Kroger Gets Into Online Grocery Shopping Act

Supermarket uber-chain The Kroger Co. on Wednesday launched Kroger Ship, a direct-to-consumer e-commerce platform. Ship debuted in four markets: Cincinnati; Houston; Louisville, Kentucky; and Nashville, Tennessee.

The service will be rolled out to additional markets over the next few months.

During the first phase of Kroger Ship, customers will be able to shop from a curated selection of 4,500 Our Brands products, which are not available elsewhere online, and more than 50,000 center-aisle groceries and household essentials that matter the most, as rated by 84.51, a Kroger subsidiary.

Kroger Ship will carry staples, customer favorites, and bulk and additional sizes. It will focus on Our Brands, local and international food and flavors, specialty items, and health and wellness products.

“I think it’s interesting — and important — that Kroger’s featuring its private label in the assortment,” said Nikki Baird, VP of retail innovation at Aptos.

“That has proven to be a strong strategy for Amazon,” she told the E-Commerce Times.

The Ship service offers competitive e-commerce pricing, Kroger said.

Still, pricing is not the real issue, suggested Ray Wang, principal analyst at Constellation Research. The products “have to be good enough to purchase online instead of going to the store.”

That’s hard to do with produce unless there’s uniform quality in the supply chain, he told the E-Commerce Times. “For other goods, they’d better be better than Amazon, which is the gold standard.”

Kroger Ship “complements and joins our 2,800 grocery stores, 1,250 curbside pickup locations, and delivery service from 1,200 locations,” noted Yael Cosset, Kroger’s chief digital officer.

Ship “is our next step in creating a seamless experience that allows our customers to shop when and how they want,” he said. “Our new service is just one more way we are redefining the customer experience as part of Restock Kroger, bringing more convenience and options to shoppers across America.”

Kroger is the third-largest retailer in the world. Its family of companies includes Kroger, Ralphs, Food4 Less, Copps, JayC Food Stores, King Soopers, Baker’s, Foods Co., FredMeyer, Fry’s Food Stores, Fred Meyer Jewelers, Pick ‘n Save, Kroger Personal Insurance, The Little Clinic and City Market.

Shipping Details

During the launch phase, shipping is free with no minimum purchase requirement. Also, customers can get 15 percent off their order with a one-time promo code, SHIP15.

After that, shipping will cost US$4.99 for orders up to $35, and it will be free for orders that exceed that amount.

“People do not want to pay for shipping,” Aptos’ Baird said. “I think that’s true for almost any product category, but it seems to be more true for groceries.”

With e-commerce offerings, grocery chains “aren’t competing with other e-commerce companies and their shipping charges,” Baird remarked. “They’re competing with the value consumers put on their time and the hassle factor to go to a grocery.”

Deals for Customers

Kroger Ship customers will get exclusive promo codes and pricing deals and can use a set-and-save subscription.

“I think this is becoming the standard required to be minimally competitive,” Aptos’ Baird remarked. “The set-and-save subscription is important — not everyone is offering that quite yet. But I haven’t seen how granular that is.”

Promo codes and pricing deals, as well as subscriptions, “are like Amazon Prime membership for Whole Foods shoppers,” Constellation’s Wang, told the E-Commerce Times. “This seems to be more a defensive play than offensive.”

However, predefined break points in subscriptions plans could be a problem, Baird noted.

“If I need something every 10 days, but my choices are to order every week or two, it’s frustrating to go back and forth between having it pile up or run out,” she pointed out. “There are still lessons to be learned for managing subscriptions, especially for everyday-use items.”

Running to Catch Up

Amazon, Walmart and Costco are the major players in the online food ordering and delivery sphere.

“When crafting a digital strategy, you should always have products that aren’t available on the store list,” Wang pointed out.

“One goal is to optimize revenue per order and to minimize shipping costs with high volume merchandise; the other is to get repetitive orders for replenishment, and vendor-managed inventory for consumers,” he said.

“Amazon is closest to being able to do this,” Wang observed. “Walmart is working on it, and Costco does it well for business deliveries.”

Ship “is about the same as or worse than” those three, he said, because it doesn’t have a clear differentiator.

Kroger “is playing catchup,” said Baird. “Pretty much all the traditional grocers are. What’s important here, though, is that they’re catching up much faster than other verticals impacted by online [shopping]. They have the advantage of learning from other categories’ mistakes and successes.”

Payments Issues

Kroger’s supermarkets unit in California will stop accepting Visa credit cards at 21 stores and five fuel centers as of Aug. 14, due to a dispute over the card’s rates and fees.

Kroger reportedly has been considering an expansion of the ban to its other units.

Customers will still be able to use Visa debit cards, MasterCard, American Express and Discover credit cards at Kroger’s California supermarkets after Aug. 14.

This “may mean you need a MasterCard, because Kroger is pushing their Rewards MasterCard to capture shopper buying data,” Wang suggested.

The State of the Market

Currently, there are enough players based on geographic reach for supermarkets to make money through e-commerce sales, according to Wang.

However, he added, “we are going to see competition that will make this very competitive and low-margin soon.”