{"id":17892,"date":"2016-11-18T13:55:08","date_gmt":"2016-11-18T18:55:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/how-is-kroger-fending-off-the-attack-of-grocery-delivery-companies\/"},"modified":"2016-11-18T14:07:48","modified_gmt":"2016-11-18T19:07:48","slug":"how-is-kroger-fending-off-the-attack-of-grocery-delivery-companies","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-is-kroger-fending-off-the-attack-of-grocery-delivery-companies\/","title":{"rendered":"How is Kroger Fending off the Attack of Grocery Delivery Companies?"},"content":{"rendered":"

The traditional grocery store is in danger. Current trends reveal more people are dining at restaurants than making food at home.[1]<\/a> Furthermore, groceries are purchased through alternative sources: online like AmazonFresh, large convenience stores, and retail giants like Wal-Mart.[2]<\/a> To stay competitive, traditional grocery stores should find creative ways to leverage digital technology to enter new distribution channels, increase connection with customers, and decrease costs. Kroger, the largest supermarket chain in the U.S.,[3]<\/a> has weathered this storm by leveraging several technological and digital integrations.[4]<\/a><\/p>\n

Kroger aims to provide value to its customers with quality products, good prices, a pleasant shopping experience, and personalized rewards for a customer\u2019s loyalty.[5]<\/a> Kroger\u2019s value proposition and business model have remained largely constant, however, three examples of how Kroger now incorporates digital technology are: online grocery ordering, experimentation with digital shelving, and collection and analysis of \u201cbig data.\u201d<\/p>\n

Technology Integration at Kroger<\/strong><\/p>\n

In 2015, Kroger initiated ClickList<\/em> allowing customers to order online and pick up at the store.[6]<\/a> This service was a response to the booming \u201ce-Grocery\u201d industry, but differs in that it does not deliver groceries to the customer\u2019s door. Although Kroger has not released any sales or user information on ClickList, public response has been positive with plenty of ground to gain in the rapidly growing $9.4 billion industry.[7]<\/a><\/p>\n

Kroger is also experimenting with Smart Shelving <\/em>that will alert customers when they pass products they may need, provide targeted advertising, and reduce labor costs associated with re-pricing by hand in the current model.[8]<\/a> Beacons throughout the store will track the location of phones that use the Kroger app to provide these services. The largest cost saving potential with this technology might be in targeted advertising, where Kroger spent $648 million in 2014.[9]<\/a> By offering relevant, personalized offers, Kroger has achieved marketing response rates of over 60%, which will significantly reduce advertising spend and increase inventory management efficacy.[10]<\/a><\/p>\n

\"kroger-digital-shelves\"<\/a><\/p>\n

[11]<\/a><\/p>\n

Finally, and arguably most importantly, Kroger is leveraging \u201cbig data\u201d collection and analysis to better understand its customer and influence strategy. Kroger acquired Dunnhumby USA\u2019s<\/em> data-mining technology in 2015, forming its own data collection and analysis company, 84.51\u00b0.[12]<\/a> Effectively capturing and analyzing customer data \u2013 through means such as motion sensors, temperature sensors, online shopper profiles, purchase history, and weather- enables Kroger to increase operating margins in the following ways: improving inventory forecasting; analyzing customer buying patterns to inform negotiations with suppliers; determining which products to carry and where based on local demographics; and developing customer loyalty programs to increase the lifetime value of each of their customers.[13]<\/a> According to Kroger executives at its annual investor day in November 2016 , this capability has already resulted in hundreds of millions in cost savings.[14]<\/a><\/p>\n

Future Steps<\/strong><\/p>\n

These technological advances have so far resulted in more efficient operations, higher margins, and increasingly loyal customers, but Kroger is missing an opportunity to apply these competitive advantages to the grocery delivery industry. Kroger recently invested billions of dollars to acquire hundreds of stores in the Midwest, and also introduced 120 Wal-Mart-like supercenters. [15]<\/a> [16]<\/a>\u00a0 The $9.4-billion-dollar grocery delivery industry is growing at nearly 10% annually, which will pull customers directly from brick and mortar stores. [17]<\/a> Kroger\u2019s online platform and data collection need to be expanded and applied to grocery delivery. This service has the potential to make Kroger the industry leader by maximizing efficiencies through inventory management, labor utilization, and advertising. (799 Words)<\/p>\n

 <\/p>\n

[1]<\/a> Bloomberg, \u201cKroger Will Save the Grocery Store.\u201d https:\/\/www.bloomberg.com\/gadfly\/articles\/2015-12-03\/kroger-earnings-the-chain-quietly-gains-on-walmart-whole-foods, accessed November 2016.<\/p>\n

[2]<\/a> Wall Street Journal, \u201cGrocers Feel Chill from Millennials.\u201d http:\/\/www.wsj.com\/articles\/grocers-feel-chill-from-millennials-1477579072, accessed November 2016.<\/p>\n

[3]<\/a> The Balance, \u201cU.S. Based 2016 World\u2019s Largest Supermarket and Retail Grocery Chains.\u201d https:\/\/www.thebalance.com\/largest-us-based-grocery-chains-3862932, accessed November 2016.<\/p>\n

