Kroger/Uber

Kroger Faces Pitfalls In Deal With Uber

We gather the sharpest minds in retailing to analyze the latest trends and issues.

George AndersonGeorge Anderson, Contributor

Kroger’s streak of quarterly same-store gains has ended after 13 years, but the supermarket giant is intent on starting a new run. Part of the strategy may be evident in a home delivery pilot the chain is running with Uber, an initiative designed to help “solve the last mile equation” for grocery consumers, according to Kroger CEO Rodney McMullen via Seeking Alpha.

“We’re testing with Uber delivery in several locations with plans to expand in 2017 where our customers can order through ClickList and choose to have their groceries delivered by a local Uber driver,” said McMullen on Kroger’s earnings call last week. “We have a couple of other home delivery tests as well.”

Until now, Kroger has concentrated its online efforts on ClickList, its ordering and in-store pickup system. Last year the company announced plans to offer the service at up to 1,200 stores, approximately 45% of its locations. Kroger is slightly more than halfway to its goal with 640 stores currently offering the service.

According to a Cincinnati Business Courier report, Kroger has offered home delivery using its own vehicles through its King Soopers division but has not expanded the service beyond the Denver area.

“More and more customers are connecting digitally with Kroger,” said McMullen on the conference call. “We are leveraging refined customer insights from 8451 as well as years of online shopping experience from both Vitacost.com and Harris Teeter to develop a sophisticated understanding of our customers’ behavior when shopping with us online, in-store and both.”

“We’re utilizing this rich data set to make decisions about where the right locations to offer ClickList, what are the right assortments and promotions to engage customers online and how can we offer the quality and convenience online that customers have come to expect from a Kroger brick-and-mortar location,” he added.

News of the development met with skepticism from members of RetailWire’s BrainTrust. Many think the grocer should keep the Uber name at a distance.

“Yikes!” said Anne Howe, principal at Anne Howe Associates. “With Uber’s dark culture cloud looming, Kroger might want to look for a supplier that can white-label delivery services under the Kroger brand umbrella. Vetting and proper training of the humans to ‘rep the brand’ correctly is the key to success here.”

“The key for grocers is to do the outsourcing in as close to a white-label manner as possible and ensure that the grocers continue to own the consumer and the relationship with that customer,” said Jon Polin, cofounder and president of StorePower.

Others didn’t see an advantage in leveraging ride share services for delivery vs. other options.

“Use of Uber, Lyft, another ride-share service could be a solution in select markets to fill a gap, but what is the differentiator from any other online grocer?” said Larry Negrich, director of business development at TXT Retail.

And a BrainTrust member with firsthand experience in grocery operations saw Kroger’s move potentially opening up a can of worms.

“Does Uber have a special refrigerated van with frozen and medium temperature storage?” asked Tony Orlando, owner of Tony O’s Supermarket and Catering. “Staple goods from the center store, I can understand, but delivering perishables with Uber is a big mistake. Laws have already been passed on the delivery of perishables from manufacturers all the way to the consumer’s home, and it requires dual temperature zones for home delivery and special vans that meet these requirements or the potential for lawsuits is huge.”

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