Kroger Recommendation

Editor's Notes

• #3: Our overall recommendation to front the competition at hand is to partner with Instacart in major urban cities and increase Kroger’s uniqueness directly through the products offered. We made this recommendation based on analysis of the industry and its current players.
• #4: Our overall recommendation to front the competition at hand is to partner with Instacart in major urban cities and increase Kroger’s uniqueness directly through the products offered. We made this recommendation based on analysis of the industry and its current players.
• #5: The grocery industry is a 500 billion dollar industry. Go through the flow chart describing grocery industry value chain 3.3% of this 500 billion dollar industry is online grocery or 15 billion total. Bloomberg Business published in 2014 that the online grocery business would reach 85 billion by 2023.
• #6: Two consumer segments: Urban and Non-urban. Urban customers are … and are going to be mainly targeted by the online grocery services because of their characteristics. Non-urban customers on the other hand are going to be … and mainly targeted by large grocery stores like Kroger.
• #7: Through your purchase of Harris Teeter in 2013, you also acquired their online order and pick up service called “ExpressLane”. According to your Annual Report you are exploring this concept and we support this movement. You also purchased vitacost, an online delivery vitamin store. Since your acquisition, you have expanded their services into non-perishable food items and we encourage this. Finally, we recognize that you are aiming to solely grow within your selected markets and not into new geographies. We considered this throughout our recommendation process.
• #8: We’ve also considered other competitors at the time, but feel that amazon is the largest competitor at the time. Amazon is directly challenging the grocery stores because they purchase from the food and merchandise manufacturers and therefore circumventing the grocery stores within the value chain whereas other competitors purchase from grocery stores and are therefore complimentors.
• #9: Staying abreast of the online grocery development will provide you with necessary expertise and insights to launch a full frontal assault when the industry picks up pace. Sticking with urban segments will keep costs minimal and deliver to a segment that wants those services
• #10: Only partner with Instacart in major urban cities for now. Amazon is competing in major cities like Atlanta, Chicago, and 9 more. Kroger could compete in all of these markets in addition to more. Have a 3% to 5% increase in price through Instacart. The profit margins of Kroger are only 1.5% currently therefore Kroger cannot afford to include a commission in the price of goods through Instacart. With a 3% to 5% increase in price through Instacart, profits would still be seen by Kroger and the overall price of a typical order of groceries would still be less than the same groceries purchased through Amazon. Finally it would be connected to the Kroger Loyalty Program. The loyalty program is very important to Kroger and it’s ability to predict the merchandise it wants to put on the shelf. This is very pertinent to Kroger’s long term strategy and therefore must be maintained.
• #11: In order to make Kroger’s online delivery attractive offer products that appeal to urban audience. Source: http://www.nridigital.com/inside-pacakaging-magazine/market-focus-issue-1.html
• #12: 1. Don’t react to the industry changes. You’ve had a 7.17% growth rate over the past five years and the online grocery industry is only 3.3% of the grocery industry. Although in the short term this doesn’t seem to be a large make-up, the online industry will continue to grow with the new generations aging and will eventually be an approximately 85 billion dollar industry. 2. Offer full online delivery services nation wide to compete directly with amazon and the services they offer. It could be intelligent for you to directly front the full online delivery services offered by amazon, but financially this could be both difficult and capital prohibitive. Amazon is most likely not making any money on this service, but by their business strategy, staying within the industry for the long haul essentially waiting for the other competition to exit. 3. Purchase Instacart. Purchasing instacart would allow you full access to full online delivery services for your customers. Again this is unfortunately most likely capital prohibitive as Instacart is a private company and currently worth approximately 2 billion. In addition, with the uncertainty of the growth of the online business it isn’t in your best interest to completely invest right now.
• #16: 1: CIS Market states Kroger has a growth rate of 7.17% per year 2: CIS Market states the grocery industry has a growth rate of 4.97% per year 3: Bloomberg Business predicted the 2023 Online Grocery will be 11% of the total Grocery Industry Revenue