business news in context, analysis with attitude

Kroger yesterday announced the launching of new program called Kroger Ship, which it described as a “new direct-to-customer ecommerce platform,” in four markets - Cincinnati, Houston, Louisville, and Nashville, with the intention of a further rollout in coming months.

Yael Cosset, Kroger’s chief digital officer, says that Kroger Ship is “our next step in creating a seamless experience that allows our customers to shop when and how they want,” and says that it both “complements and joins our 2,800 grocery stores, 1,250 curbside pickup locations, and delivery service from 1,200 locations.”

Kroger Ship is said to be built on the platform developed by Vitacost, an e-commerce business focused on health products and natural foods that it acquired four years ago.

Here’s how Kroger describes the service:

“The service offers competitive ecommerce pricing and fast and free doorstep delivery by a package carrier on orders over $35, otherwise shipping is $4.99 per order. Ship customers will experience exclusive money-saving opportunities, including promo codes and pricing deals along with the convenience of a set-and-save subscription model. During the launch phase, customers will receive free shipping - no minimum purchase required - and 15 percent off their order with a one-time-use promo code … During the first phase of Kroger Ship, customers can shop from a curated selection of 4,500 Our Brands products, which are not available anywhere else online, and more than 50,000 center-aisle groceries and household essentials that matter the most, influenced by 84.51° data and insights.”

In its analysis, the Wall Street Journal writes that “Kroger is looking to take on Inc. and Walmart Inc. in delivering goods directly to customers’ homes and businesses in boxes through third-party carriers, a service it hasn’t competed in to date … One of the biggest challenges for Kroger and other conventional supermarkets is Amazon, which sold around $650 million in consumer packaged-food items in the second quarter this year, up 40% from the previous year, according to the One Click Retail research firm. The e-commerce giant now offers rapid delivery from Whole Foods in 20 cities to Prime members, with the service and discounts to benefit holders spurring billions of dollars in revenue from the chain’s stores.”

In addition, the Journal writes, “Walmart bought in 2016 to expand its delivery capabilities, and is pushing into New York City in the fall. Target Corp. bought the Shipt Inc. grocery service last year and is now rolling out new delivery areas.”
KC's View:
I did what I always do when stories like these break, especially when my gut tells me that the hype may be exceeding the reality - I called Tom Furphy, who knows far more than I do about this stuff, and with whom I write “The Innovation Conversation” column here on MNB (as well as doing it before live audiences around the country).

“This is a perfect competitive weapon for Kroger to compete with the Amazon of 2009,” Tom told me. “I think that when you look at other things that Kroger is doing, like its deal with Ocado, things are going to get a lot more interesting; I would expect a lot more positive innovations in the future.”

I wasn’t surprised by Tom’s reaction, though it made me feel better to hear him say it. It reinforced my first reaction - that this sort of sounded a lot like a combination of Amazon’s Prime Pantry and Subscribe & Save offerings, which have been around for some time. In fact, Prime Pantry has always struck me as one of Amazon’s less compelling offerings, not really fitting into its broader narrative, and I fully expect that as Prime Now and Whole Foods Prime continue to evolve, we may see the slow disappearance of Prime Pantry from the Amazon portfolio.

Sure, Kroger Ship seems designed to compete with some of what Target’s doing … but my understanding is that Target has been struggling to generate the kind of volume that it needs to make its Target Restock program viable.

Look, let me be clear here. I think that Kroger Ship does make sense. In some ways, I see it as backfilling the company’s digital offering in a way that provides a stronger foundation for what the retailer needs to do going forward. That’s important - you need to have a solid foundation.

But it also is important to remember that, as Tom Furphy says, these kinds of offerings can be seen as “table stakes” as retailers move forward trying to compete in a vastly changed retail environment.

One other point, if I may.

Yesterday, when commenting about a story suggesting that Kroger may be looking to re-enter Florida after decades without a presence in the state, I speculated that it might be possible, using its data mining and e-commerce capabilities, to actually enter a market without the traditional fleet of stores. The Kroger Ship program, with its consumer direct focus, may actually give it the kind of weapon that would make this even more feasible that I imagined just 24 hours ago.

Just saying.