Retail / CPG
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New research from SymphonyAI offers fresh perspective on the premiumization in retail trend and the high-value shoppers whose spending accounts for a disproportionate percentage of sales. But what is premiumization, why do 14% of shoppers pay higher prices and how does their behavior impact different categories and retailers’ overall performance?
These themes were explored in a major SymphonyAI research project that used AI-powered analytics to shed new light on the topic of premiumization in retail. The goal was to quantify the overall impact of premiumization, determine which categories experience the greatest impact and identify strategies to target the high value shopper segment. The research findings and strategic recommendations were shared during a webinar titled, “The Wealth Effect in Retail: Winning with Shoppers Willing to Pay More.”
This exploration of premiumization, defined as shoppers who make purchases at higher price points, is a timely assessment of a trend that can seem counterintuitive. For example, shoppers are still dealing with inflation, that although it has subsided from several years of elevated levels, remains higher than desired by shoppers or the central bankers who seek to control it with monetary policy. As inflation surged over the past several years shoppers coped by seeking out promotions while also curtailing purchases, which led to pressure on unit volumes.
Despite these trends, 14% of shoppers identified in the research engaged in premiumization where they actually shifted to purchasing higher-priced items after previously purchasing low- or medium-priced items.
To identify premiumization SymphonyAI used AI-powered analytics to discover behaviors and correlations in shopper data that otherwise would have been impossible given the volume of data. The research involved shopper data from 107 million households across the U.S., Europe, and Asia, who made three billion transactions and purchased 35 billion items during the 52 week period ended September 30, 2024, compared to the comparable period the prior year.
This analysis showed the premiumization effect was present in 13% of categories that accounted for 18% of total store sales during the study period. Drilling deeper, the behaviors used to determine premiumization in the study included shoppers purchasing larger pack sizes, higher-tier products such as national brands rather than retailers’ own brands, and organic products, which are typically more expensive than conventional alternatives.
Of these three behaviors, the purchase of larger pack sizes was the major driver of premiumization, evident 52% of the time, followed by higher tier products (29%) and organics (19%). While those are the three markers of premiumization, they show up differently based on the product category which is revealed in greater detail in the study.
When retailers increase their use of AI-powered analytics they can discover actionable insights that are not readily apparent. In the case of premiumization, retailers create a wealth effect for themselves because they can identify the behaviors of shoppers and categories where they are willing to spend more. The study also revealed effective strategies that can be used to increase engagement with a high-value shopper segment that can drive a disproportionate percentage of sales. The top four recommendations include:
As with other SymphonyAI studies , the top takeaway from this premiumization research is to again validate how AI-powered analytics give retailers a huge advantage. The ability to identify previously undetected behaviors, understand how those behaviors manifest in different categories and develop strategies to drive sales growth is a powerful advantage.
To watch a replay of the 30 minute webinar and receive a copy of the research click here.
Premiumization is when shoppers make purchases at higher price points for reasons explored in the study such as choosing larger pack sizes, national brands or organic products.
The path to premiumization begins with the use of AI-powered analytics. Understanding how shopper behaviors vary by product category is key to ensuring that specific products possess the attributes SymphonyAI’s research shows shoppers are willing to pay more for.
Appealing to shoppers who exhibit premiumization behaviors has a positive and disproportionate impact on sales. For example, the premiumization effect was present in 13% of categories, but those categories accounted for 18% of total store sales during the study period.
Mike Troy is a retail industry veteran who leads content creation and thought leadership at SymphonyAI. He focuses on how innovative technologies are transforming the retail and consumer goods industry. Prior to joining SymphonyAI in January 2022, Mike spent 30 years in key editorial roles with leading B2B brands focused on the retail industry.