Kroger Ship to take on Amazon’s Prime Pantry

Discussion
Photo: Kroger
Aug 01, 2018
George Anderson

Kroger announced today the launch of “Kroger Ship,” a new delivery program for shelf-stable grocery products that appears to be an answer to similar services from Amazon.com (Prime Pantry) and Target (Restock).

Ship is being launched in Cincinnati, Houston, Louisville, and Nashville with plans to roll it out to additional markets over the next several months. At the start, customers will be able to order from a selection of more than 50,000 products and receive discounts on items that are added to a subscription list.

Kroger will deliver orders of $35 or more for free, and charge $4.99 per order for those falling below that total. In addition to discounts for subscriptions, Kroger will also offer opportunities to save money with promo codes and sales offers on select items. To generate interest, the grocer is offering 15 percent off the first order to customers testing the service.

The Wall Street Journal reports that Kroger developed the platform for the new service in-house using the expertise of its Vitacost.com team. The supermarket giant acquired Vitacost in 2014.

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

DISCUSSION QUESTIONS: Will the Kroger Ship service help to “redefine the customer experience” at Kroger? How does it fit in with Kroger’s delivery and curbside pickup services?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Replenishable center-aisle items are the best candidates for an in-home delivery, and that's exactly what Kroger is leading with. "
"This is certainly a reaction to their primary competition but necessary as retailers these days need to have many arrows in their quiver to meet the e"
"For Kroger’s loyal customers, I believe this service will add to the customer experience, not necessarily redefine it."

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18 Comments on "Kroger Ship to take on Amazon’s Prime Pantry"


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Mark Ryski
BrainTrust

There’s no doubt that this offering will appeal to some customers — with free delivery on orders over $35, it’s compelling. Ultimately the questions that will need to be answered are: 1.) does this attract new/retain existing customers and 2.) can this be done in a sustainably profitable way. As was discussed in prior posts, the economics of home delivery services are terrible and I don’t imagine they will be any different for Kroger.

Keith Anderson
BrainTrust

I view this as an important but largely defensive play to offer loyal Kroger shoppers the convenience and value they might otherwise seek elsewhere.

Membership and subscription models like Kroger Ship are creating “forever moments of truth” that raise the competitive stakes by “annuitizing” consumption. If Kroger doesn’t lock in loyal households now, the risk is that competitors will.

Kiri Masters
BrainTrust

Given the success of their Vitacost division which they’ve held for four years now, I think Kroger can make this work.

Replenishable center-aisle items are the best candidates for an in-home delivery, and that’s exactly what Kroger is leading with.

They also revealed an ace up their sleeves: launching 4,500 of their private label “Our Brands” products, which are not available anywhere else online. Customers who are loyal to those products will be pleased to be able to stock up between store visits.

David Weinand
BrainTrust

This is certainly a reaction to their primary competition but necessary as retailers these days need to have many arrows in their quiver to meet the enhanced expectations of their shoppers. As we know, free shipping over a certain basket size is a motivator so this may help them to increase basket size as a side benefit.

Adrian Weidmann
BrainTrust

The more retailers provide these services, the more shoppers will use and feel comfortable with these services. Shopper expectations will continue to grow and expand. Kroger customers will benefit and this will further distance Kroger from its competitors. These delivery services are sticky in that they establish a tighter bond between the brand and their customers provided retailers deliver — both on their promise and literally; on time and the correct items! As shopper expectations grow and customers demand more, the challenge for retailers is how to meet these expectations with a sustainable business model. Offering free delivery of $35 worth of groceries certainly redefines the customer experience for those Kroger customers taking advantage of this fantastic offer. They’ll come to expect this experience — let’s hope they won’t be disappointed.

David Naumann
BrainTrust
David Naumann
Vice President, Retail Marketing, enVista
1 year 24 days ago

It is all about options! Offering customers multiple ways to buy and receive goods lets them choose what works best for them, which may be different based on product selection or how much time they have in a given day or week.

Kroger’s shipping costs seem reasonable based on what Amazon and Target are offering. They may want to consider a membership program where customers can get all orders for free with a monthly subscription service.

Jennifer McDermott
Guest

The rollout of Kroger Ship is vital if Kroger wishes to remain in competition with large retailers such as Amazon and Target. For Kroger’s loyal customers, I believe this service will add to the customer experience, not necessarily redefine it.

Kroger Ship offers customers a convenient way to restock without leaving their homes. This service compliments Kroger’s delivery and curbside pickup services, seeing as those services deliver on more immediate items. With Kroger offering competitive delivery services, it will be interesting to see how customers respond to Kroger Ship, and how it will tie in with its other services.

Doug Garnett
BrainTrust

Retailers everywhere need to be cautious about loading all these experiences and features.

We need remember Christensen’s observations in The Innovator’s Dilemma. Disruption (whose commonness he exaggerates) becomes a risk when a long-time player loads too many costly features that consumers only partially value. That creates the situation where a low-cost player can come into the market and offer far fewer features but make customers quite happy. And the market is disrupted.

