As Digital Sales Skyrocket, Kroger Gives VIP Treatment to Everyone

Lisa Johnston
Editor-in-Chief, CGT
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While Kroger is seeing triple-digit growth in grocery home delivery volume, shoppers continue to flock toward click-and-collect fulfillment because of the flexibility it offers.  

As a result, the grocer is constantly adjusting pickup capacity during the day, with some store locations necessitating further investments, said Kroger chairman and CEO Rodney McMullen in a recent earnings call.

“As people get used to the new normal, the times they want pickup slots constantly change,” he noted. “There are stores now where we're aggressively investing a little bit of capital to be able to expand what's available within that store, and [that] will allow us to add slots as well.”

As Kroger continues to grow its delivery capabilities, its pickup volume is also experiencing triple-digit growth, with basket sizes larger for pickup vs. in-store orders. Demand for grocery pickup accelerated when the No. 5 retailer waived the service fee, and the company hasn’t yet determined when it will resume charging again, said McMullen.

Kroger reported total company sales of $30.5 billion in the second quarter, up 13.9% excluding fuel. Its digital sales grew 127% during the period, contributing 4.4% to identical sales without fuel. Going forward, the company will leverage its personalization investments to increase digital profitability, seeking to improve sales mix as basket sizes grow and trips decrease continuing through the pandemic.

The cooking-at-home trend is expected by Kroger to continue even once the health crisis has concluded, and the company recently announced a partnership with meal planning service The Dinner Daily that sends weekly personalized meal plans that account for weekly specials at Kroger.

Subscribers in 24 states can receive an organized, editable shopping list that integrates with Kroger’s pickup and delivery online ordering; items on the list can be selected in the Dinner Daily app and sent directly to their Kroger online cart.

Kroger also intends to continue reducing fulfillment costs via process improvements and automation, with its partnership with Ocado expected to improve the customer experience and further reducing costs. The company is on track to open its first two Ocado-powered customer fulfillment centers in the spring of 2021.

Kroger is also now giving new digital and in-store customers the same treatment as its loyal ones, thereby improving retention and repeat purchases. “In the past, a new customer would have to earn their right to start getting loyal customer mailings, and digital offers and things like that,” said McMullen. “During this, we've started treating customers as loyal shoppers immediately, rather than waiting for them to engage with us for a period of time. And what we're finding is we're having success on retaining those customers and repeat purchases as well.”

Kroger is also seeing “tremendous growth” in digital media revenue generated from customer digital spend thanks the ability to personalize its communication with them. This in turn lets Kroger “close the loop” for its consumer goods partners in understanding whether the advertising led to a sale with the customer, Millerchip said.

The company is also continuing to test various membership programs beyond its fuel rewards program.

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