Kroger Co. KR 0.49% said it is partnering with Instacart Inc. to deliver food and household staples in as little as 30 minutes, bringing the supermarket giant further into a crowded grocery-delivery business.
Kroger tested 30-minute delivery about two years ago, but the grocer found it difficult to expand the service quickly with only its staffers, said Rodney McMullen, chief executive officer of Kroger. It will be easier to expand the service with Instacart, he said, because the grocery-delivery provider has the technology and shoppers in place to pick and deliver grocery staples, household products and prepared meals from Kroger’s more than 2,700 stores.
Grocery delivery has become a competitive market as companies ranging from upstarts to giants like Amazon.com Inc. try to grab a bigger slice of consumer spending. It remains tough to reach consistent profitability in delivery because of high labor and transportation costs.
Grocery-delivery sales boomed during the height of the pandemic, as people avoided going to public places. That initial surge has slowed since last year, though the number of groceries being delivered to shoppers’ homes remains much higher than pre-pandemic levels.
Deliveries of convenience-store items, such as snacks and toiletries, are growing rapidly, said Instacart CEO Fidji Simo. Nearly 20% of Instacart customers are paying more for faster delivery, though delays remain possible.
“The consumer’s need for speed is real and here to stay,” Ms. Simo said. Instacart said it would give priority to completing 30-minute deliveries before less urgent orders to meet demand, and Ms. Simo said the company, which has worked with Kroger since 2017, has enough shoppers for the service.
Express deliveries can be difficult to pull off in suburban and rural areas that are more spread apart, supermarket-industry analysts have said. Chelsea Gross, a Gartner Inc. analyst, said the immediate-delivery model doesn’t work as well for larger baskets of groceries or heavier items such as bottled water that can slow down the speed of delivery.
“The secret sauce for retailers is to charge more for express deliveries and sway customers toward more profitable” options, such as pickup or next-day delivery, Ms. Gross said.
“‘The consumer’s need for speed is real and here to stay.’”
Food retailers are forging partnerships with a variety of delivery providers, a move that some industry executives have said helps avoid relying heavily on a single provider.
Albertsons ACI 1.40% Cos. works with Uber Technologies Inc.’s UBER 0.45% Uber Eats, DoorDash Inc. DASH -0.82% and Instacart. Walmart Inc., WMT -0.57% which has been using a combination of its own service and services such as DoorDash, is working with Instacart to distribute groceries in parts of New York City.
Some supermarkets have said they are rethinking their partnership with Instacart because the commission rates make it tougher for them to earn money. Many grocers charge service fees for delivery to help offset costs. Kroger said its express delivery will have a $10 minimum and a $2.99 delivery fee. The company’s standard delivery service has a $35 minimum with a $3.99 delivery fee. There is no delivery fee for people with Instacart’s annual memberships.
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