What’s Kroger doing most right?
At this week’s GroceryShop trade event in Last Vegas, the crowds have been a little lighter than in the pre-COVID era, but the information flowed copiously.
Kroger chairman & CEO Rodney McMullen took the opportunity to enumerate a series of initiatives his company has pursued in the past year, as the retailer made moves to consolidate its position at the top.
Most recently in the headlines was the Kroger Rush announcement that put the grocer into a strategic alliance with Instacart to enable “ultra-fast” grocery delivery (read: hour or less) for shoppers near any of the chain’s 2,700 stores nationwide.
The move was made as a response to “huge swings in demand” that Kroger stores have experienced with online ordering, Mr. McMullen said.
The most popular products ordered online varied greatly by day of week, even the time of day, he said.
“Many late-night orders involve some sort of sin,” he quipped. “Alcohol or ice cream.”
Kroger’s online sales volume has reached $10 billion from a standing start five years ago.
“We are committed to take that to $20 billion,” Mr. McMullen said, adding a point about incrementality, “For the first time we have data points that show our digital customers are remaining within our ecosystem.”
A key enabler for digital growth will be the “sheds” Kroger has been erecting using automated fulfillment technology from Ocado. They hold promise for reducing the cost of digital delivery, which may partly offset rising labor costs.
“The sheds are also a way into new markets,” McMullen said. “There is one third of the U.S. we are not yet in today. Our aspiration is to feed the whole nation one step at a time.”
This won’t happen instantly, he cautioned, “You don’t eat an elephant overnight.”
Kroger has been making waves recently with its retail media network, an innovation made possible by 11 million daily store visits and four million daily digital visits. “We have an opportunity to monetize that traffic,” he said. “We are working to figure out a way to do that to make all boats rise. That lets us make an offer to CPGs they can’t get elsewhere.”
Kroger sees a chance to double profits in pursuing these initiatives. “I like to say we really have two jobs,” he said. “Job one is don’t lose the customer. Job two is to make money doing that.”
DISCUSSION QUESTIONS: Which of Kroger’s recent initiatives — digital sales, automated fulfillment, media network, etc. — is likely to have the greatest impact on corporate success? Can Kroger sustain its recent growth in digital sales and continue to build its in-store business at the same time?