Kroger sees stores and automation as complementary parts to online fulfillment ecosystem
Kroger has spent a lot of time talking about the evolving network of automated e-commerce warehouses it’s building alongside Ocado, creating the impression that these robot-packed facilities are the future of digital fulfillment for the company.
But during a business update on Friday, Kroger executives stressed the ongoing importance of stores to its digital strategy, saying they are the crucial other half of the online ecosystem that the company is building.
Yael Cosset, Kroger’s chief information officer, said the ability to leverage stores as well as separate facilities of varying sizes amount to a unique advantage for the company over competitors that primarily utilize one asset or the other.
“On one hand, the store offers a lot of options to customers taking advantage of its proximity, but limited scale. On the other hand, large facilities offer reliability, scale and efficiency, but limit some of the trips we can capture,” he said. “This is exactly why we have structured our ecosystem to leverage both, forming a dynamic network with our stores.”
This elevation of its stores in the discussion about the future of online grocery for the nation’s largest supermarket chain reflects the dramatic and, in many ways, unexpected ways e-commerce has evolved over the past few years.
Kroger’s tie-up with Ocado back in 2018 to build a network of automated warehouses across the U.S. seemed to be a bet on delivery service that prioritized scale and efficiency over speed and proximity. The pandemic generated a tidal wave of e-commerce demand, bolstering Kroger’s ambitions. But shoppers are also showing a growing preference for pickup as well as instant delivery and meal delivery — services that center on company stores.
On Friday, Cosset along with CEO Rodney McMullen mentioned numerous times Kroger Delivery Now, the 30-minute delivery service it launched last year with Instacart, noting that offering is helping the company fill impulse buys and other unique delivery occasions with existing shoppers.
“This new offering was profitable on day one,” Cosset said.
Kroger sees a more than $1 billion opportunity in quick commerce over the next few years, Cosset said.
