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Is Shipping Fee the New Paradigm in Retail Delivery Race? (Revised)

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The Kroger Co (KR - Free Report) last week launched Kroger Ship, its direct-to-customer e-commerce platform that boasts faster and free home delivery on orders of more than $35. The move is aimed at staying ahead in the online delivery race and compete with the likes of Amazon.com, Inc. (AMZN - Free Report) , Target Corporation (TGT - Free Report) and Walmart, Inc. (WMT - Free Report) .

The online retail war is fast heating up with retailers focusing on not only faster delivery service but also affordable shipping fees. Understandably, the low-cost Kroger Ship will now add muscle to its delivery wing at a time when retailers are increasingly relying on technology to speed up delivery service at affordable fee.

Kroger Pumps Up Delivery Arm

On Aug 1, Kroger launched Kroger Ship in four markets — Cincinnati, Houston, Nashville and Louisville — and has plans of expanding its services over the next few months. The service has been launched with the aim of delivering goods faster and free of cost on orders above $35.

Kroger already has a delivery service, Kroger Delivery, in partnership with Instacart, which offers two-hour delivery from local stores. However, Kroger Ship will focus more on non-perishable goods. Undoubtedly, Kroger’s new offering is in a move to fast catch up with the likes of Amazon and Target, which are increasingly focusing on faster delivery service. Kroger Ship definitely is going to strengthen its delivery arm.

In fact, Kroger has been focusing on delivery for quite some time now. It already offers grocery pickup and delivery through the Kroger Checklist service. However, Checklist pickup carries a fee of $4.95, while the delivery fee varies. The company had long been looking for an affordable delivery option that can substitute shipments through parcel delivery companies like FedEx Corporation (FDX - Free Report) and United Parcel Service, Inc. (UPS - Free Report) .

Focus Shifts Toward Shipping Fee

Delivery time is no more the only benchmark in the retail war. Retailers are trying to attract customers based on delivery fee. Kroger Ship will be charging $4.99 per order for orders below $35, while anything above that will be shipped free. Understandably, Kroger is taking the war to Amazon and Target, which too have almost similar delivery models.

Target Restock charges $2.99 for next-day shipping, while it is free for customers who pay though Target’s store credit or debit card. Where it’s available, same-day and one-day delivery is free for Amazon Prime members for all purchases over $35, and $5.99 for orders under $35. Amazon sports a Zacks Rank #1 (Strong Buy), while both Target and Kroger carry a Zack Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Also, Walmart, which already has curbside grocery delivery service in a number of cities, plans to expand it to 800 stores by the end of 2018. Walmart presently charges $9.95 per order and no subscription is required. Understandably, with Kroger Ship, the retailer has set a level playing ground with Amazon, Target and Walmart.

Delivery Race Heats Up

The retail ballgame has changed in the last few years, thanks to Amazon, which has been setting new benchmarks. The e-commerce behemoth set the ball rolling by playing to its strength — a strong delivery wing — when it started offering a free two-hour delivery service from Whole Food stores to its Prime members in February.

Brick-and-mortar giants like Walmart, Kroger and Target have perhaps realized that faster delivery at affordable shipping fee is the new paradigm to stay ahead in the race. Needless to say, the gap between online and offline retail is fast disappearing and it’s only a matter of time when others jump the bandwagon.

(We are reissuing this article to correct a mistake. The original article, issued on August 7, 2018, should no longer be relied upon.)



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