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09/13/2021

How Kroger’s Personalization Science Impacts Digital Carts

The Kroger Co. is on track to deliver against its 2023 digital growth and profitability targets. Learn how its personalization science is impacting shoppers' digital baskets.
Jamie Grill-Goodman
Senior Editor
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The Kroger Co. said its on track to deliver against its 2023 digital growth and profitability targets and some of that growth is thanks to the grocer’s personalization tactics.

Kroger Co. CEO Rodney McMullen noted that almost 60% of all items in a digital basket were added through Kroger’s personalization science. He said, during the companies’ Q2 2021 earnings call, that this highlights the grocer’s ability to make “meaningful suggestions that surprise and delight customers.”

“Furthermore, when we personalized recommendations for our customers, we can reduce their time to shop by nearly 70%,” he noted. “Overall, 1 in 3 people have noted that groceries have gotten more expensive in the past month. Kroger customers benefit from our personalization as we offer highly relevant savings at a household level, allowing them to further stretch their food dollars.

During the quarter, Kroger added over 340,000 new customers to its digital platforms. Digital sales two-year stack grew 114%.

"Our strategic focus on leading with fresh and accelerating with digital continues to build momentum across our business,” McMullen  said in a press release. “Kroger's seamless ecosystem is working. This was evident during the quarter as we saw customers seamlessly shift between channels, and we continued to see strong digital engagement. Customers are eating more food at home because it is more affordable, convenient, and healthier than other options. 

"We are leveraging technology, innovation, and our competitive moats to deliver against the initiatives outlined at our 2021 investor day, and we remain confident in our ability to deliver total shareholder returns of 8% to 11% over time."

[See more: Top 10 E-Commerce Retailers and Their Digital Experience]

Accelerating with Digital

Kroger said it reduced wait times for Kroger Pickup and has expanded to 2,239 Pickup locations and 2,546 Delivery locations, covering 98% of Kroger households. The retailer also now has two customer fulfillment centers open, which are expanding capabilities in Ohio, and allowing it to expand into new geographies within Florida. The retailer recently introduced Kroger Delivery Savings Pass in Florida, offering customers unlimited delivery for $79 annually. Looking ahead, Kroger is still on track to open six customer-fulfillment centers over 2022 and 2023.

Other additional moves in the quarter include:

  • Launched sushi delivery pilot with DoorDash in three geographies
  • Expanded pilot with Google Maps to improve grocery pickup experience for associates and customers
  • Recognized by Computerworld magazine as one of the Top 100 Best Places to Work in IT for 2021, marking the fourth consecutive year Kroger has received the accolade
  • Launched FEED app which provides associates easy access to company communication and resources

[See more: Kroger Launches Training Program for Frontline Associates]

“Our Digital platform remains a key strength in our model, and we were pleased with the triple-digit growth achieved over 2019,” CFO Gary Millerchip said. “We remain on track with our plans to double our digital business by 2023. And would expect continued investments in the customer experience, scaling at new fulfillment centers, and several new innovations, which we will announce throughout the year to drive future growth.

Kroger raised its full-year guidance, expecting its two-year identical sales stack to be in the range of 12.6% to 13.1% and its adjusted net earnings per diluted share to be in the range of $3.25 to $3.35.