retail news in context, analysis with attitude

The Wall Street Journal reports that Kroger CEO Dave Dillon told investors yesterday that he believes that most Americans won't turn to the internet to buy their groceries.

“I understand some people like that … but there’s still a large percentage of customers that like to get out and have that interaction with friends and neighbors in their community as they walk through the store,” Mr. Dillon said, adding, “I wouldn’t be too quick to assume that the leap to home delivery ends up replacing everything."

The Journal notes that Kroger COO Rodney McMullen, who will become CEO in January when Dillon retires, left the door to an e-commerce initiative open a bit wider, saying that "the digital component will be a major focus of his in keeping Kroger relevant. While he didn’t counter Mr. Dillon’s claims, he did mention online ordering–though not home delivery—that the supermarket operator is hoping to learn more about from its acquisition of Harris Teeter."

And a Kroger spokesman said, “We’re putting our focus where our customer is today … and when you look at our industry today, e-commerce makes up a tiny, tiny percentage of the food business," noting that "Kroger’s digital strategy is not mutually exclusive of e-commerce, as it has been testing an online shop and delivery program in the Denver market at King Soopers stores for several years."

In his comments, the passer writes, Dillon "took a stab directly at Amazon, saying there haven’t been any changes in the online ordering and grocery delivery process that make it more profitable for the stores. But Amazon, he said, can afford to get in the business because its investors only care about top line, not net profit. 'It’s totally different when you’re a company that is only valued based on its revenue and not the cash flow you produce,' Mr. Dillon said."
KC's View:
I would disagree with Dillon, McMullen and the Kroger leadership at my own peril.

And while I think it is fair to say that I am a major proponent of e-commerce - including e-grocery - I don't entirely disagree with them in this case.

The thing is, Kroger is better than almost anyone else at accumulating data about its customers and then acting on it in relevant ways. Which certainly means that it is easier for Kroger to target its customers and compete with Amazon, which is also pretty good at compiling data and acting on it.

One point that the Journal story makes - entirely fairly - is that the side of the retailing road is littered with the carcasses of companies that did not take e-commerce seriously as competition and was unwilling to do what was necessary to compete, either because of denial or ignorance. I don't think that Kroger is guilty of either of these things.

My argument here long has been that not everybody has to be in the e-commerce business. But if you're not, you need to a) recognize that e-commerce is a competitor, and b) create a compelling offering that provides a legitimate alternative to shopping online.

I suspect that at some point Kroger will have to enlarge its digital footprint. But it also is fair to say that it is going into the battle well-armed, with eyes open.