Published on: October 12, 2021
Kroger today announced its intention to enter the northeastern US - one of the few areas of the country in which it does not have a bricks-and-mortar presence - with a pure-play e-commerce model using its Kroger Delivery service powered by new "fulfillment centers powered by the Ocado Group, combining vertical integration, machine learning, and robotics to provide an affordable, friendly, and fast fresh food delivery service."
While it is not disclosing where in the northeastern US it plans to launch the business - saying cagily in its press release that it will "share more insights…in. coming months" - the announcement suggests the degree to which Kroger no longer sees its growth as being tied to traditional stores.
In addition to its plans for the northeastern US, Kroger also said it will "expand its existing operations and boost capacity in California with the addition of two CFCs. The medium and smaller-sized facilities will meet the need for same-day and next-day grocery delivery demand."
And, Kroger said, it will move beyond its current pure-play e-commerce operations launched in central Florida earlier this year and "will enter South Florida and introduce two smaller-sized fulfillment facilities. These will join the already live CFC in Groveland as well as 'spoke' sites in Jacksonville and Tampa. It will also mark the introduction of two automated local fulfillment centers with Ocado, enabling Kroger Delivery to serve customers as fast as 30 minutes with a selection of 10,000 fresh food items and essentials, and to deliver same-day and next-day orders with 35,000 items."
This latter offering is said to be similar to a "Zoom" service that Ocado uses in the UK.
Kroger Delivery currently operates CFCs in Groveland, FL and Monroe, OH and in addition to the newly announced five facilities, Kroger Delivery is slated to open previously announced sites in Dallas, TX; Forest Park, GA (Atlanta); Frederick, MD; Phoenix, AZ; Pleasant Prairie, WI; Romulus, MI (Detroit); and sites in the South, West and Pacific Northwest.
- KC's View:
For a long time, I've heard people speculate about when Kroger might decide to enter the northeast (which happens to be where I live), and what company it would have to acquire to achieve such h an end.
The reality is that the old way of doing business now is just that. The old way. Kroger can move into markets with an e-commerce model that doesn't depend on the limitations of the past, but rather than use its online capability - powered by robotic warehouses and fueled by a strong belief in compiling and using actionable data - to build a business.
A lot of things have to work, of course. These Ocado warehouses are major investments, and I have to imagine that there will be some pressure to achieve ROI. But these are strategic investments, not tactical moves, and so Kroger has to be play the long game. There is every indication that this is exactly what it plans to do.
This doesn't mean that Kroger won't have physical stores here, of course, though I have to wonder if there is a paucity of commercial real estate, which would prevent it from quickly achieving any sort of critical mass. This could change, depending on how successful Kroger is in siphoning off business from other retailers.
One thing is for sure. Things just got real for a lot of retailers in New England that haven't had this kind of competition before.
Let's see what Ahold Delhaize does with its Stop & Shop, Hannaford, and FreshDirect businesses. Let's see if Albertsons finally stops treating its Shaws business like a poor stepchild (a perception that exists within the division). Expect that Wakefern will be vigorous in its defense of its markets. I would expect Pricer Chopper will ramp things up a bit. And let's see what C&S and Bozzuto's do to bolster their independents in New England with this new threat.
Like I said, it is going to get real. Kroger has some work to do in order to get up and running, which means that all these existing competitors have a little bit of time to start working on their weaknesses, building on their strengths, and making investments in operations, infrastructure and (most of all) people.
I'm not saying that Kroger is going to be able to just come in and dominate the market. Far from it. But I am saying that it has the potential to be a disruptive influence, and existing food retailers do not have the option of being complacent.