- Albertsons’ revenue was flat in this year's second fiscal quarter, with the company recording a negligible decrease of 0.2%, according to a company release. Identical store sales were down 1.8%, largely due to a lack of food price inflation and selective price investments.
- The retailer grew its e-commerce business 19% year over year in Q2, reports Retail Leader, a bright spot amid the lackluster quarterly results. The company plans to double the number of stores offering click and collect by the end of fiscal 2017. It’s also upgrading its app for delivery and pickup in an effort to enhance its digital shopping experience.
- "We … have accelerated the expansion of our eCommerce and digital offerings," Chairman and CEO Bob Miller said in an earnings call with analysts, according to Retail Leader. "With the expansion of home delivery and click-and-collect, together with the acquisition of Plated, we are making progress in serving our customers wherever, whenever and however they want to purchase food.”
While Albertsons lost some ground in total sales, CEO Bob Miller seems happy with the latest earnings report because the company recorded a 19% increase in its e-commerce business. The CEO called this “making progress” in meeting consumers’ needs. And this doesn't even take into account the acquisition of online meal kit company Plated, which the grocer bought last month after the close of the second quarter.
Still, Albertsons' declining comps is a reminder that it is facing many of the same challenges as other grocers. These include shrinking margins, growing competition from discount stores like Lidl and Aldi, and diverse online competitors like food delivery company Instacart and meal kit preparer Blue Apron. And then there is the Whole Foods and Amazon combination, which casts further doubt on an already challenging food retail environment for Albertsons.
Albertsons and its owners have little choice but to carry on and invest in store remodeling and online efforts just to remain competitive. Standing still is not an option. Despite its recent momentum, the grocer lags behind other competitors in the evolving online grocery space. Its 19% growth pales in comparison to some industry benchmarks and that reported by market leaders Walmart and Kroger.
In its latest “Ecommerce Supermarket Scorecard Report,” consulting firm Brick Meets Click found online grocery sales are growing at 25% per year, so Albertsons is off the industry pace. Walmart recently reported that its e-commerce sales grew 73% year-over-year in the second quarter of 2017, with online grocery as the key driver. Kroger announced that its Q2 digital revenue surged 126% on the back of its ClickList e-commerce platform, now available at hundreds of company stores.
These kinds of growth figures clearly indicate Albertsons has some work cut out to catch up. Buying Plated could provide a needed boost, giving the grocer immediate brand recognition and expertise of a leading meal kit company. At the same time, Plated gains access to 2,300 stores and the financial backing of one of the largest supermarkets in the U.S. Albertsons says it plans to offer meal kits in stores as well as online. Offering a value-added solution like in-store meal kits could be a way for the retailer to claw back some sales during this time of food price deflation.
The good news for Albertsons is that research shows many consumers want to purchase meal kits in the grocery store, not online. The not-so-good news is that other statistics show meal kits are likely to remain a niche rather than mainstream market. Last year, The NPD Group found that only 3% of consumers have tried meal kit services — and about half of those quickly canceled their subscriptions.
Questions remain about whether online meal kits will pan out as a successful model. Some analysts say that supermarkets may soon dominate the meal kit market. Others argue that diverse consumer needs and shopping preferences could sustain multiple meal kit business types. One thing is certain: Albertsons has its foot in the door with Plated, which gives it a leg up over some supermarket competitors.