Kroger CEO says no one has the ‘data and insights’ that it has
Kroger CEO Rodney McMullen has plenty of reasons to be cheerful. The nation’s largest supermarket chain store operator is coming off a record year and, while matching 2020’s comps might be too much to ask, there are plenty of signs indicating that Kroger will continue to build on its strengths while adding new ones that help generate sales even more profitably.
The grocer grew its same-store sales, excluding fuel, by 14.1 percent last year, aided by a 116 percent jump in online sales. Kroger’s growing private label business was up 13.6 percent during a year when it posted an operating profit of $2.8 billion. The supermarket giant also found alternative revenue streams, notably through its retail media program, which delivered $150 million in operating profit.
Mr. McMullen, who often speaks of “competitive moats” that Kroger has established, is a firm believer that the retailer’s data and insights enable it to outperform its rivals.
“Many retailers have transactional data, but no one has the customer data and the insights that Kroger has,” he said on the company’s third quarter earnings call in December.
Kroger claims to have delivered half a trillion personalized recommendations to customers in 2020. The grocer has said that customers appreciate the preciseness of its offers — the company’s email open rate is nearly 18 percent higher than the industry average. About 95 percent of customer interactions on Kroger’s website and app are enabled by personalization, which drives engagement and purchase.
Kroger saw its digital business pick up during the fourth quarter, while at the same time achieving modest improvements in operating profits on these sales. The company currently does deliveries from 2,472 stores and offers pickup at 2,223. Ninety-eight percent of all Kroger households are now covered by these services.
The retailer is looking to ramp up revenues and profits of its online operations, including paid media. Kroger, according to reports by CNBC and Supermarket News, has set a goal of doubling online revenues by 2023.
In March, the grocery giant did a soft opening of its first automated customer fulfillment center (AKA shed) with Ocado. The formal opening is planned for this month. Kroger expects to open 11 of these warehouses this year and nine others to later. The retailer sees sheds helping it handle more orders at a lower cost.
- Kroger Delivers Strong Fourth Quarter and Fiscal Year 2020 Results – The Kroger Co.
- Kroger (KR) Q4 2020 Earnings Call Transcript – The Motley Fool
- Kroger (KR) Q3 2020 Earnings Call Transcript – The Motley Fool
- Kroger looks to make online grocery orders more profitable, double digital sales by end of 2023 – CNBC
- Kroger to ‘lead with fresh, accelerate with digital’ in 2021 – Supermarket News
DISCUSSION QUESTIONS: Do you agree with Kroger CEO Rodney McMullen’s statement on the company’s strength in data analytics and action, specifically as it relates to personalization? What role do you see for Kroger’s sheds, store delivery/pickup and retail media in its goal of doubling online revenues at operating margins more in line with its in-store business?