Will the Kroger/Instacart deal redefine grocery shopping convenience in America?

Discussion
Photo: Kroger
Sep 15, 2021

Kroger and Instacart are working together to launch “Kroger Delivery Now” a new virtual nationwide convenience delivery service that will deliver fresh food, household essentials, meal solutions and snacks from morning to late at night in as little as 30 minutes.

Fulfillment of orders will be handled by Kroger’s grocery operations around the country. Customers of the service will have their choice of products from an inventory of 25,000 items. The grocery giant says its selection, pricing and speed of delivery through Instacart means that consumers will not have to make trade-offs associated with existing convenience delivery models.

The new service will require a $10 minimum order and include a $2.99 delivery fee. Instacart annual members will not have to pay for delivery. Orders can be placed through Kroger or Instacart’s apps or websites.

“Kroger Delivery Now is a differentiated solution in the e-commerce industry, not just the grocery sector,” said Rodney McMullen, Kroger’s chairman and CEO. “Our new service provides customers with one more way to shop with us and addresses the importance of convenience and immediacy. Operationally, this service reaches up to 50 million households and it’s an expansion of our thriving e-commerce model that demonstrates strategic interplay among our assets, expansive store network, supply chain and dedicated fulfillment centers and fleet, joined by Instacart’s unrivaled fulfillment model and last-mile technology to provide our customers with anything, anytime, anywhere without compromise.”

The launch of the new service is part of Kroger’s plan to double its digital sales and profits by the end of 2023. The company saw its online business grow to more than $10 billion last year.

Kroger will be enlisting its more than 2,700 stores operating under its namesake banner and its various chain stores, including King Soopers, Ralphs, Smith’s and others, will all be participating in the effort.

Mr. McMullen called Instacart a strategic partner whose “industry-leading scale and ingenuity complements Kroger’s best-in-class assets, digital strategy and expanding seamless ecosystem.”

The launch of Kroger Delivery Now, he said, “reinforces our commitment to leading with fresh and accelerating with digital in an environment of increased and sustained customer expectations for fresh food on demand.”

He called the service “a gamechanger” and said  Kroger was focused on leveraging its assets to deliver a seamless experience “in the most scalable, sustainable, and profitable way.”

DISCUSSION QUESTIONS: Will the new Kroger Delivery Now service redefine what many Americans think of convenience when it comes to ordering fresh foods and household essentials? Do you see this as a win/win/win for Kroger, Instacart and consumers, and what will it mean for rivals of the grocery giant?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The real game changer would be a functioning supply chain. If Kroger can make it happen, more power to them!"
"Instant Delivery will be the new “greens fees” for grocery and perhaps dry goods retailers."
"Where does this leave Instacart’s stated ambitions to operate its own micro-fulfillment centers?"

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31 Comments on "Will the Kroger/Instacart deal redefine grocery shopping convenience in America?"


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Lee Peterson
BrainTrust

Methinks Amazon already “redefined convenience” for us all in every retail category, didn’t they? This is good, but a catch up play.

Dr. Stephen Needel
BrainTrust

The price is certainly good – the question will be the selection. If I can do most of my grocery shopping and have it delivered for $2.99, that’s a great deal. If it’s convenience store products at convenience store prices, I’m not sure that it’s such a bargain.

Suresh Chaganti
BrainTrust

This is a huge strategic play and will widen the gap between Kroger and Amazon/Walmart. Unlike regional grocers and smaller players, Kroger has the scale and competencies to not get disadvantaged by Instacart and make the most of the Instacart‘s delivery capabilities.

From Instacart’s POV, this is a win as the competition is getting hotter with a multitude of delivery players crowding the market. Seems like a good win-win for both parties, and for customers as well.

