The balance between online vs offline grocery business is something that is evolving in the Vaccine Economy following the global boom in e-commerce at the height of the COVID crisis. It’s a balance that Kroger CEO Rodney McMullen saw in the run up to Thanksgiving:
Leading into Thanksgiving 70% of consumers said that they would be doing more of their holiday shopping in the store this year. At the same time, 84% of consumers said that they will continue to shop online the same amount or more in the future. These seemingly contradictory behaviors are exactly what Kroger seamless ecosystem was designed to accommodate.
Kroger ‘had a good war’ during the pandemic with its digital channel development accelerating. That is set to continue in order to support a strategic commitment to double digital sales and profitability by 2023. To that end, McMullen points to three recent offerings:
First, boost by Kroger builds on our industry leading loyalty program to deliver additional savings and personalized offers to our members. We are encouraged by the initial engagement in the program, which is ahead of internal expectations.
Second, we launched Kroger Delivery Now in partnership with Instacart. This unique convenience and immediacy offering positions us to win more trips with current customers and to bring new customers to the Kroger ecosystem by offering the largest selection of quality fresh products at affordable prices in 30 minutes. Here's what's so special about this offering. It was profitable on day one, contributing to our goal to double digital profitability, like 2023 that was announced during our 2021 investor day.
And third, we announced a strategic collaboration with Bed Bath & Beyond, and buybuy Baby that will expand our current marketplace offering and provide Kroger shoppers easy access to essential home and baby products. This exclusive offering will be available through both kroger.com and on a small scale physical store pilot and select stores beginning in 2022.
Bed Bath & Beyond and buybuy Baby products will launch on kroger.com by early 2022 with the e-commerce aspect enabled by Kroger's Ship marketplace. The firms say that a branded shop-in-shop experience piloted in select stores will follow.
Meanwhile the firm’s partnership with UK online grocery platform specialist Ocado continues to roll out. Back in 2018, Kroger and Ocado announced plans to open 20 Customer Fulfilment Centers (CFC) in the US. McMullen says:
We continue to be pleased with the rollout of our Customer Fulfilment Centers in Groveland, Florida, and Monroe, Ohio, which are exceeding internal expectations. And we are especially proud of our Net Promoter Scores, driven by our teams delivering a world class experience for our customers.
The latest steps to meet this include plans to build two CFCs in Southern California and add two more in Florida. The latter two will be smaller centers to complement a 375,000-square-foot, full-size CFC in Groveland and spoke sites in Tampa and Jacksonville. The Florida move is indicative of the underlying appeal of the model, allowing Kroger to expand its footprint in territories where it has little or no physical store presence. Kroger has almost 2,800 stores across 35 states, but only one in Florida.
Another digital initiative that’s delivering benefits has been the launch of a new programmatic advertising marketplace by Kroger Precision Marketing (KPM), Kroger’s retail media business. This is aimed at enabling agencies and brands to target consumers using Kroger customer data for campaigns within their preferred ad-buying platform. The marketplace is powered by Kroger’s 84.51° data analytics arm which was set up in 2015 after Kroger acquired the rest of customer data science firm dunnhumby, its joint venture with U.K. food retailer Tesco. Kroger estimates that 84.51° can leverage first-party retail data from nearly 50% of US households and more than 2 billion transactions.
Kroger is a prime example of how businesses in the grocery sector are adapting to new opportunities in the omni-channel reality of the pandemic world. The partnership with Bed, Bath & Beyond particularly catches the eye. We’ve already seen other examples of this sort of collaboration in practice at Walmart with Home Depot and Kohl’s with Amazon. Expect more to come.