Kroger and Walgreens are partnering on a new store pilot where customers will be able to shop for products and services from both retailers.
Walgreens stores to operate as pickup points for Kroger ecommerce orders
The companies have selected 13 Walgreens locations in Northern Kentucky where customers will be able to collect their Kroger online grocery orders and purchase Kroger’s private brand ranges. The pilot will run for several months, with the companies collating customer feedback before making any decision on expanding the program.
Source: IGD Research
Aligned with Kroger’s strategic priorities
This pilot aligns with Kroger’s strategic priority to redefine the customer experience and provide its shoppers with more convenient options. The business continues to expand its grocery ecommerce operation, through both store pickup and delivery in partnership with Instacart. Earlier this year, it formed a strategic partnership with Ocado which will see it develop up to 20 customer fulfillment centres to support the further expansion of its grocery ecommerce initiative.
Delivering convenience in new ways
For Kroger, Walgreens’ network of almost 10,000 stores makes it an attractive partner to collaborate with. The drugstore retailer has secured highly convenient sites in many major US cities, potentially providing Kroger with access to new shoppers in urban locations. These are areas where Kroger is currently under-penetrated. The stores could be key in helping it grow its ecommerce business as the store locations will be close to where consumers work and live. This move comes following a shift out of convenience retailing, having sold its convenience network to UK-based, Euro Garages earlier this year.
Enhancing the Walgreens grocery offer
Partnering with Kroger provides Walgreens with an opportunity to further differentiate the customer experience. Although it has a well-established private brands program, especially in beauty categories where it has optimised the Boots portfolio, it does not have the same depth of offer in grocery categories. Kroger’s Simple Truth, natural and organic range, and premium-tier, Private Selection, brand will be key additions to the offer. Walgreens will also be assessing the impact on store traffic of having Kroger customers coming in to pick up their orders.
Enables Walgreens to focus efforts on health, wellness and pharmacy
If the pilot is successful, it could see Kroger take a more strategic role in supporting the development of the fresh and grocery offer at Walgreens. This would enable the drugstore operator to focus on its areas of expertise in health, wellness and pharmacy. While the retailer has developed a sophisticated food offer, including its ‘up market’ fresh food concept, there has been less development in this area over recent years compared to the healthcare side of the business. Future developments could also see Walgreens take a role in the provision of healthcare and pharmacy services at Kroger. Three years ago, Target divested its pharmacy business to CVS Health, noting the growing sophistication and complexity of pharmacy-related services.
Global shift towards strategic alliances
This new partnership further highlights a key trend we have seen over the last year of retailers globally reimaging how they operate. Where historically it was a case of owning and operating stores in as many countries possible, there is now a strategy of building alliances. The strategic partnerships are enabling retailers to expand into new areas and reach different customers, faster and with lower capital requirements.
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