Kroger Co. on Wednesday launched a new e-commerce website, which represents another salvo in the national grocery delivery war that pits Kroger (No. 86 in the Internet Retailer 2018 Top 500), against players like Walmart Inc. (No. 3) and Amazon.com Inc. (No. 1).
Kroger’s new Kroger Ship, service is a direct-to-consumer e-commerce platform that will deliver non-perishable grocery items. The service is initially available in four markets—Cincinnati, Houston, Louisville and Nashville—although the grocer expects to roll it out to more markets over the next few months.
During its first phase Kroger Ship will offer 4,500 Kroger private-label products, more than 50,000 other grocery and household items, including bulk items. Kroger determined the selection with the help of its 84.51° customer analysis and data collection unit.
Kroger Ship offers free doorstep delivery by a package carrier on orders more than $35. Shipping for smaller orders costs $4.99 per order. The retailer also plans to offer Kroger Ship customers exclusive deals. For example, during the launch phase customers will receive free shipping with no minimum purchase required and 15% off their initial orders if they use a one-time-use promo code.
Kroger already has 1,250 curbside pickup locations for online orders and offers delivery service from 1,200 locations. The launch of Kroger Ship is just one example of Kroger’s increasing commitment to e-commerce, which is part of a larger strategic plan announced last year.
Among other things, the plan, called Restock Kroger, aims to expand Kroger’s digital and e-commerce efforts and make broader use of personalized customer data. Other recent moves include:
- Kroger last month announced plans to work with autonomous vehicle startup Nuro to test grocery delivery via an unmanned road vehicle that will steer itself from the grocery store to customers’ homes. (Meanwhile, Walmart plans to test using autonomous vehicles to bring customers to their stores.)
- Kroger in May bought a stake in U.K. online grocer Ocado Group PLC, No. 24 in the Internet Retailer Europe 500, and says it will license Ocado’s automated warehouses and delivery technology. Kroger also announced earlier this year that it would expand its partnership with grocery delivery company Instacart.
- Also in May, Kroger paid $200 million to acquire Home Chef, a meal-kit retailer that claims to have grown its revenue to $250 million last year, while also posting two profitable quarters.
Kroger’s shift online is, in many respects, a reaction to Amazon’s acquisition of the Whole Foods grocery chain. Amazon’s Whole Foods acquisition has pushed many grocery chains, which in many cases were cautiously wading into e-commerce, into the deep end as many have made significant investments in e-commerce and omnichannel services.
A recent study from Kantar Worldpanel found that online sales of fast‑moving consumer goods (FMCG)—the kinds of low-cost products typically sold in places like grocery stores, drug stores and convenience stores—grew faster than any other sales channel despite a considerable slowdown last year. Kantar expects online sales to reach 2.8% of the U.S. FMCG market this year and 5.4% by 2021.
The rapid pace of delivery-related activity is a natural outgrowth of the broader consumer trends, Steve Bishop, managing partner and co-founder of grocery retailer consultancy Brick Meets Click, told Internet Retailer earlier this year. The industry is increasingly moving online, he says, and delivery—along with customer pickups of web orders—is essential to grocers that want to successfully compete.
“There will be significantly greater emphasis in 2018 on delivery, mainly outsourced to third-party players by Instacart and Shipt,” Bishop says. “There will be less short-term interest in delivery being done [and] fulfilled by the grocer themselves, but that’s likely to change in the future.”
Instacart and Shipt provide delivery services to grocery stores and other retailers. In April, Instacart added more money to a previous round of venture-capital financing from February, bringing the total to $350 million. Instacart operates in more than 240 markets. Late last year, Shipt was acquired by Target Corp. for $550 million.