Retail in transition - Kroger's omni-channel clout pays off as shopping patterns take shape for the Vaccine Economy

The ‘new normal’ is beginning to take shape, according to US grocery giant Kroger which is still seeing its ‘Accelerating with Digital’ strategy paying dividends despite the return to in-store shopping that it’s detecting.

For the most recent quarter, Kroger - which was one of the beneficiaries of the societal shift to online grocery shopping and delivery last year - has seen digital uptake continue, with triple digit digital sales growth since 2019. But the world is evolving now into more of a hybrid model, argues CEO Rodney McMullen, one in which omni-channel credentials will be critical:

Our customers are in a time of transition. During the quarter, we began to see some pre-pandemic habits resume. For example, smaller holiday gatherings are likely to fade as more than half of our shoppers believe holidays will return to normal by the 4th of July. We are also seeing customers shop more frequently as COVID restrictions ease. Importantly, we saw a continuation of several pandemic trends. This includes heightened digital engagement across demographics, expanded consumption in key fresh areas like meat, produce and natural foods, and trading up to more premium products.

Kroger’s use of data analytics has provided the retailer with valuable insights into how new trends are taking shape, allowing it to remain on top of - and often ahead of - buying patterns. McMullen says:

In a recent survey of our customers, a remarkable 92% of the people say they enjoy cooking the same as or more than they did pre-COVID. And as people’s busy social lives pick up, more customers are looking for convenience in cooking options. We continue to utilize our data to understand those behaviors that are more permanent in nature. While the customer habits are returning, hardening or emerging, we will continue to meet the customer where they are and use our data science expertise to be where they are going.

He adds as an example:

People still continue to eat at home more than pre-COVID. They still continue to cook more than pre-COVID. And they’re buying more premium products than pre-COVID. Those things were things that I wouldn’t say were surprises, but it’s good to see versus our research, our customers telling us they plan to. So it’s actually happening as what customers told us they would do versus being a surprise versus what we expected.

Keeping close to customers is vital. During the past three months, for example, McMullen says that Kroger was able to make more than 258 billion personalized recommendations to customers via its digital channels:

Kroger’s data and personalization capabilities will contribute to increasingly meaningful ways to grow our e-commerce reach and capabilities, and we continue to elevate our personalized customer experience with our data today.

Ocado gains

The firm’s partnership with Ocado has also continued to deliver wins, with the first Customer Fulfilment Center (CFC) opening in Ohio in March and Kroger Delivery launching this month in Florida. McMullen says:

Launching in a new geography is incredibly exciting and a milestone moment in our history. Our Kroger Delivery team is ready to bring fresh, affordable food and a consistent customer experience directly to the doors of our customers. In addition to the Groveland CFC, spokes in Tampa and Jacksonville are also now open. The hub-and-spoke model allows us to extend the range of our CFCs, allowing us to serve more customers incredible products directly to their door, and we are just getting started. We are thrilled to report that NPS scores are among the highest in the digital retail.

So even as customers get back in the store and wandering the aisles, the commitment to doubling down on digital isn’t going away, affirms McMullen:

Everything that we can see [says] that customers continue to like to shop online. The thing that I think is very important is that very few of our customers actually only shop online, and most shoppers shop online and in our stores. And when they shop, both our retention rate is incredibly high and our ability to gain share within that household is very high as well. Those are the major trends that we would expect to continue, and those are the trends that we believe that will drive our ability to double our online business.

My take

Kroger ‘had a good war’ during the pandemic and as the Vaccine Economy takes shape it can be reasonably assumed that it will be at the forefront of shaping the new retail world order. McMullen’s comments about online shopping continuing to have traction is interesting and maps onto the belief we have here at diginomica that there’s no putting that particular genie back in the bottle.