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June 25, 2024
Has Albertsons Completed Enough Initiatives To Take the Industry Lead?
Grubhub has partnered with Albertsons Companies Inc., integrating nearly 1,800 of its stores, including Albertsons, Safeway, and Vons, into Grubhub’s Marketplace. Customers can now order from these stores via the Grubhub app and website.
This partnership expands Grubhub’s grocery offerings and integrates with Grubhub+, providing unlimited $0 delivery on eligible orders. It also marks Grubhub’s first national grocery partnership and underscores its commitment to offering a comprehensive delivery service, catering to diverse consumer needs.
This is not the first time Albertsons has partnered with third-party delivery services to offer customers greater flexibility. Collaborations with Instacart for rush delivery and DoorDash for prepared and ready-to-eat offerings provide diverse delivery options. Moreover, a partnership with Uber enables customers to order a full range of groceries through the Uber platform. The launch of Albertsons Media Collective, a retail media network, also offers partners a digital marketing platform and omnichannel solutions, further enhancing the company’s market presence.
Albertsons Companies has been making significant strides to adapt and thrive in a constantly evolving business environment. By implementing various strategic changes to its business model over the past few years, Albertsons has successfully maintained its relevance and competitiveness, according to Zacks Equity Research. In 2022, a board-led review of potential strategic alternatives was initiated to boost the company’s growth and enhance stakeholder value. Over a period of three months, shares of this prominent food and drug retailer surged by 15.3%, contrasting sharply with the industry’s 16% decline at the time.
DoorDash’s success in launching a grocery delivery channel with over 150,000 non-restaurant retailers underscores the competitive delivery landscape in which Grubhub competes. Grocers, however, struggle to effectively deliver prepared foods such as deli products and sushi, often due to inadequate app interfaces and limited availability.
The outcome of the Albertsons and Kroger merger could significantly influence Grubhub’s grocery offerings, although it remains uncertain how it will unfold. Nevertheless, Grubhub sees the value in expanding its grocery delivery services, especially as groceries remain a more affordable option for consumers compared to dining out, even with added delivery costs.
As for Albertsons, the company has invested in expanding its digital and omnichannel capabilities to further engage customers and provide a seamless shopping experience. This includes a unified mobile application, digital wallet, AI chat features, and increased self-checkout installations. These enhancements contributed to a 9% year-over-year increase in digital sales in Q3 2022, with a 234% increase over two years. The company also expanded its Drive Up & Go curbside pickup service to over 2,000 locations and launched the Flash service, which allows “customers to receive their DriveUp & Go and delivery orders in as little as 30 minutes”
Key efforts to bolster product assortments, particularly in its fresh and Own Brands categories, have also significantly improved the customer experience.
Albertsons’ strategic emphasis on offering the right assortment in each local market, coupled with its loyalty program and frictionless payment options, has effectively attracted and retained customers. The recently updated “Albsertons for U” loyalty program has been a pivotal factor as well, driving customer acquisition and retention while incentivizing higher spending and frequent purchases. As of April 2024, the program has 38 million members.
Discussion Questions
How might Albertsons leverage its extensive partnership network with delivery services like Grubhub, Instacart, DoorDash, and Uber to outmaneuver competitors in the grocery delivery sector?
In what ways can Albertsons further enhance its digital and omnichannel capabilities to maintain its competitive edge, especially in light of increasing consumer expectations for seamless shopping experiences?
Considering the potential impact of the Albertsons-Kroger merger on the grocery industry, how can Albertsons strategically position itself to capitalize on emerging market dynamics and strengthen its market leadership in grocery delivery services?
Poll
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Perry Kramer
Managing Partner, Retail Consulting Partners
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The addition of Grubhub to the Albertsons ecosystem will help to widen the ways customers can buy online groceries from the chain and its various banners. Generally, Albertsons has done a pretty good job in digital and has built a strong patchwork of capabilities including micro-fulfillment centers and has developed its own software for in-store picking. It has also focused heavily on the customer experience with its app sporting functions like shoppable recipes, menu planners, and nutritional trackers. Albertsons has been rewarded with strong digital growth, but its online market share still lags that of Kroger – though that gap is closing – and is a long way behind Walmart.
Maybe I’m missing something, but if the Kroger acquisition goes through (after divesting a bunch of locations), then Albertson’s essentially ceases to exist. (And I consider Kroger to be the superior operator.) It’s always worth pursuing new initiatives like the Grubhub tie-in, but it may not matter in the long run.
