Fast Five Shorts | Kroger And Schnucks Enhance Their Quick Delivery Offerings Via Instacart

Summary

Omni Talk Retail Podcast Summary

Episode: Fast Five Shorts | Kroger And Schnucks Enhance Their Quick Delivery Offerings Via Instacart
Release Date: February 27, 2025
Hosts: Chris Walton and Jordan [Note: The transcript references Jordan instead of Anne Mezzenga]

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Introduction

In the latest episode of Omni Talk Retail, hosts Chris Walton and Jordan delve into the rapidly evolving landscape of grocery delivery services. The episode, titled "Fast Five Shorts | Kroger And Schnucks Enhance Their Quick Delivery Offerings Via Instacart," examines recent strategic moves by major grocery chains Kroger and Schnucks to bolster their quick delivery capabilities in partnership with Instacart. The discussion is enriched with industry insights, expert analysis, and notable announcements impacting the retail sector.

Enhancements in Quick Delivery Services

Schnucks Market's Late-Night Delivery Pilot

Chris kickstarts the conversation by highlighting Schnucks Market's innovative initiative to pilot late-night deliveries from their newly established fulfillment site in Ellisville, Missouri. This facility, formerly a Straub's market, now offers a diverse product range, including home goods, beverages, prepackaged foods, fresh produce, and alcohol. Schnucks customers can place orders through either the Schnucks or Instacart platforms to receive groceries post-10 PM, addressing the needs of late-night shoppers when local stores are closed.

Chris [00:00]: "Customers can place orders from the Schnucks or Instacart site and get groceries after 10pm when the grocer's local stores are already closed."

Kroger's Partnership with Instacart for Express Delivery

Parallelly, Kroger has intensified its collaboration with Instacart by launching a new express delivery service. Customers can now shop for express delivery orders directly via the Kroger website and its digital app, enjoying the same prices, savings, and rewards available in-store. Moreover, members of the "Boost by Kroger Plus" loyalty program, priced at $99 per year, automatically receive free delivery on express orders.

Chris [00:45]: "Members of the $99 per year level of the Boost by Kroger plus loyalty program always get free delivery on Express Delivery orders."

The hosts share a light-hearted moment discussing the catchy name of Kroger’s loyalty program, emphasizing its market-friendly appeal.

Chris [00:50]: "I always love saying Boost by Kroger plus Loyalty program. That's my rolls off the tongue program."

Rising Trends in Quick Delivery

Walmart's Dominance in Same-Day Delivery

Jordan shifts the focus to a significant trend revealed in Walmart's recent earnings report: the retail giant now offers same-day delivery to 93% of U.S. households. This expansive coverage underscores Walmart's aggressive push into the quick delivery market, setting a high bar for competitors.

Jordan [01:18]: "Walmart is now reaching 93% of households with same day delivery. Let that one sink in."

Implications for Kroger and Schnucks

The discussion pivots to how Kroger and Schnucks are navigating this competitive landscape. Both companies have synchronized their delivery hours, operating until midnight and resuming at 6 AM, akin to Walmart's schedule. This alignment underscores a strategic response to consumer demand for flexibility and convenience in grocery delivery services.

Jordan [01:33]: "The hours are exactly the same. They're delivering until midnight and then they're starting back up at 6am which is what Walmart already does."

Market Competition and Customer Behavior

Shifting Customer Priorities

Jordan posits that consumers are increasingly indifferent to the specific grocery brand, prioritizing the availability and timing of deliveries over brand loyalty. This shift presents both challenges and opportunities for Kroger and Schnucks, as they strive to attract new customers through enhanced delivery options.

Jordan [01:45]: "If I go on Instacart or if I go to Walmart... I just want to get them at that time when I need them, when I want them."

Chris on Walmart's Impact on High-Income Shoppers

Chris offers a nuanced perspective, suggesting that Walmart's extensive delivery network might be siphoning off high-income shoppers from traditional grocers like Kroger and Schnucks. These shoppers typically constitute the most valuable customer segment due to their higher spending and frequent engagement.

