Kroger announces new initiative aimed at bolstering its e-commerce and omnichannel business (KR)

Daniel Keyes
Estimated US ecommerce grocery sales

BI Intelligence


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Kroger has revealed a new initiative, dubbed Restock Kroger, that aims to build out its e-commerce and omnichannel businesses, Internet Retailer reports. Kroger is the second-largest grocer in the US, and appears to recognize that a revamp of its digital options is in order if it's to maintain that position. The initiative is expected to cost $9 billion over the next three years.

Restock Kroger aims to bolster the grocer’s digital and omnichannel options.

  • Kroger improved its search results personalization by taking into account a customer’s past purchases and how long they usually last. The company has seen a 33% increase in “add to cart” clicks for products at the top of search results from the update, which it released just a few weeks ago.
  • The grocer hopes to expand its Scan, Bag, Go pilot program to 400 stores by the end of 2018. The initiative allows users to scan products as they shop with their smartphone, bag their items as they grab them, and pay quickly in specified self-checkout lines. It has so far been tested in 20 stores.
  • Kroger will invest in areas like IoT sensors, machine learning, and artificial intelligence (AI), as the grocer looks to make its shopping experience and operations as efficient as possible.

This is part of Kroger’s ongoing effort to provide quality online and omnichannel grocery options. Kroger had already planned to expand its online grocery pickup offering to 1,000 stores by the end of 2017, and has acquired multiple retailers with e-commerce value, as well as several technology companies. With online grocery projected to account for 20% of all grocery by 2025, Kroger is likely trying to position itself as a viable grocer both online and in-store.

Brick-and-mortar retailers are caught on the wrong side of the digital shift in retail, with many stuck in a dangerous cycle of falling foot traffic, declining comparable-store sales, and increasing store closures. Over 8,600 retail stores could close this year in the US — more than the previous two years combined, brokerage firm Credit Suisse said in a recent report. Meanwhile, e-commerce pureplays are riding the rise of digital commerce to success — none more so than Amazon, which accounted for 53% of online sales growth in the US last year, according to Slice Intelligence. 

In response, many brick-and-mortar retailers have started to use omnichannel fulfillment methods that leverage their store locations and in-store inventory in order to better compete in e-commerce. These omnichannel services, including ship-from-store and click-and-collect, can help retailers manage the transition to digital by:

  • Increasing online sales by offering cheaper, more convenient delivery options for online shoppers.
  • Limiting the growth of shipping costs as online sales volumes increase by leveraging store networks for delivery.
  • Keeping stores relevant by turning them into fulfillment centers that pull customers in to pick up online orders.

However, few retailers have mastered these new fulfillment services. While these companies have spent years optimizing their supply chain and logistics networks for delivering goods to their stores or directly to customers’ doorsteps, most have yet to figure out how to profitably bring their store locations into the e-commerce delivery process.

Jonathan Camhi, research analyst for BI Intelligence, Business Insider's premium research service, has laid out the case for why retailers must transition to an omnichannel fulfillment model, and the challenges complicating that transition for most companies. This omnichannel fulfillment report also detail the benefits and difficulties involved with specific omnichannel fulfillment services like click-and-collect, ship-to-store, and ship-from-store, providing examples of retailers that have experienced success and struggles with these methods. Lastly, it walks through the steps retailers need to take to optimize omnichannel fulfillment for lower costs and faster delivery times. 

Here are some of the key takeaways from the report:

  • Brick-and-mortar retailers must cut delivery times and costs to meet online shoppers’ expectations of free and fast shipping.
  • Omnichannel fulfillment services can help retailers achieve that goal while also keeping their stores relevant. 
  • However, few retailers have mastered these services, which has led to increasing shipping costs eating into their profit margins.
  • In order to optimize costs and realize the full benefits of these omnichannel services, retailers must undertake costly and time-consuming transformations of their logistics, inventory, and store systems and operations.

 In full, the report:

  • Details the benefits of omnichannel services like click-and-collect and ship-from-store, including lowering delivery times and costs, and driving in-store traffic and sales.
  • Provides examples of the successes and struggles various retailers have experienced with omnichannel delivery.
  • Explains why retailers are having trouble managing costs with their omnichannel fulfillment efforts, which are eating into their profits.
  • Lays out what steps retailers need to take to optimize costs for their omnichannel operations by placing inventory where it best meets customer demand.

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