Kroger Co. (NYSE: K), the massive U.S. grocery chain, has decided it wants to expand further into the grocery delivery service. The primary challenge to its new plan is that it gambles that a large number of people want their groceries delivered. They may not.
The new program is called Ship. It allows consumers to order groceries online and have them delivered. Yael Cosset, Kroger’s chief digital officer, describes it this way:
Kroger Ship is our next step in creating a seamless experience that allows our customers to shop when and how they want. 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.
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People with orders of over $35 get the delivery service for free. People who order less face a fee of $4.99. That means a 50% premium on a $10 order.
The program is meant to combat a slew of related services from Amazon.com Inc. (NASDAQ: AMZN) and Walmart Inc. (NYSE: WMT). Amazon sold food before it bought grocery chain Whole Foods. It has now doubled down, offering grocery shoppers benefits from its Prime membership. And groceries are among the largest contributors to Walmart’s revenue.
The food delivery business may make for good headlines, but does it affect financial results for any of these companies? Kroger’s sales last year were $123 billion. Presumably, almost all the people responsible for those sales walked into a store, shopped and walked out. And people can be finicky about what they buy. As with clothing, people often want to see before they buy.
The new Kroger delivery program is a good idea, if anyone uses it.
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