Is Kroger in denial about the magnitude of its challenges?
Kroger is in denial about the competitive challenges it faces. That’s the central thesis of a Bloomberg opinion column by Sarah Halzack, who criticized the grocer for announcing strategic moves such as product assortments personalized by store and improvements to customer service as little more than anteing up table stakes in the current retailing era.
Ms. Halzack characterized executives at Kroger as describing the “current rough patch” it is going through as adapting to shifts that take place in the industry “every 12 to 15 years.” Kroger, which confidently maintains it is in the process of responding to the market’s challenges, doesn’t understand that the e-commerce transition taking place now is “a dramatically different business model, with a new set of competitors, logistical hurdles and profitability impediments,” writes Ms. Halzack.
Kroger unveiled its new strategic plan at its annual Analyst Day meeting this week. The plan, known as Restock Kroger, includes reducing capital investments in new stores while using technology to optimize product assortments and improve customer service in existing locations.
Kroger’s plan includes:
- Utilizing customer data from its 84.51 division to offer more personalized recommendations to customers throughout the year. Kroger maintains that it currently “delivers more than three billion personalized recommendations” annually.
- Building on digital investments such as its ClickList click and collect program. Last year, Kroger announced it planned to offer the service at roughly 45 percent of its stores. The company has also has been testing home delivery using Uber.
- Keeping customers happy through smart pricing. Kroger maintains it has invested more than $4 billion in pricing going back to 2001.
- Developing its private label portfolio. The company has seen annual sales of its own brands grow 37 percent from $15 billion to $20.5 billion between 2011 and 2017.
- Investing in its store-level associates. Kroger plans to spend $500 million over the next three years in improve training, “rebalance pay and benefits,” offer performance incentives and define career opportunities.
The one area of Kroger’s plan that has gotten the most attention from investors was its announcement that it was exploring strategic alternatives for its convenience stores including a possible sale of the 784 stores under the KwikShop, Loaf ‘N Jug, QuickStop, Tom Thumb and Turkey Hill Minit Markets banners.
DISCUSSION QUESTIONS: Do you think Kroger management is failing to fully grasp that its current challenges are unlike others that it has encountered in the past? Does Restock Kroger hit or miss the strategic mark, in your opinion?