With the increase in demand for essential goods, Kroger Co. is entering the digital marketplace to compete with the likes of industry giants Amazon and Walmart. The grocery supply chain will be working with Mirakl, a company that offers internet and e-commerce services, to launch the new marketplace Fall 2020. The platform will be open to third-party-vendors, broadening Kroger’s inventory with 50,000 additional items across international food, specialty items, natural and organic products, houseware, and toys. The new e-commerce platform will include staples that are available in their brick and mortar stores, as well products that are exclusive to Kroger.com.
Kroger could not have picked a more opportune time to enter the space thanks to the coronavirus pandemic. In Q1 of 2020 alone, Kroger saw a 92% increase in digital sales after responding to the pandemic and adopting contact-free shopping options for its consumers. In addition, some consumers have even gone so far to boycott the industry giant Amazon after reports of poor working conditions including unfair wages, high injury rates, and extreme performance expectations while it is reported that Amazon CEO, Jeff Bezos, has profited upwards of $34 billion from the pandemic alone. The company’s unstable reputation, consumers’ disapproval of poor working conditions, and CEO could allow Kroger to steal those consumers from Amazon allowing for more competition in the space.
However, entering the space does not guarantee instant success as e-commerce giant Amazon reports a 40% jump in sales through Q2 mainly driven by increase in demand for groceries and consumable products amid the pandemic. Due to the rise in panic buying, grocery delivery capacity was up by over 160% in which Amazon responded by tripling the volume of grocery pickup locations through subsidiary company Whole Foods locations. While Whole Foods currently has 500 stores across the U.S., competitor Kroger dominates the space as it owns and operates nearly 2,800 supermarkets, multi-department stores, warehouse clubs and convenience stores under 30 banners with loyal customers including Ralphs, Dillons, and QFC. The new digital marketplace will allow consumers to purchase all of their favorite goods from Kroger’s vast retail portfolio, and its convenience of being able to purchase goods from a number of sources may steal some of Whole Food’s customers. However, Amazon is also entering the space of brick-and-mortar stores as they are also planning to open its first standard grocery store, unveiling the first “smart grocery cart” in its efforts to automate the retail checkout experience. This new technology and process will allow customers to be able to visit a location verses Amazon’s traditional online strategy and skip the traditional check-out line, avoiding lines and self check-out machines.
Meanwhile, retail giant Walmart recently announced that they will be partnering with Shopify allowing 1,200 Shopify merchants access to Walmart.com as there has been immense growth within the space as Q1 saw a 74% increase in e-commerce alone. This partnership will allow expansion for the range of goods that are available to Walmart customers while also helping small business by allowing them to tap into “the surging traffic on Walmart.com.” Although this opportunity is not exclusive to all Shopify users as they will have to apply to be considered, Walmart is seeking U.S. small and medium sized businesses whose inventory will complement theirs as well as a known reputation for exceeding customers’ expectations. Upon approval, merchants will gain access to inventory and order management within Shopify as well as bulk editing marketplace listings with no additional monthly fees to list their products. This partnership will allow a broader selection of items for Walmart customers while also allowing them to support small owned business during a time when many of them need help more than ever, while also being able to compete with retail leader Amazon. While Kroger has many loyal customers, they offer many private label products which are exclusive to the Kroger brand. However, more than ever, consumers are more open to new brands with Gen Z and Millennials being the most responsive in switching to new brands. This may work in competitors’ Amazon & Shopify’s favor since the platform allows consumers to support small and verifiably good business.
Although it is too early to tell when or how Kroger will incorporate advertising opportunities, given their large offline loyalty card data set plus an added layer of digital sales, they are poised to compete from an ad perspective against Amazon as well as Walmart. This is especially true as competition for promoting products on Amazon had been reportedly more difficult for brands since product placement is so important in determining the success of your campaign. Amazon also tweaked their algorithm to make sure that their own brands are granted special treatment by having their branded products appear towards the top of the search results as well. So not only do other brands have to pay for their spot, but they must also compete with the highly-rated and relatively inexpensive Amazon branded products. However, upon launch of the platform, advertisers can hopefully begin to test-and-learn against which platform optimizes the best results for their brands.
In addition to Ignited’s experience planning and managing marketplace advertising like Amazon, we help businesses stay on top of the ever-evolving retail landscape and leverage omnichannel to their fullest potential.
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