As retailers vie for grocery shoppers’ attention, several major players in the industry have honed in on a similar tactic: providing swift deliveries to customers’ doorsteps.
Target recently unveiled a new premium membership program, highlighting free same-day home deliveries as a key perk. Meanwhile, Walmart has expanded its same-day delivery service, enabling shoppers to receive online purchases earlier in the morning. Additionally, Kroger attributed its over 10% year-over-year growth in digital sales and a 24% year-over-year surge in delivery sales in the latest quarter to home deliveries.
According to Michael Baker, a retail analyst at D.A. Davidson, these retailers are leveraging not only convenience but also their brick-and-mortar locations’ proximity to customers’ homes as a significant advantage over e-commerce giants like Amazon.
“Walmart is the largest grocer in the U.S., with 23.6% of market share in 2023,” reported Numerator, a market research firm. Kroger follows closely behind with 10.1% of market share, while Target ranks ninth with 2.7%.
With Target’s recent announcement, Walmart, Target, and Kroger will all offer paid membership programs featuring home deliveries as a key benefit. These subscription services have comparable price points and minimum spending requirements, typically set at $35 for home delivery.
Target’s new program, Target Circle 360, launching in early April, will cost $99 annually, with a discounted rate of $49 for customers with the retailer’s credit card or those signing up during the promotional period. Walmart+ membership costs $98 per year or $12.95 monthly, offering perks such as gas discounts, free shipping, and free grocery deliveries.
Kroger’s Boost program provides two subscription options: $59 per year and $99 per year, with the latter including free delivery within two hours on orders over $35. While Walmart and Kroger have not disclosed their subscriber numbers, Target boasts over 100 million members of its free loyalty program, Target Circle, though it remains uncertain how many will transition to Target Circle 360.
Each retailer has implemented unique features to differentiate itself. For instance, Target promises some online orders can be delivered in as little as an hour, while Walmart now offers on-demand deliveries starting as early as 6 a.m., a change from its previous 8 a.m. start time.
Membership programs not only help offset delivery costs but also provide retailers with valuable customer data for personalized offers and advertising initiatives, according to D.A. Davidson’s Baker. They also encourage more frequent online purchases.
For Walmart, these services represent a strategy beyond price competition. Walmart CFO John David Rainey has emphasized on earnings calls how the retailer’s convenience-focused services like curbside pickup and home delivery attract customers, particularly as it seeks to retain higher-income shoppers amid fluctuating food prices.
At Target, same-day deliveries could potentially drive sales growth. Despite experiencing declines in comparable sales for three consecutive quarters, the retailer aims to capitalize on essentials like food and household items, frequently replenished or ordered for home delivery.
Kroger has leveraged online delivery to expand into new markets like Florida, without opening physical stores. The company has invested in large fulfillment centers powered by automation and robotics, courtesy of U.K.-based company Ocado.
During an investor call, Kroger CEO Rodney McMullen highlighted digital as a significant growth driver, with digital sales surpassing $12 billion in 2023. However, this remains a small fraction of Kroger’s total annual revenue, approximately $150 billion for the year. McMullen emphasized the importance of digitally engaged customers, who tend to spend more and support the company’s advertising business.
Despite facing stiff competition from rivals like Costco and Amazon, Kroger remains focused on meeting evolving customer preferences and navigating regulatory hurdles, such as its proposed acquisition of Albertsons, currently under scrutiny by the FTC.
McMullen expressed confidence in the company’s ability to monetize its online business, emphasizing the importance of retaining and profitability of digital customers.
While delivery services may address specific challenges faced by these retailers, they collectively confront the overarching task of appealing to budget-conscious shoppers. Despite surpassing Wall Street’s sales expectations, both Walmart and Target noted that consumers remain focused on value.
Echoing these sentiments, McMullen acknowledged on the earnings call that customers express optimism but have yet to significantly alter their spending behavior.
