss, increased marketing and customer acquisition costs and negative word-of-mouth.

Once a cornerstone for many food retailers, brand loyalty is eroding as consumers prioritize immediate cost savings over long-term brand relationships.

Adapting to rising food costs

Inflation is impacting a wide range of income groups: 81 per cent of lower-income, 50 per cent of middle-income and 35 per cent of high-income earners in Canada are impacted by inflation, spending less on clothing, beauty products and big-ticket items.

Consumers have been adopting various strategies to manage their budgets. Three-quarters of Canadians say they dine out less often because of the rising cost of living, and 70 per cent say inflation has shifted the way they cook.

Despite rising grocery prices, eating at home is still more budget-friendly than eating out and allows for better control over the cost of ingredients.

Some Canadians are also modifying their eating habits by altering portion sizes, cutting back on pricier food items and focusing on more affordable staple foods. While these changes help consumers deal with rising costs, they also come at the expense of brand loyalty.

The digital landscape is also playing a key role in this shift. Consumers are increasingly turning to digital platforms to find economical food options. The convenience of online marketplaces and food delivery services exposes them to a wide array of product choices and competitive pricing.

Consumers also use online tools like coupons and price comparison options to seek discounts. Loyalty programs lose their appeal when consumers prioritize immediate savings.

This transparency and the ease of comparing prices online encourage consumers to explore various brands, making it more challenging for traditional food brands to sustain customer loyalty.

Changing consumer priorities

As prices rise and budgets tighten, consumers are more inclined to seek out more cost-effective options, which often means abandoning favourite brands in pursuit of better value.

One report found that 42 per cent of consumers now seek sales or shop clearance, 40 per cent adhere to a budget, 28 per cent buy less overall and 25 per cent prefer bulk stores or warehouse retailers.

In pursuit of cheaper alternatives, consumers become more open to trying private-label or store-brand products, discounted brands and generic or unbranded options. These alternatives provide shoppers with a practical way to cope with rising prices, allowing them to manage their expenses while maintaining a satisfactory level of product quality.

People shop inside a grocery store in Toronto, on July 18, 2023. THE CANADIAN PRESS/Cole Burston

Inflation also leads to changes in spending habits in a phenomenon known as consumption smoothing. This often involves delaying the purchase of durable goods, prioritizing the purchase of necessities and opting for store-brand products.

In essence, consumers shift their priorities toward cost management, which in turn reduces their loyalty to specific brands. Food companies need to adapt to these changing consumer needs by recognizing affordability and value take precedence in an inflationary market.

What can retailers do?

The shift away from brand loyalty can pose challenges for business owners and retailers who depend on consumer spending. Aside from the most obvious solution to the issue — lowering prices — there are other things retailers can do to win back customers.

First, retailers can use dynamic pricing, allowing them to adjust prices based on factors like supply and demand, inventory and competition. This approach enables them to offer competitive prices and discounts while also minimizing food waste.

Second, retailers can also introduce loyalty programs that go beyond conventional point-based systems. By using personalized data from consumers, retailers can tailor rewards and incentives to match individual shopping habits, experiences and preferences. Retailers can also collaborate with other businesses and incorporate gamification elements to further enhance loyalty.

Lastly, retailers should consider using a value-oriented marketing approach to elevate consumer experiences. Retailers should communicate the value of their products, emphasizing quality, nutritional benefits and unique features to justify their price points.

Simultaneously, investing in exceptional customer experience, both in-store and online, can foster strong emotional connections between retailers and consumers. When consumers feel valued by brands, they are more likely to stay committed to that brand’s products. By assuring customers of their commitment to value, retailers can play a crucial role in guiding consumers through these challenging times.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By Omar H. Fares, Lecturer in the Ted Rogers School of Retail Management, Toronto Metropolitan University and Seung Hwan (Mark) Lee, Professor and Associate Dean of Engagement & Inclusion, Ted Rogers School of Management, Toronto Metropolitan University.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

More From Retail Insider

Canadian Consumers Willing to Switch Grocery Stores while Seeking Bargains: Study [Op-Ed]

Sylvain Charlebois says that a new survey offers a rigorous look into the preferences and behaviours shaping the future of grocery shopping in Canada.

Canadian Retail Sales Dip: Year-End Drop in Discretionary Spending [J.C. Williams Group Analysis]

2023 Canadian retail sales ended in a lacklustre way, with controlled consumer spending amid a tumultuous year.

Landlord QuadReal Launches Pickleball Courts in Commercial Properties to Create Consumer Experience [Interview/Photos]

The initiative helps revitalize and re-imagine spaces using sustainable development practices, while incorporating the latest technology to enhance the visitor experience, blending physical and digital elements.

