Kroger Boosts Online Sales 22% Thanks to Digital Investments

Need to Know

• Kroger’s recent earnings call details a 22% digital sales growth in Q4, as well as 29% digital sales growth in total for 2019. 
• Its digital innovation lab, expanded digital delivery options, and fresh food push remain important drivers for the supermarket chain. 
• In Q4 2019, Kroger reported $327 million in profit, up from $259 million during the same period in 2018. 
• On the earnings call Kroger CEO Rodney McMullen noted how building automated e-commerce fulfillment centers with e-grocer Ocado, “will accelerate our ability to provide customers with a seamless experience in a much more cost-effective way.”
• The company is about one year away from its first functional customer fulfillment center with Ocado in Monroe, Ohio.

Analysis

Kroger’s digital initiatives are paying off as the company reports a 22% growth of online sales in its recent earnings call.  

“We’ve been working hard on transforming our fundamental business model, and we feel like we’ve made significant progress on that and continue to invest in the future from a digital experience. So, we’re excited about where we are. We’re even more excited about where we’re headed,” CEO Rodney McMullen said on the call. 

Last month Kroger announced its new digital innovation lab at Northern Kentucky University, a bid for the grocer to expand on its digital strategy by focusing on initiatives that directly impact Kroger customers across the nation.

The grocer also recently partnered with DRINKS to launch a first of its kind, build-your-own pack wine delivery service. Tapping into the $250 billion alcohol industry allowed the retailer to increase its presence online, further expand its offerings and drive customer in-store visits. 

“Digitally engaged customers not only drive growth through our digital modalities, but they also help drive brick-and-mortar sales growth and share of wallet as well. Providing our customers with the ability to have anything, anywhere, anytime from Kroger sets us apart from a large segment of our competitors and will drive loyalty, as well as our long-term growth and margin expansion,” McMullen said on the call. 

In 2018 the Kroger announced a partnership with e-grocer Ocado, to deliver its first functional customer fulfillment centers with automated warehouses, robotic and digital functions. On the call, McMullen noted Kroger is approximately one year away from its first functional center. Adding, “These facilities will accelerate our ability to provide customers with a seamless experience in a much more cost-effective way.” 

Canadian grocer Loblaws recently unveiled similar plans for a micro-fulfillment center that will streamline e-commerce and make filling orders at least four times more productive. 

Digital growth aside, Kroger reported all-around sales growth of 2% and $327 million in profit, up from $259 million during the year-ago period.