Chris [02:15]: "I wonder if the level to which Walmart has been pulling the high income shoppers is not hurting all of grocery too because... those are your best shoppers traditionally too."

Economic Sustainability Concerns

While acknowledging the necessity for grocers to adopt similar delivery services to remain competitive, Chris raises concerns about the economic sustainability of these initiatives. Unlike Walmart, Kroger and Schnucks may lack the same high-margin product assortment and delivery volume to offset the costs, posing a potential financial strain.

Chris [03:05]: "Unlike Walmart, I worry they don't have the same basket of higher margin items helping to defray of these efforts. Yeah. You know, or the number of deliveries going out... I don't know that it's economically sustainable to do it. And that's the question I have."

Investment and Operational Strategies

Technological Investments and Fulfillment Solutions

Jordan highlights the investments required for Kroger and Schnucks to support their enhanced delivery services. This may include adopting micro-fulfillment centers and other technological solutions to streamline operations and reduce costs. Schnucks, for instance, is leveraging a dark store model to optimize its fulfillment processes.

Jordan [04:58]: "What investments will Schnucks have to make upstream too to be able to support this? Like will they have to get into micro fulfillment to make it worth it?"

Chris [05:00]: "You have to find a way to lower the costs... They are doing that. It sounds like because it's a dark store."

Conclusion

The episode concludes with Jordan expressing astonishment at Walmart's rapid expansion in same-day delivery, acknowledging the formidable challenge it poses to other grocers.

Jordan [05:12]: "I still can't get over it. It still is astonishing to me, but I guess it makes sense. They're... Walmart is moving at a pace that not a lot of people can compete with right now."

Final Thoughts

Chris and Jordan collectively underscore the critical importance for grocers like Kroger and Schnucks to innovate and scale their delivery services to retain and grow their customer base in an increasingly competitive market dominated by retail giants like Walmart. The conversation highlights the delicate balance between meeting consumer expectations and maintaining economic viability, setting the stage for ongoing developments in the retail delivery space.

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Notable Quotes with Timestamps:

• Chris [00:00]: "Boost by Kroger plus Loyalty program rolls off the tongue program."
• Jordan [01:18]: "Walmart is now reaching 93% of households with same day delivery."
• Chris [02:15]: "Walmart has been pulling the high income shoppers... those are your best shoppers traditionally too."
• Jordan [04:58]: "What investments will Schnucks have to make upstream too to be able to support this? Like will they have to get into micro fulfillment to make it worth it?"
• Jordan [05:12]: "Walmart is moving at a pace that not a lot of people can compete with right now."

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This comprehensive summary encapsulates the key discussions from the episode, providing listeners with a clear understanding of the strategic moves by Kroger and Schnucks in the context of Walmart's dominant delivery services. It offers valuable insights into the challenges and opportunities facing the retail grocery industry in the realm of quick delivery services.

Transcript

[Chris]

This one is the rare dual headline because both Schnooks and Kroger have upped their quick delivery game. According to Grocery Dive, Schnooks Market is piloting late night delivery out of a fulfillment site in Ellisville, Missouri. Customers can place orders from the Schnooks or Instacart site and get groceries after 10pm when the grocer's local stores are already closed. The fulfillment site, which was formerly a Straub's market, I hope I'm saying that correctly, has home goods, drinks, prepackaged food, fresh produce and alcohol, the St. Louis Post Dispatch also reported. And not to be outdone, according to Chain Storage, the Kroger company is also partnering with Instacart for its new express delivery service. Customers can shop express delivery orders directly from the Kroger website and digital app, receiving the same prices, savings and rewards found in store. And members of the $99 per year level of the Boost by Kroger plus loyalty program always get free deliver delivery on Express Delivery orders. Yes, and I always love saying Boost by Kroger plus Loyalty program. That's my rolls off the tongue program. Yeah, just rolls off the tongue, doesn't it? Woo. I know you have a lot of marketing thoughts on that one. And why do you think we are seeing a rush of quick delivery headlines this week?

