Kroger Relies on Partners to Accelerate Change

Kroger has penned deals with Nuro, Home Chef, Ocado and Alibaba in the past year with the goal of becoming more available, accessible and relevant to its customers.

“As we set out to redefine the customer experience, we’ve been very aggressive but diligent and decisive," Kroger chief digital officer Yael Cosset said in a presentation on Oct. 28 at Groceryshop in Las Vegas. "What that means is constantly looking for potential partners to help us accelerate that transformation.”

Cosset said each of those partnerships is in different stages: learning, implementation or scaling. Kroger is still learning from Alibaba, slowly ramping up the assortment of private label products it offers through the Chinese e-commerce giant's marketplace. A major test will be how Kroger's brands perform on Nov. 11, which is the Chinese equivalent of Black Friday.

"There is a lot of demand for our product, especially in the natural and organic space," Cosset said. "We’re learning how we use data to fine-tune the assortment and engage the customer.”

Acquiring Home Chef allowed Kroger to accelerate its presence in the meal kit space, which it had entered last year through private label products, while partnerships with Ocado and Nuro will help the retailer keep e-commerce cost efficient. Kroger has 14 million shoppers each day and 60 million each year, 90% of whom have access to delivery or click-and-collect services. The retailer plans to bring that number to 100% by next year.

"We’ve made a point of staying on strategy and really narrowing the scope of partnerships to make sure they deliver high impact to the customer experience in a short time," Cosset said. "The time and capital investment has to pay off. It’s important to stay relevant and true to who you are as a retailer.”

Ramping up its e-commerce portfolio hasn’t come at the cost of in-store sales. Instead, Kroger has been seeing shoppers shift purchases away from its competitors.

"We see digital customers spending more time in stores, which is counterintuitive," Cosset said. "There is a balance between the two and they are very complementary.”

Cosset said companies must be cautious when it comes to the pace of change and avoid investing in new technologies just because a competitor is using them.

"Not all customers are the same," he said. "Consumers have different characteristics from one market to another so it’s important to not be naive but understand how various retailers solve problems for their customers and when they’re relevant to our customers.”

Still the company is constantly looking towards the future to see how U.S. and international companies reduce friction. Cosset said he's particularly interested in mobile payment in Asia and the changing nature of physical stores. He said he expects future grocery stores to devote a significant amount of space to order fulfillment and that the rest of the location will be centered around a "food experience."

All of Kroger's moves are based off of the retailer's keen understanding of its customers, and Cosset said that he believes the ability to use data to provide relevant shopper experiences has become table stakes for supermarket operators. That includes not just using data to inform selection or marketing tactics, but how to approach technological innovation.

"If you go too fast or get too far ahead of the customer, while it may capture headlines you’re going to create friction in your business model," Cosset said. "If you get too far behind, you lose the ability to be relevant. Technology has opened many doors, but not everybody is adopting it the same way and at the same pace. We need to be conscious of the fact that we have over 60 million families we need to satisfy.”