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Kroger’s had a rough time adapting to grocery’s transition to e-commerce, staying focused on in-store sales even as competitors shifted their focus to setting up online-ordering technology and delivery services, The Wall Street Journal reports.
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Kroger CEO Rodney McMullen has acknowledged that the company’s been slow to invest in the online channel, saying "There was no doubt we were behind," but he also believes that Kroger executives have devised a strategy to grow again, per an interview with The WSJ.
Here’s what it means: The grocer’s had a couple of definitive tactical struggles in the past that have set it behind competitors.
- It’s failed to partner with, invest in, or acquire startups that could have jolted its online business. Kroger was interested in three startups: online grocery delivery service Shipt, meal kit company Plated, and bulk e-tailer Boxed.com, but was unable to work with or buy any of them. Instead, Shipt was acquired by competitor Target in 2017, national grocery chain Albertsons bought Plated that same year, and the terms Kroger offered Boxed caused talks to stall and Kroger never made a formal offer. These companies represent serious missed opportunities that could’ve helped Kroger get a much faster start in e-commerce.
- Kroger wasn’t able to maximize the value of an e-tailer it acquired. Kroger picked up Vitacost, an online seller of natural foods and supplements, for $280 million in 2014. However, it was slow to integrate Vitacost’s technology into its operations and balked when Vitacost employees suggested emailing promotions to customers instead of using paper circulars. These problems, along with other internal struggles over issues like Kroger’s slowness to add a link to Vitacost on its website or promote Vitacost in its stores, led engineers and executives to leave the company, and Vitacost saw slower revenue growth than it had expected.
The bigger picture: Despite its slow start, Kroger has amplified its focus on its online offering and has innovations in the works that bode well for its future prospects.
- The grocer now sells with Instacart and is developing a new grocery platform for nonperishable items. Working with Instacart has allowed Kroger to make products from 1,600 stores available online quickly without having to set up and deploy online ordering capabilities itself. It’s also been slowly rolling out a proprietary online platform, dubbed "Kroger Ship," that sells nonperishable items for delivery as fast as next-day.
- Kroger is working with UK grocer Ocado to boost its fulfillment capabilities. Kroger’s been working with Ocado, which it invested in last May, to build customer fulfillment centers augmented by robotics in the US, a strategy that may enable Kroger to fulfill online orders much more efficiently going forward. Faster delivery capabilities could also enable Kroger to use its new Ship platform to sell perishable goods in addition to nonperishables, as they would spend less time in transit.
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