Kroger’s storeless expansion model looks like the future

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Stores? Kroger

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no need for smelly stores!

Kroger may not have found the Sierra Madre treasure, but the grocery giant appears to have found gold in grocery retailing through its use of automated warehouses, department centers and micro-execution centers to enter markets without having to open stores.

The country’s largest supermarket operator announced last week that it plans to expand Kroger Delivery, including into markets where it currently has no physical store presence (northeastern US) and expand into another (Florida) where it started its digital-only push earlier this year. .

“If it works, it will demonstrate the scalability of a strong brand made possible by efficient logistics,” wrote Retail BrainTrust panelist Jeff Sward, founding partner of Merchandising Metrics, in an online discussion last week. “We already know that physical stores drive e-commerce activity in a given area, but this scenario can test the ‘necessary but not sufficient’ equation. The brand is the store, whatever channel they are running.

“Kroger is establishing itself nationwide through a modern retail strategy,” wrote Melissa Minkow, Retail Business Manager at CI&T. “I expect that many more retailers will initiate partnerships that allow them to access consumers that they could not access conventionally. “

Kroger entered the Central Florida market following significant consumer demand and found that its technological prowess using Ocado’s automated execution tools allowed it to grow faster than originally anticipated. The retailer claims high levels of repeat orders and net promoter scores from customers.

The company opened its first large order fulfillment hangar in Groveland and has since added “department” locations in Jacksonville and Tampa. Two smaller distribution centers will be added in South Florida, allowing Kroger to serve customers in as little as 30 minutes from a selection of 10,000 food and non-food items and deliver same-day orders or the next day to customers choosing from over 35,000 items.

“Kroger Delivery’s acceleration continues with these new facilities and our continued focus on creating career opportunities and serving clients through interconnected, automated and innovative execution models that respond to buyer missions. different and accretive grocery stores in new and existing geographic areas, ”said Gabriel Arreaga. , Senior Vice President and Chief Supply Chain Officer at Kroger. “We have a pipeline of sites in development across the United States, several of which are slated to open next year, and we’re excited to continue to bring the Kroger experience to more doors. “

Kroger said he would enter the northeast for the first time, offering same-day and next-day grocery delivery. The retailer is expected to open one of its Ocado facilities in Frederick, Md., Next year.

“The reason Kroger doesn’t need physical stores in a new shopping area is their existing national brand coupled with smart localized marketing,” wrote Mohamed Amer, independent board member, investor and start-up advisor. , on Retail. “I won’t be surprised if Kroger introduces physical stores, at some point, into these new markets to build on the expected success. “

However, some BrainTrust experts have questioned how far Kroger’s brand alone can take it to new territories.

“Kroger selling where there are no stores is a genius – if they can cut delivery costs,” wrote Michael La Kier, president of What Brands Want. “Not having stores can be effective, but it will be interesting to see if they can generate an appropriate share of voice without physical locations. “

“I think having physical stores in one market is less important in grocery shopping than in most other areas of retail, and so I think this could be a very significant step forward for Kroger,” wrote Dave Bruno, Director of Retail Market Information at Aptos. “The challenge, as always, is building branding and brand awareness in new markets, but their early successes indicate that they’ve understood the marketing aspect.”

And a BrainTrust member pointed out that even with brand recognition, the channel will need a reason to be there.

“For markets like the North East where grocery shopping habits are well established and multiple retailers are active, there must be a compelling reason to change,” wrote Liz Crawford, VP of Planning at TPN Retail . “What is their point of difference compared to, for example, Stop & Shop or ShopRite? It feels like one more actor in a crowded space, regardless of the delivery mechanisms. “


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