Congratulations to The Kroger Co., which Supermarket News has honored as its 2022 Retailer of the Year.
As usual, the choice was difficult, with a number of deserving companies. But one thing stood out for Kroger: conviction.
I’m referring to Kroger’s decision to take a deep plunge into e-commerce, in the process possibly answering a question on the minds of many in the industry: Is a large-scale online grocery operation viable for brick-and-mortar supermarket chains? Well, Kroger will give us a peek as its automated fulfillment network, powered by Ocado Group, continues to unfold.
In mid-2018, Kroger announced an exclusive U.S. partnership with U.K.-based online grocery specialist Ocado to identify sites for about 20 high-tech customer fulfillment centers (CFCs) over the ensuing three years. The plan was seen as a win for Kroger but by no means as a slam dunk — and some industry observers even called it risky. They said the potential benefits of the CFC model were countered by major concerns. What’s more, online grocery’s market share remained small. Research from Mercatus/Incisiv pegged the U.S. e-grocery market at just 2.7% of overall grocery sales in 2018 and 3.4% in 2019.
How things change. The pandemic triggered a boom in online grocery shopping. Mercatus/Incisiv estimated the e-grocery market at 8.1% of total grocery sales in 2020 and 9.5% in 2021, projected to reach 11.1% this year and 13.5% next year, and top 20% by 2026. And where do things stand with Kroger? Seventeen Ocado CFCs have been announced, and six are operational. Also live as of this writing are seven of 12 announced Ocado-automated “spoke” facilities.
This has enabled Kroger establish a presence in one state where it lacks physical stores and positions it to do the same in two more states and one new region. The AI-driven network also provides quite a platform for expanding Kroger’s $28 billion Our Brands business, spreading its “Fresh for Everyone” value proposition, fine-tuning seamless omnichannel shopping, and leveraging troves of data to personalize the experience for customers.
Kudos to Kroger for sticking to its vision. Check out our Retailer of the Year report below.