Is Kroger lagging in e-commerce?
Jinjoo Lee, Heard on the Street columnist at The Wall Street Journal, has found some “nits to pick” with Kroger following the grocery giant’s release of its third quarter earnings results and its recent deal, pending regulatory approval, to merge with Albertsons.
Ms. Lee writes that Kroger’s 6.9 percent gain in same-store sales, excluding gas, is positive but its growth trails peers including Ahold Delhaize, which posted an 8.2 percent gain. Kroger rivals Walmart and Target each saw grocery comps grow above 10 percent in their latest reports.
Particularly concerning for Ms. Lee is what she perceives as a lack of progress by Kroger on the digital front. She points to the most recent quarter when Kroger’s 10 percent growth in online sales fell behind Walmart’s 16 percent gain. The columnist further cites an Insider Intelligence forecast that projects Kroger losing online grocery market share this year followed by two years where it remains “stagnant.”
Kroger’s current performance and the forecasts help to strengthen the company’s argument for completing the Albertsons deal, writes Ms. Lee.
Rodney McMullen, Kroger CEO, speaking earlier this week before the Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy and Consumer Rights, said that the merger would not change the balance of power within grocery where Walmart is at the top.
Kroger and Albertsons’ rationale for approval of the merger is that grocery is not solely about supermarkets, given the wide range of competitors (Walmart, Costco, Amazon.com) operating formats that do not fall under the traditional label.
Dealing with a wide variety of rivals has required Kroger to adapt its business model. Mr. McMullen spoke to the retailer’s digital development.
“Our digital investments are focused on growing our Kroger Delivery network,” said Mr. McMullen. “This includes Kroger Delivery Now with Instacart, which established Kroger as the first grocery retailer to directly provide a convenience delivery solution, with deliveries made in as little as 30-minutes. It also includes our collaboration with technology firm Ocado Group to build out e- commerce customer fulfillment centers.”
Kroger is looking to grow its digital channel sales to $10 billion by the end of 2023. A merger with Albertsons, while requiring investments, opens up opportunities for growth.
“Kroger can make use of Albertsons’ locations to drive click-and-collect growth, while Albertsons can leverage Kroger’s fulfillment infrastructure to bring its online capabilities in-house, instead of relying on third-parties like Instacart and DoorDash,” Insider Intelligence senior analyst Blake Droesch told Retailwire in an October email.
- Kroger Needs to Up Its E-Commerce Game – The Wall Street Journal
- Written Testimony of Rodney McMullen, Chair and CEO, The Kroger Co. Before The Senate Committee on the Judiciary, Subcommittee on Antitrust, Competition Policy, and Consumer Rights
DISCUSSION QUESTIONS: How do Kroger’s digital operations stand up to its competitors in the grocery space? Would a merger with Albertsons be a boost or a drag on Kroger’s online expectations?