In Kroger’s Q1 2018 earnings call earlier today, CEO Rodney McMullen delivered good news for shareholders: 66% digital sales growth for the quarter. He attributed this development to the expansion of ClickList and home delivery initiatives through Instacart.

However, expanding fulfillment options may be a growing part of Kroger’s agenda. L2 analysts believe that Kroger may be trying to expand fulfillment options beyond same day/next day grocery delivery and pickup, as indicated by its beta test for the Ship to Home program.

Kroger currently delivers to customers using its own ClickList service, as well as Instacart, a third-party service, but doesn’t offer a standard delivery service for non-perishable items. H-E-B and Walmart are the only grocers in Gartner L2’s Digital IQ Index: Grocery to offer brand-owned standard delivery, brand-owned local same-day/next-day delivery, and local delivery through a partnership.

Ship to Home allows Kroger customers to purchase non-perishable items for home delivery. Located on a separate website from Kroger.com, it includes features such as free shipping for orders over $35 and a “Set & Save” offering that gives consumers discounts on recurring product orders. If implemented nationwide, it would round out Kroger’s status as a triple threat grocer capable of partner, same-day/next-day, and now standard delivery, alongside H-E-B and Walmart.

Grocery

Moving into parcel-based home delivery is likely an attempt to capture part of the non-perishable home delivery market, which contributed to 3% of total fast-moving consumer goods sales in 2017 and accounts for an increasing share of the $17.5 billion online grocery market. This market is currently controlled by Amazon, with added competition from Target, Walmart, and a flurry of new pureplay retailers like Boxed and Brandless.

However, L2’s experience with Kroger Ship to Home revealed key improvement areas necessary for the retailer to excel above the competition. Kroger Ship to Home only offers standard delivery, in contrast to 20% of grocers included in Gartner L2’s study, which offer same-day or next-day delivery for non-perishable goods. Experimentation with home delivery is certainly consistent with Kroger’s efforts to provide value to its loyal customer base, but without full implementation and competitive delivery speed, Kroger is still playing catch-up.

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