Kroger launches its own online grocery delivery service

A new service from The Kroger Co. turns up the competitive heat on Amazon, Walmart and online grocery delivery providers like Instacart and Shipt.

The Cincinnati-based supermarket giant on Wednesday introduced Kroger Ship, a direct-to-customer e-commerce platform that enables consumers to order from a selection of groceries at ship.kroger.com and have them delivered to their door.

Kroger is beta-launching Ship in four markets: Cincinnati; Houston; Louisville, Kentucky; and Nashville, Tennessee. During the initial phase of the rollout, Kroger said, customers can shop from a curated assortment of 4,500 Kroger own-brand products as well as more than 50,000 center store groceries and household essentials. The company noted that it tailored the product selection using data and insights from its 84.51° digital intelligence arm.

Home delivery via Kroger Ship, made by a package carrier, is free for orders over $35 and carries a $4.99 fee for smaller orders.

“Kroger Ship is our next step in creating a seamless experience that allows our customers to shop when and how they want,” Yael Cosset, chief digital officer at Kroger, said in a statement. “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.”

Besides staple items, customer favorites and private label, Kroger Ship will carry bulk and other sizes, local and international food and flavors, specialty items, and health and wellness products.

“Kroger Ship brings together the best of our digital, technology, logistics, 84.51°, merchandising and Our Brands teams to deliver our customers convenient and curated food inspiration,” according to Cosset. “Kroger's e-commerce platform expands our offering beyond the physical store to include even more products.”

Kroger said Ship customers will be offered exclusive money-saving opportunities—including promotional codes, digital coupons and pricing deals—plus a convenient “set and save” subscription model providing 5 percent off daily essentials. Ship users, too, can earn fuel points and save up to $1 off per gallon by buying online.

In the launch stage, Ship customers will get free shipping, with no minimum purchase, as well as 15 percent off their order with a one-time promo code. Kroger said it expects to roll out Ship to more markets over the next few months.

“Kroger is building on our expansive logistics and fulfillment infrastructure to support the rapid rollout of Ship,” said Frank Bruni, vice president of supply chain and procurement. “With the support of Our Brands and Kroger’s manufacturers and suppliers, our vision is to build a seamless e-commerce system that offers our customers an ever-growing number of products and allows Kroger to ship nationwide.”

With Ship, Kroger is moving ahead with a strategy to bolster its own e-commerce capabilities. The company saw digital sales surge 90 percent in 2017, and it’s projected to grow its online business from 1.7 percent of sales currently to more than 5 percent by 2022.

According to Jefferies analyst Christopher Mandeville, the Ship service gives Kroger another tool to defend and take market share.

“Kroger has launched a D-T-C offering called Ship, providing just one more method for consumers to shop,” he said in a research note on Wednesday. “This service should allow the company to better compete with online retailers and accelerate market share gains versus subscale operators unable to offer similar programs.”

In May, Kroger announced an exclusive U.S. partnership with U.K.-based online supermarket Ocado. The companies plan to build three automated e-commerce warehouses this year and identify up to 20 possible sites for the facilities over the first three years of their agreement. Kroger also raised its ownership stake in Ocado to 6 percent.

And in March, Kroger announced an expanded partnership with Instacart to bring the grocery delivery service to more markets. At the time, Instacart delivery was available from 872 Kroger Co. stores nationwide, and Kroger offered home delivery through Instacart and other providers in 45 market areas. Kroger also plans to add another 500 locations to its ClickList curbside pickup service, now available at more than 1,000 stores.

Rivals Walmart and Amazon have also been busy boosting their online grocery delivery offerings. Walmart Online Grocery Delivery is slated to reach over 40 percent of U.S. households, serving more than 100 metropolitan areas across the country by year’s end. Meanwhile, Amazon has expanded Prime Now same-day grocery delivery from Whole Foods Market stores to 24 major metro markets since launching the service at the chain in February.

Instacart and Target Corp.-owned Shipt also continue to grow rapidly. San Francisco-based Instacart, which partners with more than 200 supermarket operators in North America, has expanded its service from 30 markets at the start of 2017 to over 240 markets currently, and it aims to serve more than 80 percent of U.S. households by the end of 2018. Shipt, based in Birmingham, Alabama, now reaches about 50 million households in more than 150 markets and expects its service to be available in 180 markets and reach 80 million households by the end of this year.