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Kroger plans to shutter 3 ‘spoke’ warehouses

Delivery facilities were underperforming expectations, company said

Kroger is shutting down three ecommerce delivery warehouses in Texas and Florida, citing the underperformance of the facilities.

The 60,000-square-foot Miami-area delivery warehouse in Opa-locka, Fla., dubbed the “Miami Spoke,” opened last year to serve delivery customers in the Southeast region of the state. The two Texas facilities, located in Austin and San Antonio and both measuring about 70,000 square feet, opened in March 2023 and August 2022, respectively.

The Opa-locka facility was built to extend the reach of the company’s automated fulfillment center in Groveland, Fla., to the Miami area, while the Austin and San Antonio facilities were spokes for the company’s Dallas fulfillment center. All three are scheduled to close on May 25, a spokesperson for Kroger told Supermarket News.

“Kroger’s commitment to innovation means that we test and learn quickly to identify the most effective ways to deliver fresh, affordable food to our customers,” the spokesperson said. “Despite our best efforts, including the support from new customers, learnings from other locations and the incredible work of our associates, these facilities did not meet the benchmarks we set for success.”

In a memo sent to employees of the Opa-locka warehouse, the company said it was offering relocation assistance for those interested in moving to a new location.

The Opa-locka spoke facility opened in February 2023, serving as an intermediate transfer point between the company’s 375,000-square-foot, highly automated Groveland facility and individual delivery customers. The cross-docking warehouse received deliveries from the Groveland fulfillment center and loaded them onto smaller, refrigerated trucks for home deliveries in the Miami area.

Kroger and its ecommerce fulfillment partner Ocado opened the state-of-the-art Groveland facility in 2021, complete with advanced robotics that seek to optimize order-picking and movement of product within the facility.

The Austin and San Antonio spoke facilities served similar functions in their respective markets and were supplied by the 350,000-square-foot automated Dallas fulfillment center, which Kroger and Ocado opened in 2022.

In Florida, where Kroger lacks a retail presence, its delivery operations give it a foothold against regional powerhouse Publix Super Markets, as well as low-price competitors such as Walmart and fast-growing Aldi, which is expanding through its recent acquisition of 400 Winn-Dixie and Harvey’s supermarket locations in Florida and other Southeastern states.

Reports last year said Kroger was slowing its development of automated fulfillment centers with Ocado as it seeks to better understand the systems, which have been more extensively deployed in Europe. Kroger launched its partnership with U.K.-based Ocado Group in 2018 and has since opened several automated facilities around the country.

In its recent year-end conference call with analysts, Kroger said its digital sales, which include both pick-up and delivery, totaled more than $12 billion in fiscal 2023. Delivery sales, excluding an extra week in fiscal 2023, were up 24% over year-ago results.

“We improved our cost to serve through increased volume and process enhancements as well as technology to optimize associate pick routes for more efficient picking,” said Rodney McMullen, chairman and CEO, during the call. “Digital is an important growth accelerator in our business.”

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