Ken Morris
BrainTrust

Kroger and Instacart are leaders in robotic MFCs. They can pick, pack, and ship faster than the competition and had the foresight to see this opportunity and seize the day. It will take some time for others to catch up. Kroger’s ability to shift fulfillment to their MFCs and out of the store aisles will be essential to keeping in-store customer satisfaction levels high. Nobody likes fighting with Instacart pickers for elbow room. By the way, with Kroger using Ocado as its MFC solution, and Instacart using Fabric, it will be interesting to see how they integrate the processes.

Marc de Speville
Guest
6 days 11 hours ago

By no stretch of the imagination can Instacart claim to be a “leader in robotic MFCs.” It is totally new to what remains an emerging industry in which few players – Fabric included – have progressed beyond the pilot stage. Furthermore, due to latency limitations and distance from customers, MFCs and especially Kroger’s CFCs are not suited for 30 minute delivery times. This means Instacart will have to pick orders from Kroger’s stores. Given that third party pickers are inherently less efficient than a well trained and equipped in-house team, and considering the out-of-stock issues all grocers are facing, it remains to be seen how effectively Kroger and Instacart will be able to deliver on their new 30 minute service offer.

Melissa Minkow
BrainTrust

When consumers are afforded a premium service in one space, they start expecting it across all of retail. Just like Amazon set the two-day shipping standard for all, this will have a ripple effect for other retailers as well. This is absolutely a win for all involved, especially in the face of increasing shipping delays on larger ticket items.

Paula Rosenblum
BrainTrust

I have been using Instacart (through Publix) for more than three years. Before the pandemic I had knee issues that made shopping tough. However the number of out-of-stocks has been consistently surprising. The Instacart shopper really does have to work hard.

Yesterday I made my first visit to my local Publix in a very long time. The number of products out of stock or no longer carried was actually mind-boggling. Point is, if Kroger can do a better job with its supply chain and in-stock position, THAT will be the game changer. Amazon is okay — but has had its own issues. Target and Shipt, well, I used it once, but way too much was out of stock.

So the real game changer would be a functioning supply chain. If Kroger can make it happen, more power to them!

Al McClain
Staff

We are using Publix and Instacart often too, Paula. The out of stocks for the last 18 months have been high, as you said, and seemingly in almost all categories. What I really wonder, though, is if a 30-minute delivery goal for Kroger/Instacart is realistic. I’ve found Instacart service to be a bumpy ride, depending on the current state of the pandemic. They’ve ironed out some of the kinks, but are not consistent in delivering within a 2 hour window, so I seriously doubt a shorter window than that is regularly possible. Much depends on Instacart staff, and there seems to be a very high level of turnover.

Ryan Mathews
BrainTrust

Al, it’s hard to believe a 30-minute delivery window can be guaranteed day in and day out. So the question becomes, how tolerant will customers be? I’m sure we are about to understand, from the consumer’s perspective, the effective limits of time-elasticity.

Paula Rosenblum
BrainTrust

Well, it’s interesting. I find they are always on time, but I don’t ask for half hour service, ever. I think Instacart is getting the people who are tired of working in traditional retail and hospitality jobs. As long as they can find their way through the store/distribution center, it should work.

John Hyman
Guest
8 days 7 hours ago

Agreed – seeing the same supply issues in the Northeast. Do you find it less cumbersome to select a substitution in-store rather than on a webpage?

Al McClain
Staff

It’s absolutely easier to select a substitution in-store, if it weren’t for the pandemic and the sometimes inexplicable behavior of other shoppers 😉

Paula Rosenblum
BrainTrust

Yeah, I literally have to be on my iPad the whole time the picking process is going on to approve or request different substitutes. I think Instacart is getting better with that, but it takes time for it to “learn.”

Jeff Hall
BrainTrust

This is a transformative, game-changing move on the part of Kroger and Instacart. In reaching 50 million households, and offering all-day plus late-night delivery, Kroger has redefined convenience for its customers who traditionally shop in-store while enhancing the experience for those already ordering online.

John Hyman
Guest
8 days 7 hours ago

Kroger has made a promise and set an expectation. What if they fail to meet that expectation?

