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Fuelled By At-Home Shoppers, Kroger Tests Prime-Like Subscription Delivery Service

TOPLINE

With little fanfare, Kroger, the nation’s largest traditional grocery, this spring began testing a $79 annual delivery service that functions much the same as the initial Amazon Prime — further evidence that Amazon’s strategy of catering to the at-home consumer is gaining apostles.

KEY FACTS

Kroger’s Delivery Savings Pass allows consumers to have unlimited delivery via Instacart of grocery orders over $35 for the set $79 annual fee, avoiding the standard $9.95 per order charge and potentially saving shoppers hundreds of dollars after the eighth order in a year.

The service is being tested in Dallas and Southern California, at Kroger’s eponymous stores in Texas and at Ralphs stores on the coast — and the company is evaluating whether to roll it out more broadly and add additional perks beyond points that translate into discounts on gasoline.

Amazon Prime was introduced in February 2005, as an unlimited, two-day shipping service on 1 million items; coincidentally with a then-pricetag of $79 a year.

Today, the service is $119 annually in the U.S., includes free access to movies and music, along with discounts at and same-day delivery from Whole Foods; with Prime members spending and shopping more often than non-members and streaming double the amount of content as a year ago according to Amazon executives.

Kroger would not say how many consumers have signed up since the test began in May; a spokeswoman told Forbes “customer adoption and engagement are on track with our goals,” but added “it’s too early to determine future plans.”

The nation’s largest retailer also is about to get into the subscription delivery game with Walmart+, a service that reportedly will cost $98 a year and include unlimited same-day delivery of groceries and products from Walmart stores, discounts at Walmart gas stations, early access to deals and more.

what to watch for

Earlier this week, CNBC reported that Walmart was working with Instacart to test same-day grocery delivery in four markets in California and Oklahoma. Walmart, in an email to Forbes, did not offer details of the test but said: “As we continue to expand our own delivery from nearly 3,000 stores reaching nearly two-thirds of American households, we’re excited to test and learn in four markets reaching new customers with Instacart.”

big number

$7.25 billion: That was the tally for online grocery delivery and pickup in June, according to Brick Meets Click, a research firm that studies the evolving grocery industry. In March, near the beginning of the coronavirus pandemic, that figure was $4 billion compared with a mere $1.2 billion in August 2019, according to Food On Demand News, with the rapid growth this year demonstrating the impact of pandemic lockdowns.

key background

The coronavirus pandemic accelerated what already was a growing consumer affinity for shopping online and picking the items up either from the store or the doorstep. In Kroger’s first quarter 2020, digital sales grew 92%, even though stores remained open for in-person purchases. Major retailers are betting that the desire to buy potatoes from the couch will continue. Between July 2019 and July 2020, global e-commerce transactions increased by 19%, according to payments processing firm ACI Worldwide. And companies that are not Amazon are coveting its loyal customer base of more than 150 million paid Prime members worldwide (as of January). While offering more services — now there’s Amazon Prime Gaming — Amazon expands its ecosystem and picks up invaluable customer preference data.

further reading

Grocery Shoppers Fuel Huge Boost in Amazon Sales (Forbes)

What Walmart Plus Means For The Future Of Retail (Forbes)

Online Grocery Continues To Accelerate (Food On Demand)

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