Kroger now a money market
CINCINNATI -- Weekend grocery shopping list:
• Milk, on sale at four half-gallons for $5.
• Cookies, two packages-for-one at $3.99.
• New $200,000 fixed-rate mortgage, 30 years at 6.2 percent.
Kroger Co., the nation's largest traditional grocery chain, has been quietly but steadily expanding its financial services business since beginning with a Kroger credit card three years ago. Stores now market mortgages, home equity lines of credit and a just-expanded set of a half-dozen insurance coverage plans from identity theft to home and life policies.
The company has been broadening its offerings at the same time as rival Wal-Mart Stores is expanding its financial services business. Kroger sees its services not as big moneymakers but as a good way to increase traffic and customer loyalty.
"It's about driving more people to the store and bringing them back," said Kathy Kelly, president of the Kroger personal finance division formed in 2004.
The grocery chain reaps fees for the services provided in partnership with conventional banks and insurance companies. Kelly wouldn't disclose specific numbers, but said the services offered are usually priced in the middle-to-lower-end of market averages.
For customers, they're a convenience, if surprising to find from their grocer, which so far markets them mainly in store displays and brochures.
One of Kroger's initial offerings was pet insurance through Jeffersonville, Ind.-based PetFirst Healthcare. Wayne DeLancey of Parkersburg, W.Va., was passing the time while his wife was shopping when he spotted the Kroger rack with brochures about its financial products.
He read through one on pet insurance and soon signed up their beloved Blu, a 5-year-old Siberian husky and German shepherd mix.
"I told my wife if this thing does what they say, this is a pretty good deal," DeLancey recalled.
For $24.95 a month, most of Blu's health-related expenses are covered, including 90 percent of a recent tumor removal.
"We're real happy with the coverage. I'm glad Kroger did this," he said.
Kroger stores, like Wal-Mart and supermarket chains from Stop & Shop stores in the Northeast to Pleasanton, Calif.-based Safeway stores, have long hosted banking company branches. But Kroger has now made financial services part of its own business.
Spencer Hapoienu, president of Insight Out of Chaos, a database and marketing company, cautioned that grocers might range too far from their area of expertise.
"I think the problem is whether or not the grocery chains understand the other businesses and execute properly," he said. "If you start doing financial services and you have a bad experience, it can backfire on an individual consumer level and business level."
He noted the current national credit crunch could squeeze some Kroger credit-card customers, for example. Kelly said the company hasn't had any negative feedback, although business for some financial products has been sluggish.