Has Kroger found an answer for Amazon Prime and Walmart+?

Discussion
Source: Kroger
Nov 05, 2021

Kroger appears ready to get on the subscription program bandwagon with the launch of a new service that offers expedited grocery delivery and fuel rewards for its customers. The program, called Kroger Boost, seems designed to be the supermarket giant’s answer to similar services offered by rivals Amazon.com, Walmart and others.

The new service, which is being piloted in the Atlanta, Cincinnati, Columbus, OH, and Indianapolis markets, comes in two price tiers. Customers paying $59 a year get free delivery within 24 hours and two-times Kroger fuel points up to $1 off the price of a gallon of gas. Those paying $99 get free delivery in as little as two hours and fuel rewards. Free delivery is offered on orders of $35 or more.

Kroger sends customers who sign up for Boost “a welcome kit” valued at over $100, according to WLTW. It includes deals from Home Chef, Murray’s Cheese, Vitacost and Kroger’s Our Brands in an offset to the membership fee.

“Customers are increasingly looking for more convenient ways to feed their families and shop for groceries while consolidating trips and saving money. From fresh food to household essentials, Boost elevates everything Kroger has to offer while providing our customers access to a new level of savings and benefits,” Scott Hays, president of the grocer’s Cincinnati/Dayton Division, said in a statement.

Kroger is counting on the fuel rewards to be a significant draw for Boost since prices at the pump have jumped.

“It’s the perfect time to launch with double fuel points,” Stuart Aitken, Kroger’s chief merchant and marketing officer, told The Enquirer in Cincinnati. “If you go to the gas station right now, it’s more than it’s been in a long time, so it’s a great deal for customers.”

The retail giant is also looking to boost sales (pun intended) via digital channels, having set a goal of doubling its $10 billion in online revenues by 2023.

The company said last month that it plans to expand Kroger Delivery, including into markets where it currently has no physical store presence (Northeast U.S.) and in Florida where it has only a single store. Kroger’s automated shed fulfillment facilities using Ocado technology are expected to handle up to $700 million in orders annually. Kroger extends the reach of sheds, which are designed to cover up to 90 miles, with the addition of spoke locations.

DISCUSSION QUESTIONS: Will Kroger’s new subscription options prove popular with the grocer’s customers in the markets where it is being tested? Do you expect the program to be rolled out nationally?

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15 Comments on "Has Kroger found an answer for Amazon Prime and Walmart+?"


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Mark Ryski
BrainTrust

There’s good reasons for Kroger to launch a subscription option as it’s ideally suited for many household goods that people buy. And while this new program will undoubtedly resonate with some customers, characterizing it as “jumping on a bandwagon” is appropriate. This is another version of a “me too” program that hardly represents anything profoundly new or innovative.

Neil Saunders
BrainTrust

For regular customers this is a good program which, from Kroger’s perspective, helps lock in their loyalty. However I wonder how attractive it is for those who only shop occasionally. There are so many paid-for subscription programs and schemes now and there are limits to the number customers will participate in. Free delivery and discounted gas are valuable, but they’re not exactly groundbreaking.

Ben Ball
Guest

Sounds like a winner — relatively speaking. Fuel discounts have always been one of brick-and-mortar retailers’ best weapons. Especially during rising prices. And paying for “shipping” up front is a proven winner too as Amazon has proven. Somehow there seems to be an irony here though. Pay upfront for delivery — so you don’t have to drive — to get fuel rewards on gas. Hmmm…

David Naumann
BrainTrust

The trends have shown an increase in consumer demand for grocery delivery services. What was spurred by the pandemic has become a convenient habit for many consumers. The Kroger Boost program is Kroger’s response to “keep up with the Joneses” (Amazon and Walmart) and to help retain its customer base. The Kroger Boost program will appeal to loyal Kroger customers that appreciate home delivery. I suspect we will see other grocery chains launching similar delivery subscription options.

Liza Amlani
BrainTrust

This is exactly what Kroger should be doing and the benefits of bringing subscription into a delivery model will not only “boost” recurring revenues but will also increase Kroger’s brand power and loyalty.