No. This won’t “redefined the customer experience.” It is another option that some people will use. It won’t offer much profit ($5 shipping up to $30 then free? Eating one-sixth of cost isn’t the way to profitability).

Lee Peterson
BrainTrust

This is a good idea as the best customer experience with Kroger is not going to one of their stores. So if they just became a huge warehouse and shipped, they’d probably improve their CX scores threefold!

Kroger obviously has a burning platform and Amazon and Walmart will quickly figure out a zero profit model for shipping groceries to put them out of business so, a necessary move as well. I hope it all works for consumers’ sake too, as it’s still the number one place people dislike shopping. And don’t we all know that from our own experiences!

Philip Cop
Guest

For the growing target demographics Millennials and Generation Zers, this seems indeed like an attractive deal from Kroger compared to Amazon Prime Pantry: free delivery from $35 instead of Amazon’s $40; and when below that a delivery fee of $4.99 instead of Amazon’s $7.99.

It will be interesting to see if they are able to get enough scale and velocity to make it economically viable. Large retailers such as Kroger simply cannot sit on the sideline. They have to try out and tweak different online fulfillment methods.

Tony Orlando
BrainTrust

Once again the big boys are chasing each other into more losses providing free delivery on $35 worth of staples. Making money seems unfashionable with these new efforts, but again it is a battle to see who is left standing out there in the retail supermarket arena and, unless you are willing to take a loss, I’d stay out of the craziness.

Michael La Kier
BrainTrust

Saying it will “redefine the customer experience” is a bit much. Kroger Ship helps get Kroger on a level playing field with other retailers (Amazon, Target, etc). What could help significantly is the huge data asset from 84.51 to help manage the inventory and engender greater omnichannel shopper loyalty.

Cynthia Holcomb
BrainTrust

This is simply now one of the established methods of grocery delivery Kroger must match to remain relevant to their competition. It’s great news for Kroger loyalists, as they curiously watch their neighbors receive daily packages from Amazon. Now they too can ride the digital shopping wave right into their pantry.

Ryan Mathews
BrainTrust

This may be a half-step in an inevitable direction. But why stop at shelf-stable? Well, because picking is too expensive I suppose. However, what do younger consumers want — more canned corn or fresh corn? It feels like too little to really make a significant difference. As to the second question, it’s all part of what is becoming a universal strategy aimed at attempting to get people when they want it, where they want it and how they want it.

Andrew Blatherwick
BrainTrust

It is interesting that so much attention is being paid to creating new innovative home delivery options for all the major grocery chains, yet they seem to be doing only half the job. If the home delivery options only offer shelf-stable grocery products, the customer will still have to visit the store or, more dangerously, another store to get their fresh, chilled and frozen products. This does not offer a compelling story to the consumer and as stated could provide a risk to the retailer that the customer visits another more local store for the non shelf-stable items and finds it a better alternative.

This does not happen with Tesco, Sainsbury’s or other U.K. retailers and if it is properly organized the delivery of these items is achievable. All retailers offering this half measure leave themselves open to being beaten by a competitor who does have the ability to do the job properly.

Rich Kizer
BrainTrust

A long time ago, an old retailer taught me — “do something, even if its wrong, just do it and learn.” I have to tip my hat to Kroger: it seems like I read about something they are doing to improve, reinvent or become more efficient every week. This delivery strategy is not groundbreaking, but this is a giant retailer that is refusing to stand still with their focus on the improving the customer’s expectations and experiences. It will work with their customers, and it will spread. Kroger Ship may erode some margin in the learning process but, with the lessons they learn, improvement will come.

Lyle Bunn (Ph.D. Hon)
Guest

Kroger Ship is a worthy addition to the growing armada of shop ‘n ship. Despite all the exceptions, constraints and wrinkles to the ironed out, it is more important that the game is on. Kroger has made a move that says basically, “we will not stand idly by.”

Susan Viamari
BrainTrust

Kroger Ship won’t necessarily redefine the customer experience, but will simply be one more way that Kroger continues to demonstrate value for its customers. Online and offline retail must be reciprocal to meet consumer expectations and be successful. Kroger is already doing well in brick-and-mortar, and they are taking calculated, incremental steps to beef up both online and offline shopping experiences, while still managing to scale quickly. Many retailers are discovering the complexities of offering home delivery profitably or at least with minimal losses. This is the “last mile” issue that occurs in many industries. However, shoppers want home delivery and it has the potential to be a differentiator; the ones who figure out how to do it profitably and efficiently will win.

wpDiscuz
Braintrust
"Replenishable center-aisle items are the best candidates for an in-home delivery, and that's exactly what Kroger is leading with. "
"This is certainly a reaction to their primary competition but necessary as retailers these days need to have many arrows in their quiver to meet the e"
"For Kroger’s loyal customers, I believe this service will add to the customer experience, not necessarily redefine it."

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