Dealing with a volatile Vaccine Economy market - Kroger gets seamless and personal in its omni-channel approach

Profile picture for user slauchlan By Stuart Lauchlan September 13, 2021
Summary:
Kroger 'had a good war' throughout the COVID crisis; now it's time to win the peace in a turbulent Vaccine Economy.

Rodney McMullen
Rodney McMullen

There’s some indication of the volatility still present across the retail sector in the Vaccine Economy to be found in the words of Rodney McMullen, CEO of US grocery behemoth Kroger:

Early in the quarter, our customers visited stores more frequently and many shifted from online to in-store…Towards the end of the quarter, as COVID-19 cases increased in many geographies, customers began shifting back to our digital solutions.

In other words, while there are (over)confident claims from some quarters that the worst is behind us now, the rise of the Delta variant around the world is a painful reminder that the real ‘new normal’ is likely to be one of having to be able to adapt to every-changing circumstances and to do so quickly depending on customer mood.

While (hopefully) there’s never again the need to ‘scramble’ as there was back in Spring 2020, the future - for the foreseeable - is about agility.

As McMullen succinctly puts it:

Customers can choose how they want to shop. Our job is to be available in every channel so the customer does not have to compromise.

Learnings

Kroger, as diginomica has noted before, ‘had a good war’ when it came to the COVID crisis at its height, going so far as to publish its own learnings for other retailers to emulate. Over the past two years, digital revenues have risen 114%. The return to stores over the past few months has had an impact, with digital declining in the most recent quarter by 13%, the firm remains highly committed to building out and consolidating its omni-capabilities. McMullen notes:

Kroger has doubled our e-commerce household penetration, increasing the number of our brick-and-mortar customers that engage with our digital solutions since 2019. During the quarter, we added over 340,000 new customers to our digital platforms. We continue to expand capacity across our footprint, and we reduced wait times for Kroger Pick-up. As we look ahead, our seamless ecosystem will remain a competitive advantage, as we offer what customers need and want in a way that fits into their life. Whether it's shopping in our stores, picking it up at our stores, or getting it delivered or shipped directly to their homes. We continue to enhance our seamless ecosystem.

The firm’s partnership with Ocado continues to deliver with 2 Customer Fulfillment Centers (CFC) now open, he adds:

We are happy with the performance thus far and are energized by the volume and growth in both sheds. In Ohio, our focus has been on involving the customer proposition to maximize opportunities alongside our existing digital solutions. In Florida, we launched delivery savings pass, offering customers unlimited deliveries for just $79 per year. We continue to see incredible Net Promoter Scores and our customers tell us they love our friendly, professionally trained drivers and the refrigerated delivery vans that bring the freshest food directly to their doorsteps. Looking ahead, we remain on track to open 6 customer-fulfillment centers over 2022 and 2023, which will further expand our seamless ecosystem.

Getting personal

One objective now is to drill down further on personalization capabilities with the firm’s loyalty programs taking center stage. McMullen explains:

Our rewards programs has been active for over two decades. It captures data from 60 million households and 96% of ourselves. Customers clearly see the value of our program, which drive sales and builds loyalty. As an example, nearly 60% of all items in a digital basket were added through our personalization science, highlighting our ability to make meaningful suggestions that surprise and delight customers.

Furthermore, when we personalized recommendations for our customers, we can reduce their time to shop by nearly 70%. Overall, 1 in 3 people have noted that groceries have gotten more expensive in the past month. Kroger customers benefit from our personalization as we offer highly relevant savings at a household level, allowing them to further stretch their food dollars.

All told, Kroger is well set for what are likely still to be turbulent times ahead across the grocery industry with adaptability and agility hardwired into an omni-channel corporate DNA. It’s an approach that seems to be paying off so far as McMullen notes:

The thing that we're especially proud of is almost every customer that was shopping with us digitally early in the quarter [who] stopped shopping digitally, [then] started shopping in the stores. For us, that's really important as part of our overall strategy for seamless, because what we find is after the first year, an online shopper actually comes into the store more often than they did before they became an online shopper.

My take

Kroger has been an impressive performer throughout the COVID crisis and now looks set to be taking a commendably pragmatic omni-channel approach to the Vaccine Economy.  Ocado reports its latest numbers tomorrow - it will be interesting to see what the worldview is from its perspective.