Published on: October 13, 2021
Got a number of emails responding to yesterday's breaking new story about how Kroger plans to go into both the northeastern US and south Florida with pure-play e-commerce operations that will build on its CFC warehouse development strategy with Ocado.
I commented, in part:
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 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 … 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.
MNB reader Tom Ewing wrote:
Kroger is better positioned to enter markets outside their physical footprint via eCommerce than ever before due to the success of the Simple Truth brand which is wildly successful in gaining consumer loyalty and unique to Kroger. The Simple Truth brand is now rivaling President's Choice as the best ever retailer private brand ever developed. This brand is strong enough to attract consumers to the Kroger online platform where more Kroger and National Brand products can be added to the order.
MNB reader James Tenser wrote:
This will be the first of several announcements by Kroger, I’m certain, based on Rodney McMullen’s statements on stage at GroceryShop last month. He made clear that the company’s ambition is to “feed the entire nation” and that new “sheds” would be erected in geographies not yet covered by Kroger banners.
Seems like pure e-commerce is now Kroger’s “tip of the spear.” A shrewd strategy, as it enables the retailer to skim some of the largest baskets from entrenched omnichannel competition. My crystal ball says it could drive down the acquisition price of regional players by the time Kroger is ready to absorb them.
From another reader:
Northern California may be next for Kroger E-commerce? Brick & Mortar being the “old way” and has not presented the right opportunity in the past. My eyes are officially peeled.
Positives: Some retailers already have the ability to hold off Kroger. Market Basket being the leader, with other wins coming from independents like Big Y and the specialty neighborhood stores Roche, Daves, Trucchi’s . Hannaford still has a pretty loyal following, even with some of the AHOLD influences. They should be ok. I see the big losers as SNS and Shaws. They can’t compete in the traditional marketplace, let alone in an innovative environment. Maybe Kroger will pair down Shaws enough to purchase them, and that could provide real estate in NE.
On another subject, from MNB reader Mike Springer:
In reference to your article this morning about customer tensions rising and your comment “Some argue that people got used to an increasingly frictionless economy, and so now, when there is friction, people don't know to react.”
I couldn’t agree more! My wife who is a teacher at a local High School here in the DFW area tells me that a main concern for the faculty and administration is that many of the students (now back in classrooms) seemed to have regressed socially… by quite a bit. She said cheating is up (which means they’re getting caught more!), ownership/responsibility is lacking and so on. They are having to retrain due to the lost year+
Maybe the lesson here is we cannot afford as a society to shut down like we just did. The mental, spiritual and physical impacts are just too great. And no, I’m not suggesting we ignore common sense directives (i.e. follow your Dr’s advice on vaccines, wear masks when appropriate, wash your hands etc…) In hindsight, spending time with family & friends, getting outside, fellowshipping, interacting with real people face to face (or mask to mask) are all part of a healthy regimen. Seems to far outweigh the negative fallout we’re dealing with now!
And from another reader:
Well said! There is a lot of angst and divisiveness in America currently. This, coupled with childish behavior only exacerbates the problem. Those who keep fueling these foolish "fires" need to be held accountable!
Not sure I agree that the shutdown is what caused this. Sure, it created some issues in terms of kids's socialization … but certainly at the high school level, it seems to me that kids ought to know by that point the difference between right and wrong, between responsibility and irresponsibility, and between civil and uncivil behavior.
Seems to me that the kids acting out in school may be doing so because they've seen and heard parents acting out at home, and/or adults exhibiting that kind of behavior in the public square. Part of parents' job during the pandemic was to reinforce the difference between proper and improper behavior. (When you think about it, the pandemic shutdown was not as bad as other things that kids have had to deal with. Like, say, the kids living in London during the Blitz. Or the kids dealing with their lives being destroyed by natural disasters. Or kids who've lost their parents for any of a dozen reasons.)