Keeping delivery in-house as opposed to using a third-party like Instacart will drive purchasing insights through customer data and preferences but will also encourage customers to choose Kroger vs. competitors because they have already paid for a year membership.

Costco is the benchmark on the membership model at revenues of $163 billion and Walmart is the one to beat on assortment selection and value at $560 billion.

Kroger could start to creep up and take Costco and Walmart’s marketshare quite easily by introducing a subscription model.

I can’t wait to see this play out.

Jeff Sward
BrainTrust

It looks like subscription based “free” delivery programs are about to become table stakes for many retailers. It’s a question of how many “free” delivery programs any given customer can extract maximum value out of. An annual fee of $99 sure sounds like a much better deal than the $10 per delivery that Whole Foods will charge. I doubt any other program will pry many customers away from Amazon, so my bet is Amazon plus your favorite grocer will become the baseline for many households.

David Weinand
BrainTrust

Kroger does have the scale to pull this off and consumers absolutely love fuel benefits so I will assume that the pilot will be a success and it will be rolled out nationally. Our shopper research has certainly confirmed the increasing preference for delivery (e.g. convenience) and if it’s bundled into a subscription that pays for itself, all the better.

Gary Sankary
BrainTrust

I expect that Kroger will be successful in their tests and I do expect to see it rolled out nationally. That said, I think this is more of a strategy of playing catch up than anything being innovative or cutting edge. The pandemic accelerated consumer adoption of a number of fulfillment strategies. I predict that these sorts of subscription and delivery schemes are going to be table stake for grocers in the future. I expect to see more national chains announce these services.

Lisa Goller
BrainTrust

Loyalty is up for grabs and Kroger Boost ties the retailer to consumers’ frequent habits.

Kroger customers will welcome this subscription for its convenience and compassion as the cost of living rises. As everyday expenses like food and gas increase, Kroger Boost makes these essentials more affordable. Fast grocery delivery is also essential for Kroger to counter grocers, food apps and last-mile players speeding up CPG.

If the pilot succeeds, I can imagine a national rollout within a year.

Richard J. George, Ph.D.
BrainTrust

Kroger continues to battle the two giants and is taking the game to them. Subscription services make sense. However they focus on delivery, not BOPIS. This limits the opportunity for Kroger to sell high margin items (bakery, floral, cheeses, meats, seafood, etc.) to customers with empty carts.
Fuel option are a good differentiating factor with rising fuel prices. Plus this option is harder for Amazon to match.

Jennifer Bartashus
BrainTrust

Kroger’s move helps the company cover the costs associated with delivering grocery orders and gives customers a break from delivery fees on individual orders. This provides a sense of value and helps lock in loyalty. And if people pay up for a subscription they will be more inclined to continue to use the service and not stray to other retailers.

Richard Hernandez
BrainTrust

This is keeping up with the Joneses and it’s a smart idea. They offer differentiators that are relevant to their customer base such as points on gas fill ups. I expect to see more retailers jump into the “plus” subscription model.

Shep Hyken
BrainTrust

And the competition is heating up! Kroger has a HUGE customer base and is finding a way to add more value with their subscription model. The key will not be getting people to join. It will be making sure they use it so they renew. I’d be surprised if the program doesn’t roll out nationally in the next 12 to 18 months.

Gene Detroyer
BrainTrust

I think they are going to sell a lot of gas.

Brandon Rael
BrainTrust

For extremely loyal Kroger customers, the “Kroger Boost” subscription model represents another key loyalty touchpoint for the brand. If you are loyal to Kroger, joining this program makes absolute sense as it will provide relatively affordable home delivery and gas cost savings.

However if the customers are already aligned with the Prime and Walmart subscription offerings and only are occasional shoppers at Kroger, they are not the target consumers. While “free delivery” and cost savings on gas will attract consumers’ attention, they are not the innovative offerings that will reimagine what the grocery shopping experiences could be.

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