Grocery store Kroger and drug store Walgreens are teaming up. In an effort to cut supplier costs, the two companies want to start buying merchandise together, CNBC reported. The chain retailers will call this partnership the Retail Procurement Alliance, and will have them identifying overlap in products that they both are receiving so they can place their orders together. This will increase scale and lower costs for both parties, as well as reduce waste. The alliance will also evaluate if it's possible for Kroger to start manufacturing items in-house for Walgreens and vice versa, CNBC reported. Furthermore, Kroger and Walgreens hope that other companies will join the Retail Procurement Alliance in the future.
Total Retail's Take: More than ever traditional retailers are looking to find cost savings wherever they can as the retail landscape continues to shift — i.e., more consumers going online to shop. An alliance like this will allow traditional brick-and-mortar companies such as Kroger and Walgreens to better compete with Amazon.com, particularly as Amazon continues to push further into the health and food markets after acquiring Whole Foods and creating its own internet pharmacy company, PillPack. Furthermore, it just makes smart business. If commonalities exist within brands’ product lines, leverage the economy of scale to cut costs for all parties involved. I wouldn't be surprised to see other retailers join Kroger and Walgreens in the Retail Procurement Alliance in the near future.