[4]<\/a> Wall Street Journal, \u201cGrocers Feel Chill from Millennials.\u201d https:\/\/si.wsj.net\/public\/resources\/images\/BT-AL820B_MILLS_16U_20161025124207.jpg, accessed November 2016.<\/p>\n

[5]<\/a> Kroger Company Speech Archives, \u201cFirst Quarter 2010 Investor Conference Call Prepared Remarks.\u201d http:\/\/www.thekrogerco.com\/corpnews\/corpnewsinfo_pr_speeches_speecharchives_06172010.htm, Accessed November 2016.<\/p>\n

[6]<\/a> Business Insider, \u201cKroger has a Game-Changing Grocery Service, and Moms Are Freaking Out About It.\u201d http:\/\/www.businessinsider.com\/moms-are-going-crazy-for-krogers-new-clicklist-service-2016-2, accessed November 2016.<\/p>\n

[7]<\/a> Retail Leader, \u201cOnline Grocery Shopping on Pace for 9.5% Annual Growth.\u201d http:\/\/www.retailleader .com\/ top-story-research-, online_grocery_shopping_on_pace_for_9.5_percent _annual_growth-1635.html, accessed November 2016.<\/p>\n

[8]<\/a> USA Today, \u201cKroger Tests \u2018Smart Shelf\u2019 Technology.\u201d http:\/\/www.usatoday.com\/story\/money\/nation-now\/2015\/10\/04\/kroger-tests-smart-shelf-technology\/73320236\/, accessed November 2016.<\/p>\n

[9]<\/a> Statistia, \u201cKroger\u2019s Advertising Spending in the United States.\u201d https:\/\/www.statista.com\/statistics\/298836\/kroger-ad-spending-usa\/, accessed November 2016.<\/p>\n

[10]<\/a> 84.51\u00b0, \u201cWhat We Do \/ Retail.\u201d https:\/\/www.8451.com\/what-we-do\/retail, accessed November 2016.<\/p>\n

[11]<\/a> USA Today, \u201cKroger Tests Smart Shelf Technology.\u201d http:\/\/www.cincinnati.com\/story\/money\/2015\/10\/02\/next-shelves-giving-cues-kroger\/73218252\/, accessed November 2016.<\/p>\n

[12]<\/a> Bloomberg, \u201cTesco Moves Closer to Dunnhumby Sale After Kroger Agreement.\u201d http:\/\/www.bloomberg.com\/ news\/articles\/2015-04-27\/tesco-moves-step-closer-to-dunnhumby-sale-after-u-s-agreement, accessed November 2016.<\/p>\n

[13]<\/a> McKinsey Global Institute, \u201cUnlocking the Potential of the Internet of Things.\u201d http:\/\/www.mckinsey.com\/business-functions\/digital-mckinsey\/our-insights\/the-internet-of-things-the-value-of-digitizing-the-physical-world, accessed November 2016.<\/p>\n

[14]<\/a> Cincinnati Business Courier, \u201cKroger Details Hundreds of Millions in Cost Cuts.\u201d http:\/\/www.bizjournals.com\/cincinnati\/news\/2016\/11\/03\/kroger-details-hundreds-of-millions-in-cost-cuts.html, accessed November 2016.<\/p>\n

[15]<\/a> Kroger, \u201cKroger and Roundy\u2019s Announce Definitive Merger Agreement.\u201d http:\/\/ir.kroger.com\/file\/Index?KeyFile=31829737, accessed November 2016.<\/p>\n

[16]<\/a> Business Insider, \u201cKroger has a New Plan that should Terrify Walmart and Target.\u201d http:\/\/www.businessinsider.com\/kroger-has-a-plan-to-to-take-down-walmart-2016-8\/#check-out-that-meat-selection-it-goes-on-forever-20, accessed November 2016.<\/p>\n

[17]<\/a> Retail Leader, \u201cOnline Grocery Shopping on Pace for 9.5% Annual Growth.\u201d http:\/\/www.retailleader .com\/ top-story-research-, online_grocery_shopping_on_pace_for_9.5_percent _annual_growth-1635.html, accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

Millennials are shopping less and less at grocery stores in favor of restaurants and the booming grocery delivery services. Despite this, Kroger, the largest grocer in the country by revenue, is thriving. Kroger leverages technology through data collection, online ordering platforms, "smart shelves", and speedy checkout. But is that enough?<\/p>\n","protected":false},"author":2082,"featured_media":17893,"comment_status":"open","ping_status":"closed","template":"","categories":[1417,357,2384,673],"class_list":["post-17892","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-food-retail","category-groceries","category-online-grocery","category-supermarket"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nHow is Kroger Fending off the Attack of Grocery Delivery Companies? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-is-kroger-fending-off-the-attack-of-grocery-delivery-companies\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How is Kroger Fending off the Attack of Grocery Delivery Companies? - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Millennials are shopping less and less at grocery stores in favor of restaurants and the booming grocery delivery services. 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