Kroger's ClickList fuels points for chain, but what's in the cards for customers?
Courtesy of Kroger
Kroger is extending its ClickList online ordering service to new markets, but that does not mean a national rollout is in store for consumers. How the supermarket chain balances caution about online ordering against the customer's need for convenience, as well as rising competition from Walmart and others.
Kroger's plans to expand its online order and pickup service, ClickList, should save customers hours of time while delivering much convenience. The rewards it will deliver to the grocery chain, however, are less clear.
This is largely because Kroger's adoption of digital commerce is notably conservative, and a little late. Kroger introduced ClickList, which enables shoppers to order online and pick up at the store, in May 2015. The service is now available in 47 locations, and 40 are planned for Texas by year's end. That's a minor fraction of Kroger's 2,775 stores, and the service has yet to be made available as a mobile app.
Meantime, backyard competitors from Walmart to Amazon have entered the fray, likely causing Kroger to balance its caution against their might. Data will play a key role in delivering the desired results, which are beginning to roll in. Kroger customers in Ohio, where it is based, appear to be embracing it.
"Huge timesaver for the working mom, and no more dragging fighting kids through the grocery store," one customer wrote on Kroger’s Facebook page, according to Business Insider.
Online purchase delivery
Kroger did not go fighting into digital commerce. Rather, it acquired the ClickList technology through its 2013 purchase of Harris Teeter, the southeastern grocery chain.
This inheritance provided Kroger with the necessary data on which to build. Roughly 40,000 items are available on ClickList, and products are hand-selected so orders are customized — how ripe the bananas should be, for example.
Further, a "favorites" feature keeps track of the most commonly purchased items for easy re-ordering. After orders are placed, shoppers retrieve them from a designated drive-thru within a reserved one-hour period.
The fee is $4.95, which could help offset the expense. Selecting and bagging orders requires employee time, and there are digital infrastructure costs. Whether the order fee will become a barrier to entry among consumers, let alone cover the expense for Kroger, may be a consideration at this early stage in the rollout.
Tellingly, Kroger is waiving the fee on a customer's first three orders.
"Let the customer decide"
Such tests are a must for ClickList's expansion, as online grocery ordering is becoming increasingly available among Kroger's rivals. AmazonFresh is methodically expanding its next-day grocery delivery options, and Walmart's click-and-collect service is extending to 30 cities, about 200 stores nationwide. Unlike Kroger's service, Walmart's is free.
Further, regional chains offer similar services. Giant Eagle's Curbside Express, which is fee based, is available at 11 stores in central Ohio, where Kroger competes. In 12 weeks, sales at those 11 Giant Eagle stores quadrupled, according to the Columbus Dispatch.
In a fourth quarter earnings call with analysts, Kroger CEO W. Rodney McMullen said customers want to shop in multiple ways, seamlessly.
"We're really striving to make sure that we have a model where we can let the customer decide how they want to engage with us versus us deciding that," he said, adding, "We feel really good about positioning us to address where the customer is headed versus where they've been."
Proceeding with caution
Where the customer is headed, however, is not guaranteed, though American merchants can learn from European operators that have been offering online ordering for years.
About one quarter of consumers worldwide shop for groceries online, according to a 2015 Nielsen study. In Europe, nearly one in six shoppers (16 percent) purchased groceries online in 2014, up from 13 percent in 2013, according to the research firm Sydney.
In the U.S., the figures trend smaller. Of the $795 billion Americans are expected to spend on food and drinks in 2016, just $33 billion (4 percent) will come through online orders, according to research from Cowen & Co., as cited on Bloomberg. The discrepancy between the U.S. and Europe is likely due to adoption. Availability may play a role, but it is hard to believe U.S. consumers would not adopt to at least the same levels as in Europe.
Still, the U.S. figure is sizeable enough on which to take a chance, particularly in a market where consumers are adapting to online ordering at exponential rates. Kroger may lose money on ClickList short term, but future sales could depend on it.
Back to basics with data
To make the most of its investment, and the customer experience, Kroger is evidently using data insights.
Such efforts may be why Morgan Stanley recently identified Kroger as the best-positioned retail chain for gaining online grocery sales. It may be a little later to the screen than others, but what matters is that the virtual carts register. Among the fundamentals Kroger is employing to really make it work:
Playing favorites: ClickList's favorites list tracks and stores frequently ordered items so customers can more quickly find and add them to their baskets. What adds relevance to the feature is its ability to change week by week based on the items a shopper purchases, and to alert shoppers if they will soon need to replenish items (or benefit from complementary products).
Initiation: By waiving the fee on the first three ClickList orders, Kroger is inviting customers to test the service while at the same time providing itself the opportunity to understand the adoption process. For example, analyzing the profiles of those who stop ordering after the third purchase (or first) enables Kroger to identify the characteristics of shoppers who are wiling to pay for the service, as well as pain points that prevent others from returning for a second time. Plus, the flat fee probably encourages some shoppers to order a few more items, since the sum won’t affect the charge.
Purchase data: Kroger has a vast database of customer information from its Plus Card rewards program, but it did not get cocky when it came to implementing its online ordering service. It accessed the technology through the much smaller Harris Teeter and no doubt relied on the data insights to track what worked and what did not.
If Kroger's ClickList lives up to Morgan Stanley's prediction, it may be the precursor to the future of grocery shopping — evolving from click and pick-up to a true shopping assistant that manages not only the food ordering but also provides additional product information, such as nutritional content, whether the food is organic or even where it was produced, farmed or raised.
Bottom line, grocery shopping has the potential to become enabled in many ways, offering more informational complexity yet being easier to execute. This future, however, will test the boundaries between content and context. Supermarket operators will need to get both right to make this work.
Bryan Pearson Bryan Pearson is President and CEO of LoyaltyOne Inc. and the author of the best-selling book The Loyalty Leap: Turning Customer Information into Customer Intimacy. www