Albertsons sees micro-fulfillment technology as a good match for fresh items
Dive Brief:
Pickup is the fastest-growing component of Albertsons’ e-commerce operations, and the grocer is focused on expanding the service to more stores, CEO Vivek Sankaran said last Wednesday during Goldman Sachs’ Global Retailing Conference. “Our growth rate is much faster than the growth rate of our expansion, which tells me that there’s more same-store sales in Drive Up & Go,” he said.
Albertsons sees micro-fulfillment technology as a good match for its emphasis on fresh items, “and we’re already exploring locations for this year to start rolling that out,” Sankaran said during the conference.
Albertsons has seen e-commerce penetration accelerate “by at least a couple of years” because of the pandemic, Sankaran said. The company is investing in technology to make it easier for customers to build shopping lists and allow people to use a single app to place an order, among other improvements. “E-commerce is a big part of that easy equation, so we’re pulling all of those investments forward,” he said.
Dive Insight:
A year and a half after taking over as CEO of Albertsons, Sankaran said he sees the supermarket chain as well positioned for growth without needing to substantially increase the number of locations it runs.
The grocer is paying close attention to making its stores more efficient and productive, and is working on improvements across the board, including how it buys grocery bags and handles promotions. Investments in automation technology are also high on its agenda.
Albertsons is investing in its fresh assortment, which it sees as especially important because people are eating more meals at home, Sankaran said, noting that he is especially pleased with the performance of its private label products, some of which are outpacing its stores in terms of growth.
Sankaran emphasized that Albertsons looks to match the selection of products in its stores to reflect the communities it serves, and said those efforts are why it sees micro-fulfillment as essential to its e-commerce strategy.
“We have spent a lot of years optimizing and tailoring the assortment at a store for the neighborhood around the store … you don’t want to lose that tailoring and your curation for your customer just because you’re going to e-commerce,” he said. "From a culture standpoint, we love celebrating our local knowledge that brings us speed, flexibility, yet finding ways to leverage scale."
Albertsons saw its digital sales grow 276% in the first quarter, which marked its debut as a public company.
Albertsons is also paying close attention to customer service, and recorded 27% enrollment growth in its loyalty program during Q1, Sankaran said. “People are shopping more with us, going up the loyalty ladder and spending more with us.”
Store remodels are also a priority for the grocer. The chain redid 46 stores during the first quarter and plans to continue its renovation efforts “at a significant pace,” according to Sankaran.
Sankaran also addressed the inventory challenges that had plagued the company at the start of the pandemic. He said shortages of many basic items, like produce and meat, have subsided. But the company is continuing to face challenges in obtaining items that are in higher demand now than they were previously, pointing to sanitizers, paper towels, baking products and processed meats as examples of products that are hard to keep in stock, according to Sankaran.
Sankaran said that Albertsons’ ability to obtain many items depends on the ability and willingness of manufacturers to step up production, adding that it can take a year or more to modify a production line to turn out more of a given type good.
“I empathize with the CPG companies. It’s a difficult decision for them. To what extent do they start investing in capital to meet this demand in some categories and will that kind of demand continue to stay? I suspect some of them will do that because there’s just a clear need,” Sankaran said.
Sankaran said he thinks Albertson is performing better than the performance of its stock price would suggest. Shares in the company, which went public in June at $16 per share, below expectations, closed Friday at $14.15 on the New York Stock Exchange.
