The grocery Hunger Games are not new — for at least the last 18 months, and arguably for the last three years, the competition to be the dominant force in grocery has become incredibly active as various competitors have been beefing up their offerings to consumers in a variety of ways. Rolling out delivery, curbside pick-up, expanded prepared food offerings, better payments options, richer loyalty rewards and price slashing have all become increasingly common maneuvers as the wide variety of competitors big and small are working overtime to capture the vast amounts of customer spend up for grabs in grocery annually.
The players are many — but in the last year and a half, Walmart, Amazon and Kroger have managed to pull ahead in the earliest rounds of the race in terms of the breadth and depth of their enhanced offerings for consumers.
And this week, all three made headlines for their ongoing efforts at advancement. Two seemed to be picking up speed, while one looks to have hit some hurdles.
Walmart’s biggest news of the week came care of its recently acquired Jet.com eCommerce site, which has officially relaunched as of this week.
Jet 2.0 has an updated look and a new focus: the shopping needs of major metro consumers, particularly around grocery. The new Jet has an urban-focused curation pattern, according to reports, with an increased focus on grocery, home, fashion, beauty and electronics.
The new Jet most notably now comes wired with a three-hour grocery delivery option as a challenge to Amazon’s Prime Now delivery option.
And — according to Jet — the new app will also be better customized regionally for shoppers, making use of local imagery and messages on the homepage and throughout the site. Jet will also factor in locality when deciding which products are featured in its assortment for that region.
That will start solely in New York City, but is intended to roll out more widely. Boston, Philadelphia and Washington D.C. are reportedly next on the list of expansions.
The site will also focus on helping shoppers more easily reorder items and will be personalized to shoppers’ own preferences, in terms of things like product recommendations and reorder reminders.
“The way consumers are inspired by and shop for fashion is very different than food,” Simon Belsham, president of Jet.com, told outlets. “For food, they want to see the brands and the products and confirm they will be fresh and quality. They also want to save time and get their weekly grocery needs, plus stock up items. So it’s important for the imagery to be clear and crisp and offer scheduled delivery windows that consumers can get at a time convenient to their busy lives.”
Voice computing is another key focus, but Walmart isn’t going to leverage rival Amazon’s Alexa platform for that, of course. Instead, it will allow iOS users to build lists using Siri voice commands.
For example: “Siri, add bananas to my grocery list.”
And Walmart demonstrated this week that its delivery ambitions are global. Literally. The world’s largest retailer announced it has acquired the crowdsourced, on-demand delivery marketplace Cornershop for $225 million. The business currently offers on-demand delivery from supermarkets, pharmacies and specialty food retailers in Mexico and Chile, which will continue following the deal’s close, Walmart says.
“We are focused on making life easier for customers and associates by building strong local businesses, powered by Walmart,” said Judith McKenna, president and CEO of Walmart International, in a statement.
Amazon’s Expansive Week
Amazon’s big announcement of the week was that its cashierless convenience/grocery store, Amazon Go, is making its East Coast debut sometime soon.
Currently, there are three Amazon Go locations in the U.S., all located in Amazon’s home city of Seattle.
“We plan to open Amazon Go in New York,” an Amazon spokesperson said, according to Reuters, though it was not revealed when the company plans to open the location. Amazon said in May that there are plans to expand to Chicago and San Francisco as well.
Smaller than a grocery store and more stocked with fresh meats and produce than the average convenience store, the hybrid store concept allows users to access a speedy checkout that basically isn't a checkout.
Instead of waiting in line or scanning goods, customers log in when they enter and simply leave when they are finished shopping. Their chosen items are logged with sensors and cameras and billed to their chosen payment method, though there are some transactions that still require employee interaction. Alcohol purchases, for example, require an ID check.
And while Amazon was spreading its Uberized grocery experience – or at least planning to spread it this week – Amazon Prime Now grocery was on the march again, adding another 10 major metros to the line-up this week.
As of today, Prime Now grocery delivery from Whole Foods Markets is now available in Las Vegas, Nevada; Charlotte and Raleigh, North Carolina; Nashville, Tennessee; Memphis, Tennessee; New Orleans, Louisiana; Oklahoma City, Oklahoma; Phoenix, Arizona; Seattle, Washington; and Tucson, Arizona.
Prime Delivery has also officially expanded to more neighborhoods in New York City, Los Angeles and the Dallas/Ft. Worth area this week.
All in, for those keeping score at home, Prime Now Grocery delivery through Whole Foods is now in 38 cities … and counting.
While Amazon and Walmart were talking up their latest expansions and additions this week, Kroger was explaining and justifying theirs, as investors took a somewhat dim view of how much upgrades are costing the nation’s largest pure-play grocery company – particularly as it looks like the returns on that investment are somewhat limited.
Kroger released its Q2 earnings this week, and the market did not love what it saw.
Same-store sales, one of the favored metrics for judging retail, excluding fuel, increased 1.6 percent during the second quarter. Analysts, according to Reuters, had expected a 1.86 percent increase.
According to reports, Kroger is changing the way it stocks merchandise in the stores, which it blamed for the decline in foot traffic.
The program, dubbed Restock, was launched earlier this year in an effort to adjust product choices, rearrange store layouts and highlight private-label brands. There was some concern that the move caused confusion for customers, pushing them to go to other stores they understood better rather than buying Kroger-branded products.
And Kroger also has margin woes – adjusted gross margins declined 36 basis points, impacted by price cuts and increased freight costs.
“Pricing pressure continues to negatively impact comparable sales and margins, and we expect competition to remain intense in 2018,” Moody’s Vice President Mickey Chadha wrote in a note on Thursday, covered by Reuters.
The company’s Chief Financial Officer John Schlotman pointed noted the firm's EPS outlook remains rock-solid, and defended the recent uptick in costs as Kroger is “making dramatic investments to reshape the future of the company.”
Dramatic indeed. Ever since Amazon acquired Whole Foods Market, Kroger has been in reinvention mode, launching new services to match the eCommerce giant. In August, the company rolled out a delivery service called Kroger Ship that uses third-party carriers, which will debut in Houston, Louisville, Nashville and Kroger’s hometown of Cincinnati, Chain Store Age reported at the time.
“Kroger Ship is our next step in creating a seamless experience that allows our customers to shop when and how they want,” Chief Digital Officer Yael Cosset said in an announcement. “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.”
But first, they have to convince investors to come along for the ride. As of now, all of the re-invention is not quite feeling the love, as the grocery giant saw its shares go down as much as 11 percent upon announcing its latest results.
But Q2 is just one costly quarter, and Kroger is clearly invested in winning what will be a long footrace against Walmart and Amazon/Whole Foods. It may be costly, but with Prime Now Delivery in 38 major metros and Walmart customizing Jet.com for urban metro delivery, Kroger doesn’t have much of a choice but to clear this week's hurdles and keep pace in the race.
As for all the other players who didn’t make this week’s headline news?
They saw the gap get bigger – and the pressure go up.