Kroger, Wal­greens pi­lot one-stop shops

The Columbus Dispatch - - Front Page -

Look­ing for av­o­ca­dos? They’re near the Aleve.

Band-Aids? You passed them when you grabbed a ba­nana.

A one-stop shop for your gro­cery and phar­macy needs is what Kroger and Wal­greens have in store. Through “Kroger Ex­press,” the gro­cer will add more than 2,300 prod­ucts at 13 Wal­greens lo­ca­tions in North­ern Ken­tucky, selling dairy, meat, pro­duce, frozen foods and more. The first pi­lot store is al­ready open in Florence, Ken­tucky, with the re­main­ing 12 lo­ca­tions de­but­ing early next year. Shop­pers can also or­der Kroger gro­ceries on­line to be picked up at Wal­greens.

The part­ner­ship comes as brick-and-mor­tar re­tail­ers look for new ways to com­pete with e-com­merce gi­ants, es­pe­cially when it comes to gro­ceries. An­a­lysts say both com­pa­nies could stand to ben­e­fit: Kroger could see a ma­jor boost to its na­tional foot­print if the pi­lot ex­pands, for ex­am­ple. And Wal­greens could reel in foot traf­fic from shop­pers who reg­u­larly re­fill their pre­scrip­tions and de­cide to pick up din­ner, too.

But an­a­lysts also have a lot of ques­tions: How will prof­its be di­vided be­tween the com­pa­nies? Will the space in­side Wal­greens stores be leased out to Kroger? Will Wal­greens pay its own em­ploy­ees to stock Kroger items? Could there be any over­lap be­tween Kroger­brand and Wal­greens-brand items sold on the same shelves?

“There are so many things we don’t know,” said Bill Kirk, a food re­tail an­a­lyst at RBC Cap­i­tal Mar­kets. “And frankly, I think it’s be­cause they don’t know yet.”

Wal­greens said its own em­ploy­ees will stock Kroger Ex­press shelves, and that Kroger is re­spon­si­ble for sup­ply­ing the prod­ucts to Wal­greens lo­ca­tions. Kroger’s gro­ceries will take up about 4,000 square feet of a Wal­greens store, which av­er­age about 10,000 square feet of in­ven­tory. Wal­greens de­clined to say whether that space would be leased or shared un­der some other ar­range­ment.

In the ab­sence of much more in­for­ma­tion, an­a­lysts aren’t con­vinced that shop­pers will think of Wal­greens as a place to go for gro­ceries, or that peo­ple would think to or­der their gro­ceries in ad­vance and then pick them up at the drug store.

“I think [Kroger] must think they have a re­ally, re­ally strong brand that will carry over to an­other venue,” said John Ran­som, man­ag­ing di­rec­tor of health-care eq­uity re­search at Ray­mond James. “And that’s where I get to be a lit­tle skep­ti­cal.”

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