Is there a secret sauce to Kroger’s online success?
With pandemic-huddled households discovering online grocery shopping, Kroger has broken onto eMarketer’s top-ten U.S. e-commerce retailers list.
America’s largest grocery chain landed at nine, moving ahead of Costco and bumping Macy’s off the list.
“The pandemic has shifted consumer priorities,” said eMarketer analyst Cindy Liu in a statement. “Kroger will benefit from two tailwinds this year: Eating at home continues to be in favor among Americans, and there’s been greater interest by consumers in ordering groceries online.”
In its third quarter, Kroger’s digital sales catapulted 108 percent, contributing 4.6 percent of the chain’s 10.9 percent identical sales growth (without fuel). On its quarterly call, Kroger officials cited past investments in fulfillment, personalization and omnichannel as contributors to the online growth.
On fulfillment, Mr. McMullen said Kroger’s more than 2,200 pickup and 2,450 delivery locations has “allowed us to capture the increased customer demand for e-commerce offering during the pandemic we have today, reaching 98 percent of our customers with a seamless customer experience around in-store shopping, pickup, delivery, and ship-to-home modalities.”
The vast majority of digital customers are also shopping in-store, they visit more frequently and, on average, spend twice as much as those shopping in-store only.
He mentioned further plans to build a “flexible network of fulfillment options” with the expansion of its Ocado partnership to build online fulfillment centers in Michigan and in the south.
Online, Kroger is advancing personalization by leveraging its extensive customer data. Mr. McMullen said, “About 95 percent of customer interactions with product on our website and app are enabled by personalization, driving a significantly higher level of engagement in our offers and nearly doubling the likelihood of adding an item to a cart.”
Digital is also incrementally profitable, supported by increasing cost efficiencies around fulfillment and digital advertising revenue.
“We think the pandemic has accelerated the growth or transition to digital probably by three years or so,” said Mr. McMullen. “A customer really expects to be able to get something in-store, pickup or delivery. And they expect to be able to bounce back and forth based on what’s easy for them.”
- Kroger breaks into top 10 US ecommerce companies – eMarketer
- Kroger breaks into top 10 U.S. e-commerce companies – Supermarket News
- Kroger Reports Third Quarter 2020 Results and Raises Full-Year 2020 Guidance – Kroger
- Kroger (KR) Q3 2020 Earnings Call Transcript – The Motley Fool
DISCUSSION QUESTIONS: Is Kroger’s online business benefiting from similar or unique factors compared to other traditional grocers? What advantages has Kroger created for itself relative to its competition?