Walmart expands unlimited delivery option for online grocery orders, Kroger announces 5th fulfilment center with Ocado

By Elaine Watson contact

- Last updated on GMT

Picture: Walmart
Picture: Walmart

Related tags: Ocado, Kroger, Walmart, Online grocery shopping

Walmart is expanding a subscription-based, unlimited-delivery option for its online grocery service to 1,400 stores this year following trials in Houston, Salt Lake City, Miami and Tampa; while Kroger has announced the location of its fifth atuomated fulfilment center for handling online grocery orders with Ocado.

Customers subscribing to Walmart's Delivery Unlimited service pay an annual $98 fee or a monthly $12.95 fee for unlimited deliveries of online grocery orders (shoppers will continue to have the option to pay a per-delivery fee without a membership). The prices are in line with those of similar services from Instacart Express and Shipt (Target).

By the end of the year, Walmart expects to have same-day grocery delivery available at 1,600 stores and free grocery pickup at 3,100 stores, increasing its US online grocery coverage​ to reach 50% of the population for same-day delivery and almost 80% for pickup.

"Customers place their orders online at Walmart.com/grocery or on the existing Walmart Grocery app, and unlike other services, they find the same every day low prices on items that they do in stores, no premium, no hidden cost,"​ added the company.

Kroger announced 5th fulfilment center with Ocado 

Kroger is also ramping up its investment in online grocery, announcing Dallas, Texas, as the fifth location for a 350,000sq ft automated fulfilment center or ‘shed’ for handling online grocery orders with partner Ocado.  

While most US grocers have deployed a range of approaches to ecommerce - from a click and collect model whereby shoppers order online and collect their own groceries, to partnerships with third parties such as Instacart where personal shoppers pick and deliver orders to customers’ homes – Ocado’s Smart Platform allows grocers to fulfil orders from vast warehouses utilizing hundreds of robots.

Ocado – which has its own branded online grocery business in the UK – has partnered with other retailers in the UK (Waitrose and Morrisons), France (Casino) Sweden (ICA) and Canada (Sobeys).

Under the deal​​, Ocado and Kroger will build up to 20 sites for automated ‘dark’ warehouse facilities in the US. To date, it has announced sites in Monroe, OH; Groveland, FL; Forest Park, GA; the Mid-Atlantic region; plus the new site in Dallas. 

Ocado center
Ocado fulfilment center

Global DataRetail: 'One thing that we will say about Kroger is that they have not been halfhearted in their digital efforts'

While some commentators have queried whether a model that works in densely populated European markets can deliver the same efficiencies in the US, where the economics of the last mile may be quite different, partnering with a firm with proven capabilities in this space is a bold move for Kroger, said Neil Saunders at GlobalData Retail.

One thing that we will say about Kroger is that they have not been halfhearted in their digital efforts. They have explored various options, including the innovative Ocado partnership, and have rapidly expanded the coverage of their pick-up and delivery locations so that they now cover around 95% of Kroger households. This commitment has resulted in solid levels of digital sales growth which, this quarter, came in at a market-beating 31%.

“Looking ahead, our concern with digital is not that the market will get more crowded and competitive – because in its embryonic state there is enough available growth to satisfy all retailers – it is that an increased focus on low-cost and free delivery options as well as price competition on products will accelerate margin attrition. Kroger will need to manage this carefully as, for the most part, it does not have the ballast of stronger non-food margins that players like Target and Walmart do.”

ocado smart platform

Damned if they do and damned if they don’t

He added: “Given that digital is a growing part of the grocery market and is becoming a more competitive battleground with players like Walmart ramping up service options, Kroger has no choice but to engage. The cost of not doing so would be to erode market share and lead to long-term profit decline.

"For Kroger this is a very much a case of being damned if they do play more heavily in digital and damned if they don’t.”

Brick Meets Click: US online grocery sales are up >15% YoY

Online grocery sales grew more than 15% on a year-over-year basis during 2019 and now account for 6.3% of total grocery-related spending by households in the US, according to a recent analysis by consultancy Brick Meets Click​.

"Household penetration, based on past-month shopping activity, has risen more than five percentage points over the last year to nearly 25% of all US households. This gain is largely the result of aggressive expansion of home delivery and pickup services available at brick-and-mortar stores, which collectively are now accessible to 90% of all the households in the US, up from 81% in 2018.

"Average order values, encompassing ship-to-home, home delivery, and pickup orders, have climbed over 6% to $70 in 2019.

"Online purchase frequency for groceries remains relatively unchanged versus last year, averaging two orders during the past month for active online grocery customers." 

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