Iconic Flo’s Diner in Toronto’s Yorkville Forced to Close After 33 Years Amid Landlord Dispute 

Retail Insider interviewed Flo’s co-owner who discusses the “heart wrenching” situation where he is being forced to close his business that began on Bellair Street in 1991.

Anatomy of a Leader: Teresa Spinelli, Owner of Alberta-Based Italian Centre Shop Ltd.

Spinelli discusses her leadership of the popular retailer which has expanded over the years, describing how she struggled to run the company at first and grew to love it.

Upscale Canadian Fashion Brand SMYTHE Expands with New Standalone Calgary Store [Interview/Photos]

It's the second store location for the Toronto-based brand, which is seeing success with its exclusive womenswear collections.

Toronto’s CF Sherway Gardens Hits Sales Milestone with Exciting Retail Growth and Future Plans [Interview]

The shopping centre is adding new retailers as sales per square foot hit an all-time high, with plans to re-tenant Nordstorm as foot traffic grows following Eataly's opening in the mall a few months ago.

ECS Coffee Opens Canada’s Largest Coffee and Espresso Equipment Gear Showroom and Retail Space in Toronto [Interview]

The new Etobicoke location is unique to Canada if not North America, according to its founder, with coffee roasting, equipment showroom, over 500 varieties of coffee, Youtube studio and various in-store experiences. He has plans to expand the concept nationally.

New Loblaws City Market Opens in Vancouver’s ‘The Post’ Building, Adding Grocery Competition to the Downtown Core [Podcast]

Craig and Lee discuss the opening of a new Loblaws City Market in downtown Vancouver's renovated Post building, and they explore its potential impact on local grocery shopping.

Loblaw Announces $2 Billion Investment in Canada for 2024 with Dozens of New Stores and 7,500 New Jobs [Expert Comment]

The retail behemoth will be growing substantially this year, following backlash over profits as inflation continues to impact Canadians.

Dubai-Based Asian Street Food Concept ‘Wok Boyz’ Expands into Canada with Plans for Multiple Locations [Interview]

The company's founder says the popular concept, with personalized meals, has an opportunity to grow substantially with its high-quality ingredients and theatrical flare, complete with fiery customer-facing woks.

Calgary Surge Basketball Team Launches Innovative Pop-Up at CF Chinook Centre to Boost Community Engagement [Interview]

The retail activation, which opened this month, is resulting in heavier foot traffic in a quieter part of the mall.

Upscale Pusateri’s Fine Foods to Close Yorkville Grocery Store in Toronto After 20 Years

The 5,500 square foot store opened to much fanfare in 2003, with valet parking, private chefs and pricey goods. 

Loblaw and Walmart Could be Forced to Adhere to Grocery Code of Conduct with Legislation [Op-Ed]

Sylvain Charlebois says that it's rare for all of Canada's political parties to agree, signalling a shift that could force grocers to comply amid record inflation.

Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

The company, founded in 1995, is one of Canada’s largest privately owned discount retailers which struggled with declining sales and increasing costs following the pandemic.

What to Expect for the Canadian Retail and Hospitality Sectors in 2024 [Video Interview]

Michael Kehoe provides an expansive overview of what's expected for Canada's retail industry in 2024, and how the commercial real estate industry is becoming more dynamic than ever.

Anatomy of a Leader: David Lui, CEO of Kit and Ace and Co-Founder of Unity Brands

Lui has an extensive background in retail with over 30 years of experience and is known for his award-winning brand transformations, e-commerce and digital knowledge along with his passion for scaling businesses.

Robotic Retail Gaining Traction in Canada, But Some Consumers are Being Left Behind [Op-Ed]

Automated retailers without in-store staff are opening across Canada, such as Aisle 24, RC Coffee and PizzaForno -- but consumers without smart phones, credit cards, or with vision issues may not be able to access these retailers says a researcher.

Oakridge Park Announces 1st Luxury Retailers, Attracting Top Brands to Vancouver [Podcast]

Craig and Lee discuss the latest Oakridge Park announcement, highlighting the addition of luxury and upper contemporary brands to Vancouver's retail landscape and how it will impact downtown.

Interview on What it Takes: Lee Valley Tools Named Top Retailer in Ontario for Customer Service

The company's COO Jason Tasse discusses the retailer's secret sauce for having an engaged workforce, while also discussing plans to expand with more stores and retail concepts.

RECENT RETAIL INSIDER VIDEOS

Advertisment

Subscribe to the Newsletter

Subscribe

* indicates required

RECENT articles

Canadian Consumers Willing to Switch Grocery Stores while Seeking Bargains: Study [Op-Ed]

Sylvain Charlebois says that a new survey offers a rigorous look into the preferences and behaviours shaping the future of grocery shopping in Canada.

