Target and Kroger are discussing a possible megamerger, according to a report from Fast Company. Reports from both CNBC and Reuters have conflicted the report, saying there is “no truth” to it. Whether an actual merger or some other partnership takes place, it definitely would send shockwaves throughout the industry.
A Target-Kroger Merger Would Take Shots At Walmart And Amazon
Last year, Target and Kroger’s combined annual revenue added up to $195 billion. But they still have to contend with the two biggest players in retail — Walmart and Amazon.
“We’re seeing retailers trying to assess who actually is their competitor, and who is the person you need to partner with the battle the real enemy in the room, which the entire industry sees as Amazon right now,” said Tom Gehani, Director of Client Strategy and Research at L2 in an intereview with Retail TouchPoints. “Target sells groceries, but it’s a small portion of their business at $15 billion — only 21% of revenue. Kroger sells general merchandise product, although it’s only between 5% and 10% of revenue. These companies started to look at the real enemies, which are Walmart, which does $170 billion of grocery sales, and Amazon/Whole Foods, which is projected for $135 billion in grocery sales.”
Amazon’s acquisition of Whole Foods — a deal valued at $13.7 billion— last year forced grocers and retailers to rethink how they would operate, whether that meant offering more flexible pricing, payment and shipping options, creating a digital supply chain or emphasizing online grocery.
Target Seeks To Bolster Grocery, Loyalty
It’s no secret that Target has tried to bolster its grocery offerings in recent years, naming Jeff Burt, former President of Kroger subsidiary Fred Meyer, as its SVP of Grocery, Fresh Food and Beverage in April 2017. The company continues to roll out its “next-gen” stores throughout the U.S., which feature a separate entrance for convenience and grocery items, and has cut prices on thousands of items, many of which…