I recently visited both Kroger/Walgreens test formats in northern Kentucky. One test has the Kroger Express store-within-a-store concept where, in addition to being able to pick up grocery orders, you can shop Kroger fresh and grocery items, including meal kits. A smaller-scale test is running at the other location where you can pick up your Kroger grocery order and shop a select number of Kroger private label items that have been incorporated into the Walgreens assortment.
The difference between the two concepts was striking. The Kroger Express store-within-a-store concept, which launched in December, was a gorgeous display of retail when you walked into the Walgreens store. It was clear which products and aisles were from Kroger and there was also fresh signage to help build credibility and authority in a channel that shoppers do not normally trust when it comes to fresh food (Figure 1). Now there were opportunities with the format, including that the mix of Kroger products and Walgreens products was very interesting. For example, there were Kroger paper products, but there were Walgreens snacks. Candy appeared to be split – seasonal candy was Walgreens and everyday candy was Kroger. The split of categories was not what I would normally consider to be customer first. But if the shopper can navigate the store (and the layout was clear), maybe it doesn’t matter. I guess that is why we test things. Also, given how much fresh food was on markdown, it doesn’t seem to be flying off the shelves. The store is about a half-mile from a Kroger, so that might simply be an issue of location.
Figure 1: Walgreens Kroger Express test concept
Source: Kantar Consulting Store Walks
In contrast, the Walgreens store that had grocery pickup and a select assortment of Kroger products was nothing short of confusing. The majority of the Kroger product was Kroger banner brand, which resulted in the assortment being perplexing. In some places, a Walgreens private label product was next to a Kroger private label product for the same type of item (Figure 2). I could see if the assortment carried Kroger banner brand to augment the Walgreens product portfolio (for example, Walgreens does not do private label baking products so it is going to carry Kroger product), but why would you would carry both? Perhaps focusing more on the Kroger Simple Truth brand would help differentiate the product offering better. My overall takeaway was that it doesn’t feel like it is worth going through the effort of doing this if you weren’t going to do the full Kroger Express format with fresh food and clear signage. To be fair, the more significant part of the Kroger/Walgreens partnership is grocery pickup, so abandoning the in-store component would not necessarily have an immense impact.
Figure 2: Walgreens/Kroger test store private label products
Source: Kantar Consulting Store Walks
Overall, I think this is a good lesson in committing to what you’re doing even if it is more resource-intensive. Make the concept worth it for shoppers to invest their time in learning how to re-shop a format or even reconsider their relationship with a retailer. Shoppers don’t naturally want to change their behavior, so you had better make it worth their while if you want them to engage differently.
And specifically, for Kroger and Walgreens…while I question the location of the Kroger Express test (as a shopper, why would you go to Walgreens to buy fresh food when you can go to a Kroger across the street?), I can see this format having potential in non-Kroger markets or more urban locations. It really puts the store more on the level of what we are seeing from leading convenience stores in the fresh/grocery arena.
If you are a KRIQ subscriber, you can see an overview of the Kroger Express format here and our take on the Walgreens implications here.
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Tory Gundelach, Vice President