Kroger began investing in digital several years ago to build an ecosystem that would deliver anything, anytime, anywhere. Those investments, along with new steps the grocer took during the coronavirus pandemic, led to 92% sales growth in digital channels in its first quarter of 2020.
As a result of ongoing investments, the grocery retailer has over 2,000 pickup locations and 2,400 delivery locations reaching 97% of its customers.
“These investments were especially timely as customer adoption of pickup and delivery grew significantly during the pandemic,” CEO Rodney McMullen said during the retailer’s earnings call. “Because of our existing ecosystem, we were able to respond quickly to further expand and enhance our e-commerce services.”
McMullen said Kroger was able to quickly offer and promote end demand, no-contact delivery and low contact pickup services. The grocer expanded and improved its contact-free payment solutions including its Scan, Bag and Go mobile checkout solution, which it rolled out to 400 stores in 2018, and Kroger Pay, its mobile payment solution it went live with last year.
The grocer also hired additional e-commerce associates to support the higher volume of pickup orders, it added more order pickup slots and increased the frequency of communications with customers. It also began testing a grocery pickup only location in Cincinnati.
Kroger posted lessons it learned during the COVID-19 pandemic and best practices. The blueprint, which McMullen calls a “first installment,” covers everything from workforce management HR and communications, to supply chain, digital technology and data; it includes recommendations, insights, best practices and downloadable creative assets to help businesses navigate the next phase of the pandemic.
CFO Gary Millerchip said Kroger’s Q1 sales were broadly based across all retail divisions and remained heightened throughout the quarter as customers started preparing and eating more meals at home. The retailers identical sales without fuel grew 19%
In the quarter. Total company sales were $42 billion in the first quarter, compared to $37 billion for the same period last year.
“During the last few days of February, we started to see a shift in customer behavior as shoppers started stockpiling and that trend accelerated into March with identical sales of approximately 30%,” he noted. “Sales remained elevated in April and May, both up approximately 20%, as customers continue to eat more at home.”
As Kroger entered its second quarter and state restrictions eased up across the U.S., Millerchip noted Kroger is starting to see some changes in demand with sales growth becoming more balanced across the store.
“Customers remain focused on health and safety and are still stocking up, but to a lesser degree than during the shutdowns,” he said. “We are also starting to see a return to some splurge an impulse buying.”
Looking ahead, the grocer announces new enhancements to its digital customer experience, including the launch of a check-in on arrival option for pickup customers and the launch of contactless doorstep delivery.
“When we talk to customers, our customers still tell us they plan to eat more meals at home than before,” McMullen said. “When talking to customers about when their children return to schools, we still have a significantly higher percentage of families telling us they plan to make breakfast for the kids to take to school and lunch for the kids to take to school. All of those things -- in terms of what customers are telling us -- we would expect there will be more meals eaten at home or prepared at home, that obviously will help support growth as well.”
Millerchip added that Kroger would expect that as customers continue to give Kroger more of their total share of spend, as its teams take costs out in terms of serving that customer, and as the Ocado sheds come online, digital will be a tailwind for the retailer as it moves forward.
“It’s really just the fact that the business basically doubled overnight,” he said.