Neil Saunders
BrainTrust

Fast delivery is becoming a must-have for grocery retailers, especially as they now compete with an influx of startups focused on rapid service. For consumers this is a clear win as it improves convenience. Together Kroger and Instacart have the infrastructure and logistics to make this work, and the potential to do so profitably. The potential losers are some of the newer rapid delivery companies – many of which are already far from profitable.

Jenn McMillen
BrainTrust

Since impulse items often offset the margin lost on sale items, I wonder if this will have long-term ramifications for Kroger’s profitability. Ordering online is convenient, but it lacks the fresh bread smell as you walk through the bakery.

Jennifer Bartashus
BrainTrust

On-demand grocery, with delivery in very short timeframes is great for specific customer need states. Cooking dinner and forgot an ingredient? Perfect. Looking to do a big stock up on all your household essentials? Not so perfect. The danger is in offering a promise that appears to meet all needs and sets customers up for disappointment when it doesn’t pan out. So a limited number of items available for 30 minutes or less is a great strategic decision, though customers may need to be educated on the “why” so that expectations can be managed. There are also others out there doing this sort of on-demand grocery, like Yummy.com in Los Angeles (30-minute delivery) and Gorillas in NYC which delivers in under 10 minutes. Kroger has the national footprint to bring this type of offering to areas outside of major urban areas, which is a win for customers.

Ron Margulis
BrainTrust

Where does this leave Instacart’s stated ambitions to operate its own micro-fulfillment centers? They could clearly be competitors with the Kroger/Ocado centralized fulfillment centers. I’m sure the smart people at both companies discussed this eventuality, suggesting there are other joint announcements coming in the near future.

Ryan Mathews
BrainTrust

Ron,

That’s the multi-million dollar question. Is Instacart looking for a partner/buyout, or are they building a national grocery delivery brand, at their customers’ expense, that will eventually disintermediate their current partners? I’m not so sure there’s an obvious answer to what ought to be a simple question.

Lisa Goller
BrainTrust

Yes and yes. Kroger and Instacart’s last-mile speed and variety will set a new standard for grocery convenience.

Last-mile speed differentiates Kroger as e-grocery surges. Instacart partners with another grocer with pervasive national reach, boosting its influence. Consumers gain simple solutions that save time with easy food solutions.

Grocers face pressure to compete with peers, food delivery apps and ghost kitchens for consumers’ share of stomach. (In Europe, Gorillas delivers groceries in as little as 10 minutes.) Expect more last-mile partnerships to speed up e-grocery in time for Thanksgiving.

Harley Feldman
BrainTrust

The Kroger Delivery Now service will be a winner – Kroger has grocery stores with the items in a huge number of locations, Instacart will make ordering easy, the 30-minute delivery time is quick and the cost of the delivery is inexpensive or free with an Instacart account. This makes ordering for quick delivery a new standard for the grocery industry. Kroger’s competitors will need to follow.

Jeff Weidauer
BrainTrust

The Kroger/Instacart partnership will absolutely change the game for all. The question is how Kroger can protect itself from other retailers who can copy the model with Instacart. Table stakes expectations quickly become commoditized.

Venky Ramesh
BrainTrust

Though Amazon provides the benefit of convenience and immediacy in the grocery space through Whole Foods, Kroger provides a much wider scale of assortment relevant for the mass market. To Ken Morris’ point, this is a marriage of two MFC giants. It will be interesting to watch the automation-at-scale of the last mile and how that helps make the e-commerce route-to-market profitable.

Shep Hyken
BrainTrust

Americans have come to expect convenience as part of the customer experience. More and more organizations are figuring this out. Retail, and specifically the grocery industry, is a leader in this area. Just as e-commerce has evolved, so will the concept of convenience and delivery. Retailers are finding ways to be more efficient about it. In this case, it is a win/win/win – for all parties involved.