Can grocery chains make money on home delivery? “It remains to be seen,” said consultant James J. Sylvia during a New York Deal Making discussion titled “Grocery Disruption.”
A major challenge involves rising customer expectations, said Sylvia, founder and president of Readco-Sylvia Advisory Services. “They expect immediate delivery, and they don’t want to pay anything for it,” he observed.
Such challenges are not deterring grocery chains from trying, however. Kroger is building 20 robotically operated warehouses to fulfill home delivery through its joint venture with U.K. online grocer Ocado. The company now offers same-day delivery in 75 markets.
“They expect immediate delivery, and they don’t want to pay anything for it”
Kroger, which operates roughly 2,800 stores across 35 states, is experimenting with driverless vehicles for the delivery of groceries ordered online. And through the Kroger pickup service, customers order online and then collect their purchases at select stores — without even having to get out of the car. “Customers are really embracing it,” said panelist Nick Hodge, Kroger’s vice president of corporate real estate.
Shopping center landlords need not be concerned that Kroger’s online ordering ventures and fulfillment warehouses will lead to smaller stores, at least not for now. “I love having large stores right now — and that we own most of them,” said Hodge. Those large stores are providing the flexibility needed for all the company’s experimentation, he noted. “It’s a big part of our future.”
By Edmund Mander