As retailers compete for grocery shoppers, some of the industry’s biggest names are adopting the same strategy: fast delivery to your door.
this week, Target A new paid membership program has been announced and one of the key perks is free same-day delivery to your door. Walmart Expand same-day delivery to enable shoppers to shop online Alighted earlier in the morning.
and hook up Thursday means door-to-door delivery Helping drive its digital sales to grow by more than 10% annually Delivery sales increased 24% annually in the most recent quarter.
With same-day delivery, the three major retailers aren’t just trying to outdo each other in convenience. They’ve also turned physical stores and the short distance to customers’ homes into their biggest advantage over Amazon and other e-commerce companies, said Michael Baker, a retail analyst at DA Davidson.
“Over the past few years, that has completely turned it around and turned the store into an asset,” he said.
Walmart is the largest grocer in the United States and will account for 23.6% of the market by 2023, according to market research firm Numerator. Kroger ranks second with a market share of 10.1%. The company estimates Target is the ninth-largest grocer by market share, with a 2.7% market share.
Walmart, Target and Kroger are all launching paid membership programs with Target announcing this week that one of the perks is home delivery. Subscription services have similar price points and minimums, such as requiring customers to spend at least $35 to have items delivered to their homes.
Target Circle 360 will launch in early April and will cost $99 per year, but will cost $49 for customers with a credit card from the retailer and those who sign up during a promotion when the program launches.
Walmart+ costs $98 per year or $12.95 per month and offers perks such as gas discounts, free shipping and free grocery delivery. Kroger has a plan called Boost with $59 per year and $99 per year options. Higher-priced plans include free two-hour shipping on all orders $35 or more.
Walmart and Kroger haven’t disclosed how many subscribers they have. Target says its free loyalty program Target Circle has more than 100 million members, but it’s unclear how many people will sign up for Target Circle 360.
Every retailer is trying to stand out. Target, for example, says it can deliver some online orders in as little as an hour. Walmart said Thursday it would begin offering on-demand delivery services as soon as 6 a.m. local time.It used to start at 8 a.m.
Affiliate programs help offset delivery and shipping costs by charging fees, but they also allow retailers to DA Davidson’s Baker said collecting more customer data could be used to personalize offers or support its growing advertising business. They can also help drive more frequent online orders.
For Wal-Mart, service is a way to compete in ways other than price. Walmart chief financial officer John David Rainey said on the earnings call that Walmart customers are increasingly turning to the big-box retailer for conveniences such as curbside pickup or home delivery. The services may also be more important as Walmart tries to retain the higher-income shoppers it attracted during the past two years when food prices were high.
At Target, same-day delivery helps boost sales. The budget fashion retailer’s comparable sales have fallen for three consecutive quarters, and the company expects another decline this season. The company has reported digital sales declines in each of the past four quarters compared with the same period last year.
Target is trying to sell more food and household staples as customers buy fewer discretionary items. These items, such as paper towels and egg cartons, tend to be items that people restock on a regular basis or need to order for home delivery in an emergency.
Kroger has used online delivery to penetrate new areas of the country, including Florida, without opening grocery stores. It has built huge fulfillment centers powered by automation and robotics from British company Ocado.
In a conference call with investors Thursday, Kroger CEO Rodney McMullen described digital as a “significant growth accelerator” and said the company expects another year of double-digit sales. increase. He said that by 2023, digital sales will exceed US$12 billion. That’s still a fraction of Kroger’s annual revenue, which totaled about $150 billion.
Digitally engaged customers spend more with Kroger and support the growth of its advertising business, he said.
Intense competition with other grocers such as Costco and Amazon has grocers scrambling to keep up with customers’ shopping preferences and trying to acquire Albertsons, McMullen said. The Federal Trade Commission filed a lawsuit last month seeking to block the deal. He said on an earnings call that Kroger would defend the merger in the lawsuit and expected hearings to begin in mid-to-late summer.
He said the company is getting closer to turning its online business into a moneymaker.
“We always tell everyone that the first thing is to make sure we don’t lose digital customers, and the second thing is our responsibility to figure out how to make sure our customers are profitable,” he said.
While delivery will help these three retailers overcome unique problems, they still face the common challenge of winning over shoppers who are less free to spend. Walmart and Target both beat Wall Street sales expectations for the holiday quarter but said shoppers remain very value-conscious.
Although Kroger’s stock price rose Thursday, McMullen echoed those sentiments during the company’s earnings call.
“They (customers) tell us that so far they feel much better than their behavior has changed,” he said.
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