Thank you. I wondered this too. The collaboration is all well and good, but it more than likely will go away with the potential merger.
Among other things, Kroger uses Ocado automated warehousing and fulfillment technology. I suspect the merged business would be keen to push further down this path.
Maybe Albertson’s doesn’t think the merger will be approved?
The Albertsons partnership network gives it impressive reach, nimbleness and the ability to test and learn rapidly and at scale – a strategic necessity in the grocery sector. Merging with Kroger will amplify and accelerate the capacity of the new entity to compete even more effectively with Walmart, Amazon, etc.
Albertsons definitely enhances its advantages through outside delivery services such as Grubhub, Instacart, DoorDash, and Uber, but unless Albertsons has exclusive agreements, it is only a matter of a short time before most other national and regional supermarket chains offer the same. In the meantime, and with irony, Kroger still has strengths over Albertsons in digital services, but if they merge, the advantages that one has over the other will wash out. – Db
Albertson’s is quietly enhancing its customer delivery and shopping options, putting itself in a market leading position in the grocery digital/omni category. It still has volume opportunities, operating behind Wal-Mart, Costco, Kroger, and Target. But their growing capabilities will prove valuable whether they remain independent or become part of the Kroger empire.
I would not overestimate the impact of Grubhub on Albertsons’ performance. Grubhub is still a minor player compared to Instacart in food retail & DoorDash & Uber Eats in meal delivery. The question is what happens to this relationship post the Kroger merger. The Kroger-Albertsons merger is more about completing Kroger’s US footprint, than about technology acquisition.
Albertsons investments in technology and partnerships delivering results of a 9% year-over-year increase in digital sales in Q3 2022, with a 234% increase over two years show there is a lot of growth left in grocery ecommerce. That growth will go to those who invest in ways to reduce costs and increase service levels. The grocery ecommerce winners thus far are the larger chains.
Kroger has always been a leader in developing rich solutions in house. If the merger goes through with Albertsons then they will be able to pickup some additional features and merge them into a stronger eventual platform. The next step is a seamless merge with Loyalty status to give preferential times for pick up and delivery. Most important Albertson can not take their foot off of the gas until a Kroger deal is final.
Value-add services like Grubhub will definitely strengthen Albertson’s position in the marketplace, but what I find even more interesting is the pending merger with Kroger. When Kroger’s analytical prowess gets overlayed onto Albertson’s footprint, I think you’ll see tremendous synergies that emerge and provide greater value as a combined enterprise.
Winning the last mile of fulfillment is one of the major differentiators in the grocery landscape. Albertsons has done an outstanding job expanding its digital and omnichannel capabilities to drive seamless shopping experiences. Everything from improving the quality of their assortments with the addition of their own fresh and Own brands along with the integration of their mobile app, digital wallet and incorporating GenAI chap capabilities have resulted in some really positive growth, as their digital business grew by 24% during the fourth quarter, while participation in its loyalty program grew 16% to 39.8 million members.
However, micro-fulfillment is where the connected commerce experiences come to life. By expanding its capabilities, scale, and reach via the partnership model with Grubhub, instacart, DoorDash, and Uber, Albertsons will be able to meet the customers where they are and provide the added convenience they are looking for. This is particularly true as Albertsons is the first national grocery partner for Grubhub, and it seeks to use its core restaurant delivery business as a springboard to build a presence in the grocery space, where delivery accounts for roughly a third of online orders.
Through this arrangement, Grubhub allows consumers who visit its website and app to order groceries from almost 1,800 Albertson’s approximately 2,200 supermarkets. Grubhub intends to add more supply in markets where Grubhub delivery is available in the future. Grubhub expects to fulfill most orders within an hour, although delivery speed will depend on the number of purchased items and the distance between the store and the customer’s location.
It’s really just another choice and I don’t find this earth shattering. Albertsons/Safeway still offers Instacart and in some locations Safeway Delivery. Synch a catalog with one 3rd party delivery provider, might as well synch it with more…… Where it gets a little more interesting is preserving an accurate “on hand” across multiple delivery partners, and of course the inevitable substitution selection for out of stock items, where Albertsons is somewhat putting it’s reputation in the hands of more 3rd parties and the quality of their substitution process.
Albertsons is smart to do this, and they have done a great job investing in their digital experiences over the last couple years. I expect to see more success and growth from them in the near future.