Case Assignment: Kroger Co.
In 1883, Barney Kroger used his life savings (a total of $372) to open a grocery store on Pearl Street in downtown Cincinnati, Ohio. He ran his retail business with a simple principle: Be particular. Never sell anything you would not want yourself. Over 130 years later, Kroger is one of the world’s largest retailers with more than 2,700 stores falling under two dozen company banners.
Over its century of growth, mergers have been key to Kroger’s continued success. In 1983, Kroger merged with Dillion Companies Inc. in Kansas to become a coast-to-coast operator of food, drug, and convenience stories. In 1999, the company merged with Fred Meyer, Inc. to create a supermarket chain with the widest variety of formats and the broadest geographic coverage in the food retailing industry.
In 2014, Kroger completed its merger with Harris Teeter, a regional chain in the Mid-Atlantic region and the District of Columbia. In addition to acquiring more than 200 stores, Kroger gained the prototype for Harris Teeter’s online grocery service.
Kroger took this prototype and ran with it, and in late 2014, the company began testing ClickList, their option for online grocery shopping. The concept took off, with working moms calling it a “game changer” due to the fast service.
Kroger ClickList customers shop online for their groceries, choosing from a catalog featuring 40,000+ items, including fresh meat and produce. After confirming the order, shoppers reserve a pickup date and time. At the designated time, they pick up their order by parking in one of the designated ClickList spots. Store attendants personally select the groceries prior to the designated time, and at pickup, they load the groceries into the customer’s vehicle. Customers can pay without even turning off their engine. The service costs $4.95 for regular orders and $7.99 for expedited ones.
ClickList transactions must be paid for with a credit or debit card. Government benefits (including WIC and SNAP) cannot be accepted. Cash, checks, and gift cards also cannot be accepted for ClickList payments, but patrons can use their KrogerPlus Card to receive purchasing rewards.
By 2016, Kroger had expanded ClickList services to Nashville, Tennessee; Atlanta, Georgia; Louisville, Kentucky; Cincinnati, Ohio; Murfreesboro, Tennessee; central Virginia; and central Indiana locations. Kroger had to make physical changes to stores offering ClickList, such as adding refrigerators and freezers, designating a pickup area in the parking lot, and adding exterior doors to allow attendants the most direct access to pickup areas. They also had to add employees to fill the orders and manage grocery pickup and payment.
While Kroger may have been the first to enter the click-and-collect grocery business, they are unlikely to be the last. Walmart has been testing its own click-and-collect service for groceries. And Amazon may be taking steps to enter into the drive-up grocery game. (The grocery market is worth $800 billion.)
Amazon already offers AmazonFresh, home delivery of more than 500,000 items, including fresh groceries for same-day or next-day delivery. AmazonFresh is available only in Seattle, areas of northern and southern California, New York City, Philadelphia, Baltimore, and Stamford, Connecticut. AmazonFresh costs $299 for an annual membership. AmazonPrimeNow is also expanding into new markets with two-hour home delivery of select products ordered from Amazon.com.
Amazon has made no official statement about their future plans in the grocery business. Only time will tell how successful Kroger’s ClickList will actually become and what competition it will face in the future.
1. Kroger Co. is one of the world’s largest grocery retailers.
2. Kroger locations are franchises.
3. Kroger locations are considered convenience stores.
4. Kroger’s ClickList is an example of nonstore retailing.
5. Picking and packing groceries is easier for Kroger employees than customers because they have access to the floor stock and the back stock.