- Requirements for Direct Ship vendors
- Kroger’s Direct Ship performance guidelines
- Fees for each non-compliance type
For a vendor looking to increase profits, Kroger’s Direct Ship is a great way to boost sales. Since Kroger is the largest supermarket chain in the United States, a smaller supplier can easily sell goods and deliver the items to the buyer’s home.
Customers can order items such as consumer packaged goods (CPG) in bulk from their homes. Another benefit is that a consumer can also request shipping products that might not be available at the local store.
Another easy way for suppliers to sell and deliver items through Kroger is dropshipping. Sellers list goods on Kroger and dropship to customers across the U.S., but before you start, there are Kroger DSV guidelines of which each vendor needs to be aware.
Kroger Direct Ship guidelines
With Kroger’s Direct Ship program, vendors fulfill orders on Kroger’s behalf and maintain the inventory. Through direct shipping, the grocer uses ship-to-home to directly deliver to the consumer’s home address, creating a perpetual buy-and-sell chain.
Kroger Direct Ship Guidelines are subject to change, and vendors need to accept any new change within 60 days to stay part of Kroger’s Direct Ship program.
When listing products, vendors need to keep several things in mind:
- Before listing products, vendors must provide clear product descriptions.
- Product copies are eligible to change by Kroger to maintain a streamlined user experience.
- Alongside the copy, vendors can submit a maximum of six images per product.
- After setting up an inventory, vendors need to update quantity levels per Stock Keeping Unit (SKU) minimum once each day.
- In case that an item is out of stock, Kroger doesn’t allow backorders and substitutions.
- If a vendor decides to discontinue a product, it needs to communicate that with Kroger to remove the product from the website.
Direct Ship guidelines for vendor performance
There are several Direct Ship guidelines that Kroger evaluates to assess a vendor’s performance. In the beginning, Kroger’s Direct Ship program lists new sellers in the “Probation” classification.
- Probation ends after 30 days or until a vendor processes 1,000 orders.
- During the “Probation” period, non-compliance penalties do not apply.
Kroger monitors its suppliers’ performance on an ongoing basis. Vendors selling products on the Direct Ship platform have access to various self-monitoring tools to ensure they perform at an optimal level.
Kroger uses various key performance indicators (KPI) such as financial impact, overall performance, and policy compliance quality to classify each vendor. Kroger expects Direct Ship vendors to provide the same quality of service as the grocer itself.
There are several compliance parameters that Kroger calculates quarterly:
- Fulfillment rate: The vendor’s fulfillment rate needs to stay above 95%. Kroger calculates the rate by dividing shipped orders by the total received orders.
- Cancel rate: Kroger’s compliance requirement for the cancel rate is less than 5%. Kroger calculates the rate by dividing canceled orders by the total received orders.
- On-time shipment rate: The on-time shipment rate needs to stay above 95%. Kroger calculates the rate by dividing the total Ship by Date orders number by the total orders shipped.
- Return rate: The return rate needs to be less than 5%. Kroger calculates the rate by dividing total returned orders by the total orders shipped.
Fees for each non-compliance type
Each of the four main parameters has its non-compliance fees. If a vendor fails to comply with the quarterly parameters, the Kroger Direct Ship platform maintains the right to the following:
- Fulfillment rate chargebacks: Kroger can charge 10% of the total order value of mis-shipped quantities if the vendor’s fulfillment error rate is higher than 5%.
- Return rate chargebacks: Kroger can charge 10% of the total order value of returns due to the vendor’s performance error if the error rate is higher than 5%. Reasons for vendor’s error are:
- Insufficient packaging
- Incomplete shipment
- Late shipment
- Shipment of used, defective, or poor-quality goods
- Advance Shipment Notification (ASN) chargebacks: Kroger can charge 10% of the total order value for late shipments if the error rate is higher than 5%. This also includes vendors who fail to submit ASNs on time.
- Return rate chargebacks: Kroger can charge 10% of the total canceled orders if the error rate is higher than 5% for cancelations due to lack of inventory. This rate includes partially fulfilled orders as well.
Additionally, there are other non-compliance types within Kroger’s Direct Ship program that might result in non-compliance fees.
- Kroger tags as delinquent any purchase order (PO) not confirmed as shipped by 12:00 PM Eastern Time on the day following the ship date. Kroger can cancel delinquent orders and set a non-compliance penalty.
- Vendors need to provide indirect signature service for orders that exceed $300. Kroger can issue a non-compliance penalty for non-used service.
- Kroger can deduct its vendor’s payment for off-invoice allowances, such as early payment discounts or defective item returns. Chargebacks for non-compliance penalties can also apply.
- Vendors must respond to order inquiries one business day after the placed inquiry. Failure to reply may result in canceling the order and a non-compliance penalty.
- If Kroger finds a vendor isn’t adhering to the packaging standards, it can charge $100 per non-compliant order.
- If the vendor doesn’t comply with Direct Ship Routing Guide, Kroger can charge $100 per non-compliance.
Kroger’s non-compliance fee schedule
Kroger determines the total non-compliance fee after assessing the error. The retailer may fine for errors as the actual financial loss cost. This chargeback also includes the labor and a $100 fee.
If the supplier fails to comply, Kroger reserves the right to remove products at any time and for any reason. Kroger may return products if the vendor conforms to the expected service quality.
Adhering to Kroger Direct Ship guidelines ensures the vendor maintains the partnership. Provided third-party performance tools can help vendors effectively keep an eye on essential parameters such as rejection rate, fulfillment rate, and timeliness of shipments.
When facing an issue, it’s better to communicate proactively with the Kroger Digital Assortment Team directly, rather than trying to solve it on your own. Through clear communication, vendors can run a successful business and keep a productive relationship with Kroger.
Fight non-compliance fees with data
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