Riding the success of its ongoing investments in e-commerce and powered by a COVID-19 surge in online grocery sales, The Kroger Co. entered eMarketer’s annual list of Top 10 U.S. Retail E-Commerce Companies with $11.28 billion in sales this year.
Kroger, the nation’s largest grocery chain, saw its e-commerce sales jump by 79% in 2020, according to eMarketer. Kroger made the list for the first time, at No. 9, nudging out Costco Wholesale at No. 10 with $11.18 billion in digital sales.
While Kroger is the only pure grocery player to make the list, Amazon (No. 1), Walmart (No. 2), Target (No. 7) and Costco all have robust online grocery offerings.
“The pandemic has shifted consumer priorities,” said Cindy Liu, eMarketer senior forecasting analyst at Insider Intelligence. “Kroger will benefit from two tailwinds this year: Eating at home continues to be in favor among Americans, and there’s been greater interest by consumers in ordering groceries online. With these two forces at play, we shouldn’t be surprised by Kroger’s strong growth this year.”
According to eMarketer, Kroger’s early digital investments have also helped the brand — and left the company prepared it for what the year had in store. “Kroger started investing in online grocery several years ago, and now it has more than 2,000 pickup locations and 2,400 delivery locations that reach over 97% of its customers,” Liu said.
In recently announcing its third-quarter earnings, Kroger pointed to its digital sales growth and continued investment in e-commerce. ““We are innovating and building out a flexible network of fulfillment options and working with key solutions providers. As we recently announced, we continue to progress in our Ocado facilities program with plans to build customer fulfillment centers in Michigan and in the south region of the country and the upcoming opening of our first two fulfillment centers in early 2021 in Monroe, Ohio, and Groveland, Fla.,” said Kroger president and CEO Rodney McMullen during a recent analysts call.
Digital sales contributed about 4.6% growth to identical sales without fuel, according to Chief Financial Officer Gary Millerchip during the analysts call.
“Customer engagement with our digital solutions is driving overall loyalty. When customers engage with both our physical stores and digital channels, they visit more frequently and on average spend twice as much as those who shop in store only,” he said in the call. “The vast majority of our digital customers are shopping in store as well as online. We are therefore confident that the seamless experience we are building across our store and digital ecosystem position us well for continued growth in a post-COVID world.”
Kroger is improving digital profitability by lowering the cost to fulfill a pickup order and ramping up digital advertising income, Millerchip said. “We see a clear path to further improved digital profitability by leveraging our personalization tools to increase basket size and improve sales mix, further reduce the cost to fulfill an order by our process improvements and automation, and continue to grow digital media revenue,” he told analysts.
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