Discounters snag upscale customers, but do they build loyalty?

These days, consumers are more reluctant than ever to part with their hard-earned cash, and virtually every store is offering deals and discounts to entice them to spend. As USA Today reported earlier this week, the stores with the sharpest pencils and price points are clearly winning the battle to draw in new customers. Walmart, TJX and Dollar General beat analyst expectations and are reporting decent performance while the competition misses badly.

But who are they attracting, and are they building customer loyalty that will prove enduring?

The data suggest upscale consumers are shopping these discounters big time, and while they may be enjoying the savings, they're not loving the experience. That's the interpretation of the latest retail data from the American Customer Satisfaction Index.

The just-reported 2008 Department and Discount Store rankings show Nordstrom and Kohl's tied for first place in customer satisfaction (at 80). Dollar General declined more than any other Department or Discount Store (to 75). While Walmart's score increased last year, consumers still rated it the worst of the lot. (70). Among Specialty Stores, Barnes & Noble and Costco came out on top (at 83). TJX scored third from the bottom (73), with only Circuit City (72) and Home Depot (70) scoring worse.

story continues below... advertisement
		The Best Retail Customer Experiences 2009   Find out which retailers consumers crowned their favorites in five different categories across eight different retail segments. Get authoritative analysis from members of the Retail Customer Experience Advisory Panel on why these retailers are succeeding. And learn which retail technologies win over customers — and which ones don't matter.     Order your copy today!

What's a discounter to do? Hire more sale associates or improve training in customer service? Clean the stores more often or improve store lighting? No! They should trust what people are doing more than what they are saying. Consumers vote with their pocketbooks every day, and the discounters are wining.

There must be a way for Walmart to use its commitment to packaging and energy efficiency to help upscale consumers appreciate the store experience more. Shopping at Ross and Marshalls stores is all about the thrill of finding amazing deals on brand name merchandise. And at Dollar General, it's all about what a buck will buy. In a classic judo move, discounters might creatively turn a no-frills store experience into a badge of shopper frugality. Aldi and Costco both do this well. What could Dollar General, TJX and Walmart do?

Most pundits are projecting that the new behaviors being formed in this economy will have staying power. So, upscale consumers may learn to hold their noses while shopping the discounters. Just maybe, a few innovative discounters will find new ways to make them happy to come back again and again.

Judy Hopelain is a consultant with Brand Amplitude and a blogger on the topic of retail experiences.