Why retailers like Kroger & Walmart are adding streaming services to their membership programs

Retailers are now looking beyond the standard perks of free delivery, savings on gas and restaurant discounts as they look for new ways to retain and attract people to their membership programs. Kroger announced this month that it would add a choice of Disney streaming options — Disney+, Hulu or ESPN+ — for Kroger Boost members paying $99 or $59 annually. The program also offers benefits like free next-day delivery from Kroger stores and added fuel points. “Collaborating with Disney takes Boost member savings and benefits to the next-level, making our industry-leading program even more valuable and convenient for our members,” Stuart Aitken, Kroger’s senior vice president and chief merchant and marketing officer, said in a statement.

In 2022, Walmart announced it would add a Paramount+ Essential subscription to its Walmart+ membership program. This past November, Instacart and Peacock announced a similar partnership to offer Peacock Premium to Instacart+ members in the U.S. The practice is similar to how cell phone carriers offer streaming deals: Verizon announced earlier this year it would offer six months of the Disney+, Hulu and ESPN+ bundle (with no ads on Disney+ but ads on Hulu and ESPN+) to some mobile customers. Some T-Mobile unlimited plans also come with ad-supported Netflix subscriptions.

Many of the streaming services bundled in with retail memberships are ad-supported rather than ad-free. So while the stated reason behind the partnerships is to add more value to retailers’ growing membership programs, analysts and consultants say it’s also an incentive for streaming platforms as they help them grow their ad-supported plans. It gives the streaming companies more eyeballs to report to potential advertisers, in addition to potentially upping retention for the retailer programs.

“The more people you have in your platform, the better, and there’s a cost and value to that,” said Eunice Shin, CEO and founder of consulting firm Elume Group, whose clients include both retailers and streaming companies. “They’re all trying to push their ad model, and their ability to sell higher premiums is based on eyeballs.” She added that the streaming platforms care about increasing the subscriber count of their ad-supported plans, whether those subscribers are paying or getting it for free through another service.

Brad Jashinsky, a retail analyst for Gartner, said for retailers, streaming and other added perks like food and gas discounts are there to add more value on an ongoing basis so that when the consumer thinks about canceling, there is more for them to lose.

The primary reason someone would sign up for Kroger Boost or Walmart+ is likely not for streaming; the core of the services is free delivery, but access to entertainment is something retailers find their customers are also interested in. Tom Duncan, vp of marketing at Kroger, told Bloomberg that Disney and Kroger started talking earlier this year after many Kroger customers said they would want streaming as part of the membership program. Walmart has similarly used customer insights to inform its decisions on what to add to Walmart+.

Gartner research shows how attached customers are to streaming services; a cost-of-living and price sentiment survey from the firm last year found streaming services were one of the purchase categories customers would part with last when making budget cuts. Meanwhile, retailers are in an arms race to add as many benefits as possible to ensure people stay subscribed to their membership programs. More of them now offer free and fast shipping, and even Amazon has recently produced more marketing, highlighting all the various perks people get through Prime to remain competitive.

“When a consumer is thinking about ending their subscription to a Walmart+, to Kroger Boost, Amazon Prime, it’s going to give them pause because they will lose a number of benefits, not just the core benefit of the free shipping,” Jashinsky said.

Retailers and delivery services are also trying to grow their retail media networks to place advertising in their online marketplaces. Thus, they care about growing their membership count and building out their own diversified flywheels to compete with the large amount of advertising spend that Amazon takes in.

“I think the Amazon model is what everyone is vying for in their own special way,” Shin said. “But really, it’s that full-fledged Amazon flywheel that they’re looking to be able to serve. And since they don’t have their own entertainment assets, that’s where they’re finding leverage with the streamers.”