What Kroger, Walmart, Target learn from China about the future of groceries

Now in business for 140 years, Cincinnati-based Kroger has accelerated its push into digital retail during a time of pandemic and the grocery chain doesn’t look back.

Kroger adopted an omnichannel strategy, integrating offline or in-store sales with online orders and logistics. It is a concept that originated in China in 2016 when the founder Jack Ma of e-commerce giant Alibaba coined the term “New Retail” and proceeded to open 300 high-tech supermarkets bearing the brand name “New Retail”. Freshippo brand in 27 Chinese cities.

Michael Zakkour, founder of retail and digital commerce consulting firm 5 New Digital in New York, says the “New Retail” model has been “cut and pasted from businesses that used to work in China”. “We’re seeing that with Kroger, Target and Walmart,” he said. “They were looking at the nascent Retail model in China to fully integrate offline and online channels.” “Same-day delivery, in-store restaurants, app-based sales, and QR codes are all bright spots in all of those activities, and they’re all happening in China for the first time.”

At first, America’s fragmented and highly competitive food retail business was slow to catch up. But action begins when Amazon bought Whole Foods Market in 2017 and began introducing some cutting-edge technology to streamline in-store shopping, a change that also spread to major retailers Walmart and Target.

“You can’t be a 1990s grocer,” said Yael Cosset, senior vice president and chief information officer at Kroger, who is leading digital and technology initiatives. You have to be brave, break things and adapt quickly. In a nod to AlibabaHe said the Chinese e-commerce company “did a great job in reinventing the retail model, a convergence of e-commerce in the online and offline worlds.”

SHANGHAI, CHINA – May 17: Shoppers wait in line to pay at the Alibaba Hema Fresh store on May 17, 2022 in Shanghai, China.

China News Service | China News Service | beautiful pictures

Cosset has been at the forefront of introducing omnichannel shopping experiences. Kroger’s new retail operation links shopping, e-commerce, and logistics: fulfillment centers that automate grocery packing; same-day delivery vans for households; data analysis provides early information on customer trends; mobile applications that distribute promotions and coupons to customers; on-site “ghost kitchen” that prepares meals for in-store pickup or delivery by truck; QR code that processes online payments on self-checkout; and large warehouse and online fulfillment centers rely on robots to pack, sort, and load orders.

New automated fulfillment centers are an important part of the technology effort. These centers use AI and robotics to replace the labor-intensive job of sorting and packing groceries for delivery, while on-site staff handles operations like engineering and inventory management. inventory.

“When you look at the retail sector, there are two big drivers: technology and data science, and second, logistics and supply chain fulfillment,” says Zakkour. “The lesson that US retailers are learning is that their operations can be more efficient with higher margins when retail and e-commerce are seamlessly integrated.”

Zakkour credited Kroger for being one of the more progressive US retailers in implementing this omnichannel approach. Competitors Walmart and Target are spending heavilyeven in a slowing economy and with technology at the heart of today’s investments.

“ONE Jim Russell, principal at investment firm Bahl & Gaynor in Cincinnati, said the company that doesn’t focus the laser beam on the technology Kroger makes, would be vulnerable. pandemic and post-pandemic period. “

Digital grocery shopping happens during Covid, as customers favor e-commerce, home dining, and prepared meals. Kroger’s digital business grew to more than $10 billion in 2020 and has grown 113 percent over the past two years. Building on this momentum, Kroger aims to double its digital revenue by the end of 2023. Kroger’s digital sales grew 8% in Q2 2022, while in-store combined. and online up 5.8% from a year earlier.

According to McKinsey, supermarkets have lagged behind other sectors in e-commerce with 3 to 4% of total sales but have tripled during the pandemic, McKinsey predicts that e-commerce will accounting for 18% of sales at supermarkets in the next 3 to 5 years.

“We are looking at how well this digital shift is working at Kroger,” says Russell. He points out that “half of Kroger’s app stores are bringing in incremental business, and half are cannibalizing store sales.” The company’s total revenue grew 4.1% in 2021 to $137.9 billion, and Kroger is expecting an increase in the range of 4% to 4.5% in 2022.

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Under the Restock Kroger initiative started five years ago, grocers have combined physical and digital experiences, a strategy that requires large and long-term investments in robotics and supply chain management. , as well as data analytics to understand and predict customer habits, and personalize marketing.

“We are leveraging data to interact with customers through digital channels such as apps and website logins to make customer interactions relevant and meaningful,” said Cosset. to a vibrant, personalized shopping experience.” He points out that large stores can lose the personal connection with the customers that a local store provides. But by using data and technology, Kroger can better connect with customers and personalize online ads and promotions.

Cosset joined Kroger in 2015 when the grocery chain acquired the US assets of its partner, London-based data science firm dunnhumby, where he holds leadership positions. Kroger created 84.51° as a new business from dunnhumbyUSA, serving Kroger and other customers including Procter & Gamble, Coca-Cola and Tesco. Cosset began spearheading Kroger’s e-commerce and digital growth strategy in 2017, was promoted in 2019 to technology, and his role expanded back two years. advance to include the grocery store’s 84.51° unit monitoring.

Another acquisition that proves key to the new strategy is UK-based grocery e-commerce company Ocado Group, which was acquired by Kroger in 2018 and partnered to bring the delivery platform to a close. home to America. Kroger opened the first three Ocado-operated centers near Cincinnati, Atlanta, and Orlando in 2021, and this year added Dallas and Wisconsin. Several other locations are planned. These giant hubs can process thousands of online orders daily, and smaller establishments in vocal locations offer last-mile delivery from delivery vans that can handle 20 orders at the same time.

“Grocery in the US has historically been behind the curve compared to the UK, France and Germany,” said Hilding Anderson, head of retail strategy, North America, at Publicis Sapient. “American consumers are too slow and grocery stores are focused on survival. It will take Covid-19 for the US to catch up with retail trends.”

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