In response to increased consumer demand for immediacy that has given rise to a pack of well-funded and fast-growing young rivals such as GoPuff, Kroger Co. and Instacart on Tuesday announced an exclusive partnership offering a 30-minute “virtual convenience store” to customers in Kroger's trade areas that the companies are calling Kroger Delivery Now.
The offering utilizes Kroger’s network of 2,700 stores, from which 25,000 items will be available, emphasizing fresh food, household essentials, meal solutions and snacks, and is available to online shoppers 24 hours a day.
The companies described the collaboration as the first in the U.S. to utilize an established grocery retailer to directly provide a national convenience delivery solution. It will be available through the Kroger and Instacart web pages and apps and on a new “Convenience Hub” on the Instacart Marketplace.
“Kroger Delivery Now is a differentiated solution in the e-commerce industry, not just the grocery sector,” Rodney McMullen, chairman and CEO of Cincinnati-based Kroger, said in a statement. “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.”
Kroger and San Francisco-based e-commerce and delivery tech platform Instacart have partnered since 2017, with Instacart providing a web store on its Marketplace and contracted delivery drivers for the retailer, allowing Kroger to offer its full grocery lineup for delivery in two hours.
More recently, that two-hour deadline has been under attack from emerging virtual c-stores such as GoPuff, whose model offers so-called instant delivery from among a smaller selection of items, executed from strategically located mini-warehouses vs. storefronts. These companies—including a pack of bicycle-delivery brands now invading New York, are betting on the notion that consumers’ desire for instant gratification can overcome limitations in selection by enabling a more spontaneous—and more frequent—method of shopping.
Their use of microwarehouses vs. stores to cut down on the cost of picking and delivery is also seen as a something of a threat to enablers of legacy retailers like Instacart.
The model has arisen during the pandemic, which has tended to make more traditional outlets like Kroger’s grocery stores lose trip volume but gain larger rings as millions of U.S. grocery shoppers sought to shop online for the first time and tried to limit physical visits to stores. Companies like Kroger have for years been strenuously expanding their own e-commerce options through partnerships with contract delivery partners such as Instacart while developing more efficient full-shop delivery options, like Kroger's Ocado-powered warehouses—now providing grocery delivery in Ohio and in Florida and on their way to additional regions. That offering primarily provides next-day scheduled delivery in temperature-controlled vans from its own employees and gives Kroger an opportunity to expand geographically.
In this way, Kroger hopes to gather food shopping trips across varied consumer need states while retaining its store’s shoppers amid temptation from emerging rivals in the instant-delivery space. Kroger said it would do so in part by leveraging its advantages in fresh food and technology—key tenets of a newly launched strategic plan that contemplates achieving $20 billion in online sales by 2023, while doubling its online profitability. This will be achieved through higher volumes, more efficient and varied solutions, such as the Kroger Delivery Now offering and Ocado expansion, and associated digital marketing efforts, officials says.
Kroger said it had more than $10 billion in e-commerce sales in fiscal 2020, or about 7.5% of its $132 billion in overall revenue.
“Kroger Delivery Now 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,” McMullen continued. “This service is truly a game changer, and we’re eager to continue leading the way by expanding our ecosystem and leveraging our complementary assets to deliver a seamless experience with our total network of assets, including enterprising and innovative last-mile solutions—today's true competitive horsepower—in the most scalable, sustainable, and profitable way to advance our business and create a consistent and rewarding customer experience whether they want groceries now or tomorrow.”
Convenience is among the most popular categories on Instacart, with orders up more than 150% since May, the company said. Demand for rapid delivery also continues to grow, with nearly 20% of customers selecting a newly offered “Priority Delivery” at checkout today.
“We’re proud to expand our long-time, strategic partnership with Kroger and together unveil Kroger Delivery Now—an entirely new way for customers to access convenience delivery nationwide," Fidji Simo, Instacart’s CEO, said." Kroger Delivery Now, available only on Kroger.com and the Instacart Marketplace, reimagines the modern convenience store by leveraging the entire network of iconic Kroger Family of Stores brands to offer 30-minute delivery to customers for the first time nationwide.” Simo added: “Instacart has become a powerful retail enablement platform, and today’s expansion of our Kroger partnership is another example of our commitment to develop new solutions that help retailers grow and meet the evolving needs of their businesses and customers.”