[Jordan]

For one reason, and that is the headline that I feel like fell under the radar as part of Walmart's earnings last week and that is that Walmart is now reaching 93% of households with same day delivery. Let that one sink in.

[Chris]

Great point.

[Jordan]

You look at the announcements from Kroger and Schnooks, the hours are exactly the same. They're delivering until midnight and then they're starting back up at 6am which is what Walmart already does. And ultimately Chris, this all comes down to what are my options, you know, if I go on Instacart or if I go to Walmart. Plus the second I get home from second shift at night and I need groceries, do I care where they're from? Probably not. I just want to get them at that time when I need them, when I want them. And so I think it's a great opportunity for, I mean even even though it's indirect, I think competition with Walmart, I still think it's a great opportunity for schnooks and for Kroger because. And especially for schnooks because if I've never ordered from schnooks before but I go on Instacart and They're the one that's available. It's the same thing with Save a Lot that we saw, you know, a couple of weeks back with their, their format. Like I don't care who the grocer is, I just, I want my eggs and my bread and my milk and my bottle of wine or whatever it might be when I get home at that time. And so I think you, you're also gaining new customers in a way that you probably wouldn't have been able to before by not offering the service. So I like it, I think it's smart. I think the bigger headline here though is Walmart's, Walmart's coming for you grocers and you need to be prepared to have that same offering to hang on to your customers. But what do you think?

[Chris]

Yeah, I agree with you at the start and then I disagree with you slightly so let me explain why. So I think, and you mentioned the point about Walmart yesterday, I think that's. Yeah, that's crazy. 93% of the country, you know, is within same day now I think. Right, and that's, that's what statistic you quoted and what it makes me think about too is I wonder if the, the level to which Walmart has been pulling the high income shoppers is not hurting all of grocery too because you know, I think about these types of services and the thing I started about is these are, these are expensive, these cost money and so the people that are gonna, that are gonna utilize them the most are probably the people that can afford them. And so, and those are your best shoppers traditionally too. Like the best shoppers that make the most trips, that engage with you the most digitally. So I'm wondering if Walmart is starting to pull them, you know, across the nation and that's why you're seeing this. I don't know, it's something I started to think about. I have no idea. I'm sure, I'm sure our friends at Schnooks will tell us if we're, you know, on the right page with that. The part where I disagree with you slightly is, and it's not so much a disagreement, it's just, I think it's another wrinkle is like, I think given that if that's the case then the grocers have, the grocers have to do this right. That they have no other choice but to do it. But by the same token, unlike Walmart, I worry they don't have the same basket of higher margin items helping to defray of these efforts. Yeah. You know, or the number of deliveries going out. So why you have to do it? I don't know that it's economically sustainable to do it. And that's the question I have. And so, you know, again, it just goes back to. Walmart has done a really, really good job here of differentiating themselves in the marketplace, particularly when it comes to grocery and quick delivery.

[Jordan]

Right, I know, I think you're right. And excuse me, another thing I think this will bring into the fold is what investments then do like schnooks and, and even Kroger, like Kroger is working with Ocado to help fulfill these orders. But what investments will snooks have to make upstream too to be able to support this? Like will they have to get into micro fulfillment to make it worth it?

[Chris]

You have to find a way to lower the costs.

[Jordan]

Right, right, absolutely.

[Chris]

But they are doing that. It sounds like because it's a dark store. Right. That they. Formerly there was a. Formerly enough. So that's an interesting wrinkle here too. They are. Yeah. Seems like they're looking at that. We don't know to what degree they are, but. Yeah, that's a great point.

[Jordan]

Right. Well, lots, lots to come and especially from that Walmart headline, 93%. I just, I still can't get over it. It still is astonishing to me, but I guess it makes sense. They're, they're. Walmart is moving at a pace that not a lot of people can compete with right now.