- Kroger may be eyeing a deal to acquire e-commerce retailer Overstock.com, The New York Post reported, citing unnamed sources.
- Last December, Overstock CEO Patrick Byrne said selling the company to a brick and mortar retailer was a possibility. According to the Post, Byrne said he wanted to sell or re-organize the business to focus on blockchain technology.
- A merger between Kroger and Overstock would follow other notable tie-ups between grocery and online retailers, including Amazon's Whole Foods buy and Walmart's 2016 acquisition of Jet.com.
Kroger is at it again. Reports have recently linked the grocer with Ace Hardware and online club store Boxed. Now, unidentified sources say Kroger is looking at acquiring Overstock, an online retailer of home goods and clothing. If this is true, it would indicate Kroger's intent to expand its operations outside of the low-margin, highly competitive grocery industry — placing it in even more direct competition with Amazon and Walmart.
Kroger is in the midst of a three-year revamping plan called Restock Kroger that involves remodeling stores, personalizing product offerings and increasing its use of data analytics to make decisions for individual stores. The plan calls for the company to pull back on store growth and focus on what it does best — namely, shopper data and merchandising. Increased efficiency and sales velocity are the main goals.
So far, Restock has delivered results for Kroger, with its stock price up and results in the third quarter better than expected. Still, analysts believe that in order to compete with high-flying Walmart and Amazon, the Cincinnati-based grocer needs to make a transformative deal. Kroger hasn't made a large-scale retail acquisition since 2014, when it bought East Coast grocer Harris Teeter.
Could Overstock be the right partner for Kroger? Launched in 1999, the site focuses on home goods that could dovetail nicely with Kroger's kitchen and grocery offerings. The online home furnishing and accessories market has been booming lately, with Wayfair joining Overstock in reporting strong earnings. E-commerce furniture sales have emerged as a major growth area, rising 18% in 2015, second only to grocery, according to Barclays. Some 15% of the $70 billion in U.S. furniture sales are now online, according to IBISWorld data.
That success, however, hasn't gone unnoticed by Amazon, which recently entered the fray with two new furniture lines, Rivet and Stone & Beam.
It's difficult to say what sort of purchase, if any, Kroger might make at this point. But these reports do indicate the grocer is poking around in growth markets. The company struggled last year following Amazon's acquisition of Whole Foods, but 2018 could see the company return to growth in a big way — particularly if it makes a major acquisition.