When I heard the buzz last week that Target and Kroger are talking to each other about merging, I said to myself, wow, this platform-sharing model for a traffic building synergy is taking off faster than I had expected. Kohl’s recently announced that Aldi, the Germany based grocer, would soon be operating on their platform. And now a potential Target/Kroger deal, if it were to happen, would be another industry tipping point indicating that even more discombobulation of old models is speeding ahead.
And, by the way, these are not just “copycat” moves based on Amazon’s Whole Foods acquisition. The good thing about this churn is that they indicate that the “legacy world” leaders are ever more convinced that all of their buildings are “stores” that can house all sorts of things and/or services that will compel consumers to visit those locations, both online and off. And when customers come shopping for one thing, they will take a peek at the other offerings while they are on the “platform.” In particular, consumers shop for groceries, on average, close to five times a month. They visit a department store about once a month. These new partnerships will increase traffic to the Target and Kohl’s platforms fourfold, and one can only assume there will be crossover sales of other merchandise. This redefines synergy. Walmart, with about a 25 percent share of the grocery industry in the U.S., has proven this synergy works.
Another synergy for Target and Kroger would be Kroger’s ability to strengthen Target’s weaker grocery business and Target’s ability to strengthen Kroger’s slow growing online business. Furthermore, Target’s recent acquisition of Shipt, the personal shopping and delivery service, along with their drive and pick-up service, will benefit Kroger. It should be noted that Kroger had the opportunity to acquire Shipt prior to Target, but fell asleep at the switch.
Finally, Target currently has close to 1800 locations and Kroger runs close to 2500 supermarkets, so each could potentially seek out many of the other’s locations for additional shopping, shipping and distribution points.