Kroger Co. is willing to test a variety of options for home delivery programs, J. Michael Schlotman, EVP and CFO, told an investors conference Tuesday.
“You should assume that we’re testing anything that’s out there, but we just don’t shout from the rooftops about everything we’re doing,” he told the annual Jefferies Consumer Conference in Nantucket, Mass.
Schlotman said Kroger offers delivery options at several stores, including an Instacart program at its Mariano’s store in Chicago; an Uber option at a Harris Teeter store in Washington D.C., “where if you click [on an order] one more time, you can schedule a delivery via Uber; and we’ve had our own delivery trucks in Denver for a very long time.
“We don’t want the customer to think they can do either this or that we want there to be an end process. You don’t get there overnight, but rather you migrate there over time, and these are all building blocks you try to get stronger.”
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Kroger offers ClickList, its store pickup program. at about 60 stores up from 45 the last time the company specified a number, Schlotman noted. Asked if setting delivery fees around $1 an order might be effective, he replied, “We’ve done that at Harris Teeter, and it’s proving somewhat popular. We have not offered that on the Kroger side, and I don’t believe we’re doing that per-trip offer until we get through the rollout stage.”
Asked if Kroger thinks free deliveries would be economical, Schlotman replied, “Customers love it when it’s free, and they walk when you charge for it. There is a fee for the Uber cabs [that make deliveries for the Harris Teeter store] in D.C., but that store is in an urban area, and there are probably a lot of customers taking an Uber to the store and then back.”
Kroger charges $4.95 per ClickList order Schlotman said, “we modeled off of what Harris Teeter had done, and as we merged with Harris Teeter, they were profitable in their Express offering, which is where we would expect ultimately to with ClickList.
“I wouldn’t want to predict where the pickup fee would go, but today we don’t see any resistance to the $4.95, and we’re very happy with the customer acceptance of it.”
One challenge of the ClickList program, Schlotman said, involves expanding pickup slots at some stores. “They can get filled up pretty quickly, so we’ve got to figure out a way to expand the number of slots for customers to keep it very convenient,” he said.
In response to a question about Roundy’s stores in Wisconsin, Scholtman said, “We remain excited about the opportunities there. Those stores feel like many other middle-America Kroger markets from the work ethic of the people to how they go about their daily lives and how important families are.
“But the stores have been under-invested in. There are some re-sets and remodels we have to do, but not every store needs capital investment. Some are in fine shape, and we have a very well laid-out plan of how we’re going to roll through them not with a shotgun approach but a rifle approach.
“We’ll start relatively small and make sure we’re getting the customer response we expect to get, and as we get more comfortable, we’ll get a little more aggressive.”
Though he said he expects some learnings from the Mariano’s operation, “a lot of Kroger or Harris Teeter stores have a significant number of the bells and whistles that Mariano’s stores have,” he noted.
Date: June 21, 2016