Dive Brief:
- Kroger attributed a 17% year-over-year jump in Q1 delivery sales to its automated customer fulfillment centers, according to a June 20 earnings presentation.
- The grocer retooled its delivery network during the quarter, closing three of its “spoke” e-commerce locations to shift capacity closer to automated facilities, Kroger CEO Rodney McMullen said on a Q1 earnings call.
- “This decision does not impact Kroger's automated FCs or other spoke locations,” McMullen told analysts. “We remain confident that our Kroger delivery network provides a differentiated customer experience and will continue to be a key pillar of our digital growth strategy.”
Dive Insight:
Grocery delivery performance has been mixed over the last two years as the COVID-19-pandemic-induced boost has waned.According to research firm Brick Meets Click, digital grocery sales rose 8% YoY in June, but that result followed uneven performance through the first five months of the year.
Kroger has been focused on adjusting its network makeup in a bid to strengthen its delivery strategy. In addition to closing three e-commerce facilities during Q1, the company said it would stall the rollout of additional automated fulfillment centers as it evaluated the performance of existing sites.
Kroger’s supply chain shakeup has extended to its in-store pickup operations — another key component of its digital sales strategy.
“Through the power of machine learning and AI, we are developing new ways to elevate the Pickup experience for customers and at the same time reduce costs,” McMullen said on the Q1 earnings call. “With dynamic batching of orders, these tools are providing associates the most effective pick routes, which is enabling us to dramatically reduce pick lead time in our highest volume stores.”
As of last June, the grocer had eight automated fulfillment centers in its network, including its inaugural site in Monroe, Ohio. Kroger formed a partnership with retail technology firm Ocado Group in 2018 to build and outfit the facilities with automated technology.
Kroger has recently re-accelerated its work with Ocado, announcing plans to install the firm’s technology at several automated fulfillment centers earlier this week. Kroger is utilizing two of Ocado’s offerings: its On-Grid Robotic Pick, a robotic arm that picks and packs products for delivery, and its Automated Frameload, which loads customer orders onto delivery frames to prepare them for dispatch.
