In early February, Kroger, one of the nation’s leading supermarket companies, began offering personal finance offerings. According to the Lexington Herald-Leader, “customers can now sign up for a mortgage on a home equity loan, sign up for identity theft protection, purchase pet insurance or get a credit card.”
The chain has recently offered gasoline, DVD rentals, and health clinics. Merchandise offers include toys, furniture, and lawn and garden products.I have a couple of reactions to Kroger’s latest forays.
The Good: Using customer information gathered from frequent buyer cards is an excellent way for a supermarket to expand its offerings from grocery items. Tesco in Great Britain and Costco in the United States are great examples of using consumer information in novel ways.
Also, because of Wal-Mart’s incursion into the grocery industry, supermarkets have to learn how to fight back. One way: to use customer information to sell items (such as financial services) that Wal-Mart might have a tough time imitating. Wal-Mart just recently failed in their efforts to offer more banking services. Also, by selling items such as toys and furniture, supermarkets have less dependence on grocery items as their sole source of bottom line income.
The Bad:
1. Privacy: Supermarkets have to be careful about not using frequent buyer card information without customer permission. Supermarkets must recognize that consumers are starting to take privacy scares to heart. Supermarkets must not give information to third parties without their cardholders’ permission. I don’t know if Kroger will be giving financial information to third parties, but they should only give information with customer approval.
2. Loss of focus: Supermarkets are food experts. They can compete in other areas, but they have to make sure that their food quality or focus does not suffer. If customers lose faith in a supermarket’s food selection or pricing, then they will stop going to that supermarket. All the variety in the world will not save a supermarket with poor food quality or selection.
What are your thoughts?
Personally, I am not one of those who takes advantage of banking while grocery shopping. When I am shopping I am interested in the freshness and the variety of what I am purchasing, as well as good price value. Let the banking industry worry about banking. With the increase of usage of debit cards and on-line banking, the number of shoppers who need to visit a bank in person is rapidly dropping. People can do all those things – shop for a mortgage, compare home equity lines, purchase any kind of insurance or sign up for credit cards, over the internet in the convenience of their homes. This is a waste of store square footage that could be put to better use as a specialty corner marketing ethnic foods, local produce, or hard-to-find high-end herbs/spices/seasonings/organics.
This is an excellent example of how Wal-Mart is becoming competition to everyone. If you are in business, you can expect to have to deal with Wal-Mart eventually, as this company wants to be everything to everyone. But is Kroger wise to use the strategy they are? That depends.
If Kroger is going to actually DO something with all the customer information they get that is one thing. But unfortunately, most companies have loads of information that just sits there doing nothing. If Kroger is going to use this information to fight back, than that could be important for them.
On the other hand, many in business should read a book called Raving Fans by Ken Blanchard and Sheldon Bowles. This is the story of an area manager and a fairy godmother called Charlie. (Yes, it’s fairy godmother, Charlie.) This book talks about how to deliver exceptional customer service. The area manager is taken on tours of businesses that do just that.
In his tour he goes to Sally’s market. Sally’s was a focused grocery store. Sally didn’t develop film or rent carpet cleaning machines. But they did provide the best fresh produce, meats, and had the best groceries anywhere. Sally’s was a FOCUSED store.
A good example of what happens when a business is not focused is K-Mart. Years ago K-Mart bought other businesses. If I remember correctly they owned a few fast-foods places, and some other businesses. Owning those businesses took their focus off of the department store, and took it to businesses they KNEW NOTHING ABOUT. Eventually, they had to sell those businesses and concentrate on K-Mart. But it was too late and the damage was already done.
If Kroeger is going to lose their focus by getting into other areas of business, it could hurt them in the long run. Lets hope that doesn’t happen.