The Kroger and Ocado corporation have been in the production for a long time, but the focus on what resulted from it is perhaps at its most extreme now. Given the enormous boost that online shopping made in the past year.
The COVID-19 pandemic, and the resulting push from more social distancing, have pushed many people to the internet to shop, choosing to deliver over physical store visits for some or all of their food and other weekly necessities.
This trend has also led to more competition in space as well: the likes of Amazon, Walmart, and other traditional grocery stores getting their digital strategies in order and online players are all hoping to have a portion of the market from consumers now ready to buy online. The tide has also lifted the Kroger boat. In a call today with reporters, Rodney McMullen, Chairman and CEO of Kroger Corporation, said handover had grown 150% for Kroger last year.
While some of that may dissolve back into physical shopping when cases of COVID-19 fade (fingers crossed), many in the industry believe the genie has come out of the bottle, so to speak: Many consumers offer online shopping will remain, partly on the least, so this is about building the infrastructure to meet this new demand.
Kroger, like many traditional players, is building multiple fronts in its digital strategy. Along with Ocado, the company is also investing in technology to boost the efficiency of its in-store operations (for example, by working with companies like Shelf Engine), and has a grocery delivery partnership with Instacart.
While, the Kroger’s partnership with Instacart will still apply, not least because it covers a much wider geographic area than the Ocado approach, which is now being used in Cincinnati, and it appears that it will also expand to Florida. While Kroger said today that CFCs will vary in size and will be based on the concept of “modules” (the Monroe facility is built on seven modules), this is still a capital-intensive approach compared to the Instacart model, so it may have an overall slower problem posing and may only make sense in Kroger’s markets. The most intense. “The two companies are important to Kroger and our customers,” said Yael Kossett, Kroger’s chief information officer, on the call today. “We expect to work very closely in a strategic partnership with Instacart and with Ocado.”
In addition, Ocado, an early player that started in the UK in 2000, is regarded by many as the industry standard for how to create and manage an online-only grocery business. But instead of growing by moving its direct grocery business outside of the UK, the company has expanded its reach by using the technology it built for itself and turning it into a product – a process that is still largely under development, with the company now working on automated pickup machines. And other standalone systems, along with other technologies to power the delivery service and make it more efficient.
Ocado’s AWS strategy to turn the technology it built into a product to sell to others has paid off: it now has partnerships to run online grocery services, and fulfillment centers specifically, in Japan (with Aeon), France (with Aeon Casino) and Canada ( With Sobeys). This means that Kroger’s offering is now a tested model, but it’s still a very remarkable step for the company to break into the United States while at the same time giving Kroger a much-needed infrastructure piece to better compete with bigger players in the country like Walmart and Amazon. Now, what is your take on this? Let us know in the comment section below!
In that respect, it will be interesting to see how and if Kroger is leveraging its larger Ocado-powered infrastructure for its other projects. The company is working with Mirakl to develop its own market for outside retailers, Go