By Kevin Kelleher
October 2, 2018

Amazon’s looming threat to the rest of the retail industry is prompting the formation of partnerships between unlikely allies. The latest example: Walgreens and Kroger are teaming up to allow Kroger groceries to be picked up at Walgreens stores.

The companies announced Tuesday a pilot program that will take place during the next several months in 13 Walgreens stores located in Northern Kentucky, not far from Kroger’s Cincinnati headquarters. Walgreens stores will stock some of Kroger’s private-brand goods, while shoppers who buy Kroger groceries online can arrange to pick them at Walgreens locations.

Rodney McMullen, Kroger’s chairman and CEO, said in a statement that the program “brings together the best of two great brands to rethink convenience and redefine the way America shops for food.” But it also seems likely that the two retailers are banding together to have a better chance of competing against Amazon.

Grocery chains like Kroger have had to face Amazon as a direct competitor since it bought Whole Foods Market in 2017. Amazon has offered Prime members discounts at Whole Foods and launched a grocery pickup and delivery service for its groceries. Drugstores like Walgreens, meanwhile, are bracing for Amazon’s reported entry into prescription drugs. Meanwhile, they must compete with Amazon already on personal care items like shampoo.

Grocery and drug chains have fared better than department stores in recent years as Amazon’s clout in the retail industry has increased. Recently, some companies have tried to make collaborative arrangements to stave off Amazon.

Rite-Aid and Albertson’s tried to merge, but the deal was called off after Rite-Aid shareholders objected to its terms. CVS Health is planning to buy Aetna for $69 billion, while Walmart has formed a partnership with insurer Anthem to reduce prescription costs.

Walgreens shares rose 1.4% in active trading Tuesday to $73.49 a share. Kroger’s stock rose 1.2% to $29.08 a share.

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