Grocery giant Kroger (KR +0.67%) isn't sitting idly by as its industry is disrupted. The company already offers online order pickup and delivery from more than 1,200 of its 2,800 stores. Now Kroger is taking on Amazon (AMZN 0.47%) Prime Pantry and Target (TGT 0.50%) Restock directly with the launch of Kroger Ship, its new home-essentials and nonperishable-grocery delivery service.
What is Kroger Ship?
Kroger currently offers grocery pickup and delivery via its Clicklist service. Both options allow customers to buy the full range of products, from grocery-aisle staples to meat and produce. Clicklist pickup carries a $4.95 fee, while delivery fees vary. For Kroger's King Soopers locations, for example, the total delivery fee is $11.95.
What Kroger has been missing until now is an affordable delivery option for products that can be shipped via UPS or FedEx: Think canned and boxed goods, cleaning supplies, and personal-care items. While those types of items can be ordered via Clicklist, the delivery fee is steep.
Kroger Ship fills this gap in the company's delivery portfolio. The new service offers 4,500 of Kroger's private-label products and 50,000 center-aisle items and household essentials. A fee of $4.99 is charged for orders under $35, with free shipping on orders that meet that minimum. Two-day shipping is the default, although quicker shipping options are available for additional fees.
Image source: Kroger.Image is from the prnewswire version of the press release: https://www.prnewswire.com/news-releases/kroger-launches-ship-300689913.html
Kroger Ship is initially being launched in Cincinnati, Houston, Louisville, and Nashville, with plans to roll out the service to additional markets in the next few months. The company already has employees assembling Clicklist orders in more than 1,000 stores, so Kroger should be able to expand Ship quickly since much of the infrastructure is already in place. It's not clear from the company's press release, though, whether Ship orders will be fulfilled from stores or distribution centers.
Taking on Amazon and Target
If Kroger Ship sounds familiar, that's because both Amazon and Target offer nearly identical services. Amazon's Prime Pantry service offers the same types of products as a subscription service for Amazon Prime members, while Target's Restock service offers next-day shipping with no fees for those paying with the retailer's store credit or debit card.
Kroger Ship isn't breaking new ground, but the pricing should be competitive. When Target revamped its Restock service back in May, I wrote that its new pricing blew Amazon Prime Pantry out of the water. Kroger Ship isn't quite as aggressive, but it's still a compelling alternative to Amazon.
Here's how these three services stack up:
|
Features |
Amazon Prime Pantry |
Target Restock |
Kroger Ship |
|---|---|---|---|
|
Membership required? |
Amazon Prime ($119 annually) |
None |
None |
|
Delivery fee |
$7.99; a $4.99 monthly subscription on top of Prime gives free shipping on orders over $40, with a $7.99 fee for smaller orders |
$2.99, free for REDcard holders |
$4.99, free on orders over $35 |
|
Shipping speed |
Most orders arrive within 4 business days |
Next-day, or two-day for orders placed after 7 p.m. |
Typically two days if order placed before 1 p.m. |
Data sources: Amazon, Target, Kroger.
In terms of product pricing, Kroger Ship looks competitive with both Amazon and Target, at least based on the items I typically buy.
Kroger Ship isn't as quick as Target Restock, and its fees are slightly higher. But it's both faster and cheaper than Amazon Prime Pantry, even if you ignore the required Prime membership. There's no way to get a Prime Pantry order without paying some sort of fee or subscription, even for Prime members, while both Target and Kroger offer free shipping in some capacity.
Defending its turf
Nonperishable groceries and household essentials are the categories most susceptible to digital disruption. Kroger needed an answer to Amazon Prime Pantry and Target Restock, to give its customers a way to get center-aisle products delivered quickly with minimal fees. Kroger Ship does exactly that.
With grocery pickup, delivery, and now Ship, Kroger has a full suite of convenient grocery options. Like Target and unlike Amazon, the company is eschewing subscriptions and instead focusing on low fees. Margins could take a hit as Ship rolls out and ramps up. But this looks like it should be a popular service for the grocer, and Kroger Ship should help it fend off the competition.
