Kroger’s Latest Earnings Call Shows the Challenges of Supermarket Delivery

Published on June 22, 2019

There was quite a bit of buzz this week around Kroger. Much of it came from the supermarket giant’s Q1 2019 earnings call, which took place yesterday. While fiscal results were somewhat mixed, right off the bat, Kroger chairman and CEO W. Rodney McMullen highlighted growth of what he called “an omnichannel platform to serve customers with anything, anytime, anywhere.”

In other words, right now is all about doubling down on delivery efforts for Kroger.

Digital sales are in

On the call, McMullen noted that digital sales grew 42 percent over the quarter, making delivery and/or pickup options available to 93 percent of Kroger’s customers. Online grocery delivery is now available at 2,126 Kroger locations and pickup at 1,685 locations. The company plans to have those options available to “everyone in America” by the end of this year, according to McMullen.

“Our customers don’t distinguish between an in-store and online experience. Rather they typically have a food-related need or a problem to solve and want the easiest, most seamless solution,” said McMullen.

Pieces of that solution include a growing list of companies Kroger partners with to not just expand shopping options for customers but also improve the logistics around doing so. To that end, Kroger has been leveraging a number of partnerships with companies over the last quarter, including Nuro, Microsoft, meal kit company Home Chef, Walgreen’s, and Ocado, with whom Kroger is piloting smart sheds that use robots to fulfill grocery orders.

On the Ocado partnership

The Kroger/Ocado partnership just broke ground on the first of 20 of these automated warehouses that the supermarket chain plans to open over the next couple years. McMullen said that this initial warehouse, located in the grocery store’s hometown of Cincinnati, OH, “introduced transformative format of e-commerce fulfillment and logistics technology in America. This in turn means Kroger customers will get fresher food faster than ever before.”

Speaking of faster than ever before: Kroger made good on that promise a few days before the call, when it started quietly testing 30-minute grocery delivery in Cincinnati via a new program called Kroger Rush. Users download a specific app, also called Kroger Rush, to order items and have them delivered. As The Spoon’s Chris Albrecht pointed out, that service seems to be aimed more at delivering last-minute lunch or dinner, though it’s not hard to imagine a point where Kroger might digitally replicate the “express lane” concept at brick-and-mortar stores, which speed up the checkout process for customers getting just a few last-minute items.

Kroger’s delivery-centric Q1 underscores something else Chris highlighted in his post from earlier this week: grocery retailers across the board are pushing the innovation envelope harder than ever as they compete with one another to deliver the fastest, most frictionless shopping experience to the customer. The race for the virtual grocery store aisle has really just begun.

The post Kroger’s Q1 Earnings Call Highlights the Growth and Challenges of Supermarket Delivery
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