Canadian Retail Sales Dip: Year-End Drop in Discretionary Spending [J.C. Williams Group Analysis]

2023 Canadian retail sales ended in a lacklustre way, with controlled consumer spending amid a tumultuous year.

Landlord QuadReal Launches Pickleball Courts in Commercial Properties to Create Consumer Experience [Interview/Photos]

The initiative helps revitalize and re-imagine spaces using sustainable development practices, while incorporating the latest technology to enhance the visitor experience, blending physical and digital elements.

Iconic Flo’s Diner in Toronto’s Yorkville Forced to Close After 33 Years Amid Landlord Dispute 

Retail Insider interviewed Flo’s co-owner who discusses the “heart wrenching” situation where he is being forced to close his business that began on Bellair Street in 1991.

Anatomy of a Leader: Teresa Spinelli, Owner of Alberta-Based Italian Centre Shop Ltd.

Spinelli discusses her leadership of the popular retailer which has expanded over the years, describing how she struggled to run the company at first and grew to love it.

Upscale Canadian Fashion Brand SMYTHE Expands with New Standalone Calgary Store [Interview/Photos]

It's the second store location for the Toronto-based brand, which is seeing success with its exclusive womenswear collections.

Toronto’s CF Sherway Gardens Hits Sales Milestone with Exciting Retail Growth and Future Plans [Interview]

The shopping centre is adding new retailers as sales per square foot hit an all-time high, with plans to re-tenant Nordstorm as foot traffic grows following Eataly's opening in the mall a few months ago.

ECS Coffee Opens Canada’s Largest Coffee and Espresso Equipment Gear Showroom and Retail Space in Toronto [Interview]

The new Etobicoke location is unique to Canada if not North America, according to its founder, with coffee roasting, equipment showroom, over 500 varieties of coffee, Youtube studio and various in-store experiences. He has plans to expand the concept nationally.

New Loblaws City Market Opens in Vancouver’s ‘The Post’ Building, Adding Grocery Competition to the Downtown Core [Podcast]

Craig and Lee discuss the opening of a new Loblaws City Market in downtown Vancouver's renovated Post building, and they explore its potential impact on local grocery shopping.

Loblaw Announces $2 Billion Investment in Canada for 2024 with Dozens of New Stores and 7,500 New Jobs [Expert Comment]

The retail behemoth will be growing substantially this year, following backlash over profits as inflation continues to impact Canadians.

Dubai-Based Asian Street Food Concept ‘Wok Boyz’ Expands into Canada with Plans for Multiple Locations [Interview]

The company's founder says the popular concept, with personalized meals, has an opportunity to grow substantially with its high-quality ingredients and theatrical flare, complete with fiery customer-facing woks.

Calgary Surge Basketball Team Launches Innovative Pop-Up at CF Chinook Centre to Boost Community Engagement [Interview]

The retail activation, which opened this month, is resulting in heavier foot traffic in a quieter part of the mall.

Upscale Pusateri’s Fine Foods to Close Yorkville Grocery Store in Toronto After 20 Years

The 5,500 square foot store opened to much fanfare in 2003, with valet parking, private chefs and pricey goods. 

Loblaw and Walmart Could be Forced to Adhere to Grocery Code of Conduct with Legislation [Op-Ed]

Sylvain Charlebois says that it's rare for all of Canada's political parties to agree, signalling a shift that could force grocers to comply amid record inflation.

Factory Direct to Shut All 14 Stores Amid Bankruptcy, Liquidation to Begin Saturday

The company, founded in 1995, is one of Canada’s largest privately owned discount retailers which struggled with declining sales and increasing costs following the pandemic.

What to Expect for the Canadian Retail and Hospitality Sectors in 2024 [Video Interview]

Michael Kehoe provides an expansive overview of what's expected for Canada's retail industry in 2024, and how the commercial real estate industry is becoming more dynamic than ever.

Anatomy of a Leader: David Lui, CEO of Kit and Ace and Co-Founder of Unity Brands

Lui has an extensive background in retail with over 30 years of experience and is known for his award-winning brand transformations, e-commerce and digital knowledge along with his passion for scaling businesses.

Robotic Retail Gaining Traction in Canada, But Some Consumers are Being Left Behind [Op-Ed]

Automated retailers without in-store staff are opening across Canada, such as Aisle 24, RC Coffee and PizzaForno -- but consumers without smart phones, credit cards, or with vision issues may not be able to access these retailers says a researcher.

Oakridge Park Announces 1st Luxury Retailers, Attracting Top Brands to Vancouver [Podcast]

Craig and Lee discuss the latest Oakridge Park announcement, highlighting the addition of luxury and upper contemporary brands to Vancouver's retail landscape and how it will impact downtown.

Interview on What it Takes: Lee Valley Tools Named Top Retailer in Ontario for Customer Service

The company's COO Jason Tasse discusses the retailer's secret sauce for having an engaged workforce, while also discussing plans to expand with more stores and retail concepts.