Digital dips for Kroger as shoppers get back behind their real world shopping carts

Stuart Lauchlan Profile picture for user slauchlan June 17, 2022 Audio mode
Summary:
Digital sales are down year-on-year, but Kroger CEO Rodney McMullen remains focused on striking the right omni-channel balance.

Rodney McMullen
Rodney McMullen

Digital sales have declined six percent year-on-year as shoppers returned to the grocery store,  but US giant Kroger’s focus on its Accelerating with Digital strategy is paying off.

Customers are leaning towards fresh produce, according to CEO Rodney McMullen, with Kroger applying new technologies to maximise the “days of freshness” that it can offer:

We continue to increase our use of forecasting and analytical tools, specifically leveraging [retail data science specialist] 84.51 to improve our ability to maintain fresh products in stock, both in store and online. Our recent floral results are a great example of how we are leading with Fresh. As the nation's largest florist, the first quarter was our time to shine for holiday celebrations and our floral team stepped up achieving record sales. In fact, we set an overall single day floral sales record on Valentine's Day and a Mother's Day sales record with strong double-digit growth.

Personalization continues to be a corporate priority, he added:

Our data science platform provides unique insights that creates personalized customer experiences. In this dynamic environment, where customer behaviors are changing rapidly, we use our data and insights to be nimble and react quickly to ever changing needs. Our broad-based data science approach helps us determine how to best implement price, promotion, and display.

We are focused on delivering incredible value to our customers through relevant, personalized offers in fuel rewards. Our loyal customers are using our fuel rewards program now more than ever. And in fact, more than 600,000 incremental households engaged for the first time this quarter.

As customers have returned in increasing numbers to in-store shopping, this has led to an evolving balance between online and offline. McMullen said:

We have made strides to enhance that experience while introducing new tools that help our associates better serve customers. In pick-up, we unveiled new technology that improved wait times 20% and expanded capacity based on customer needs. In delivery, we continue to introduce key initiatives that expand our reach and shorten delivery times. We strive to provide more customers access to high-quality affordable food, regardless of whether they have a physical store in their community.

In terms of online and delivery, Kroger’s partnership with Ocado continues to roll-out. McMullen pointed to the opening of two new Customer Fulfilment Centers (CFCs) in recent months, bringing the total count to five.

Employee experience

As the firm adapts to the changing demands of the Vaccine Economy, there’s also a focus on there workforce’s needs and the employee experience, with the roll out of a modernized MyTime scheduling tool for associates. In addition, McMullen noted:

We took steps to improve communication across all of our teams and bring meaningful training to all of our associates, no matter where they work. One example of this commitment is the addition of Microsoft Teams Rooms across most of our store locations. This technology improvement will facilitate deeper connections and improve the associate experiences. As an employer of choice, more people are applying to work for Kroger and more associates are choosing to stay with us.

Inevitably inflation is taking its toll on customers and Kroger has seen a shift towards shoppers buying own brand, lower-cost items. That’s a pressure that’s unlikely to ease up over the coming year, but McMullen concluded:

We continue finding new ways to help customers stretch their dollars through everyday prices, data-driven promotions, personalized experiences, trusted Our Brand products and a seamless e-commerce platform. 

My take

The decline in digital sales was to be expected as shoppers got back behind the real world shopping carts. It’s interesting to note that McMullen cited pick-up, which flourished during the pandemic, as the area of sharpest decline:

What we're finding is that customers, as they get comfortable, they move back into stores and the retention rate is better than the overall retention rate.

At the same time, recent weeks have seen an uptick in online activity with the firm reporting increased numbers of “digitally-enabled households” and as a result expects to see digital sales accelerate across the year.

Kroger didn’t get the pummelling that Walmart did when it announced its latest numbers last month. The firm was a playbook in how to strike the elusive omni-channel balance during the height of the COVID crisis. How it plays out in the Vaccine Economy may yet be another template for good practice.

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