Low-income shoppers on food stamps: How grocery retailers can cater to an underserved and growing market
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By Sheetal Singh
As more Americans enroll in the Supplemental Nutrition Assistance Program (SNAP) and SNAP benefit levels increase, addressing the needs of these budget conscious shoppers will help grocery retailers win in the new normal.
The COVID-19 crisis undoubtedly accelerated the share of consumers categorized as low income - a significant portion of consumers within this segment are SNAP (or food stamp) participants. The number of SNAP recipients increased almost 17 percent nationally since February 2020 - available data suggests 7-8 million more people now receive SNAP benefits. Additionally, early in the pandemic, Congress increased benefit levels; the average monthly benefit per person jumped to $161, from about $130 in 2019.
More households are eligible for SNAP benefits, and these households have more money to spend on their EBT cards (EBT is the electronic system that allows a SNAP participant to pay for food using SNAP benefits). Yet, most grocery stores are not prioritizing these shoppers - equating to at least $70B in relatively untapped purchasing power. This presents a unique opportunity for grocery retailers to serve these shoppers better and simultaneously increase market share.
We, at Propel, have a deep understanding of low income consumers - our Fresh EBT audience consists entirely of SNAP recipients. In this post, we share what we have learned about this low income consumer segment, and provide recommendations on how grocery retailers can meet the needs of this growing shopper base.
Build an inclusive payment ecosystem
Offer EBT card payment online and/or at pickup
There are over 36M SNAP households in the US and only ~3 retailers nationwide provide the full functionality for shopping online or at pickup with an EBT card. Amidst the pandemic, a growing number of SNAP shoppers (albeit all shoppers) seek alternatives to in-store shopping and crave more diversity in retailers that offer a variety of EBT payment options. In September 2020, over 1M households bought groceries online using food stamp benefits - and that number will increase as the pandemic continues.
The majority of grocery retailers are missing out on creating revenue-generating relationships with this growing consumer segment.
Walmart and Amazon have seen initial success in the EBT online space, and competition for EBT online dollars is accelerating. Progressing towards EBT payment acceptance is necessary for traditional grocery retailers to compete for future online dollars. While the e-commerce functionality needed to accept EBT payments through the USDA program requires a high upfront investment, there is potential for a strong return on investment in the long term as SNAP spending continues to increase.
Moreover, SNAP shoppers are loyal to retailers that offer the right combination of price, convenience, and selection. Offering EBT payment online increases the likelihood of retailer loyalty from SNAP participants.
Drive retailer loyalty by meeting customer expectations
Back in September 2020, Propel surveyed over 630 Fresh EBT app users to gauge interest in online shopping. More than half of the responses indicated that users want to buy food online, but are currently unable to do so at local grocery stores. Most SNAP shoppers felt relieved to have a safer option to purchase groceries during the pandemic.
Post pandemic, shoppers are likely to continue their online shopping habits. Grocery retailers should invest the time and money into improving their online shopping experience to meet consumer expectations and foster retailer loyalty with these shoppers.