Retail Innovator of the Year: Kroger

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06/23/2021
Peter Breen
Editor-in-Chief | profile
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Kroger's Jody Kalmbach

The editorial team selected Kroger as the Path to Purchase Institute’s first-ever Retail Innovator of the Year. But the selection was based almost entirely on feedback we received from the CPG marketers in our community who, among other accolades, lauded Kroger as “best collaborative partner during the pandemic” and second-best (tied with Amazon behind Target) in “readiness for the shift to online shopping” in the Institute’s Trends Report 2021.

Brands praised the nation’s largest grocer for being willing to “work with our teams to improve the shopper experience for our products, the category and the overall basket” and ready to “lean in and discuss topics in the spirit of making progress together.”

A number of CPGs also cited the ways in which Kroger “proactively shared insights on their shopper behavior and category performance during the pandemic” by providing studies, holding webinars and revising promotional activity to align with the dramatic changes taking place. “They had a broad range of programs that were available to support our business when we needed to shift our promotional strategy,” said one.

“I would be remiss if I didn’t acknowledge the team and how they showed up for our customers, our associates and each other when – literally, overnight – everything changed,” says Jody Kalmbach, Kroger’s group vice president of product experience, who was interviewed by the Institute in May. “The business doubled. Our ways of working changed. Everyone had to move to remote work from home versus being in the office.”

Fortunately, several years of intensive development of its e-commerce capabilities had Kroger ready for the disruption. “We’d had the foresight previously to make technology investments that actually – unknowingly at the time – prepared us for that moment,” Kalmbach says. “So when the business doubled, we didn’t miss a beat. We were able to be there for our customers.”

In addition to having the right tools in place, Kroger’s efficient product development methodologies “allowed us to operate at a pace that mattered,” Kalmbach adds. “So when we had solves that we had to put in place that normally might take a quarter or two to get done, we made it happen in two weeks because we had set up the organization for success to get things in play much more rapidly and support those incredibly important customer needs that were coming up.”

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A Real ‘Omni-Presence’

As a result of the behavioral shifts, Kroger’s website engagement is at an all-time high. The retailer’s 23 million unique monthly shoppers make it the leading retailer in the food and grocery category, according to comScore. And fueled by 116% year-over-year growth in 2020, its $10 billion-plus in e-commerce sales makes it one of the 10 largest online retailers of any type.

“To be number 8 on the list is a pretty massive accomplishment when you think that, about five years or so ago, we didn’t have an e-commerce business,” says Kalmbach. “The customers evolved, we met them, and now this is very much a part of what we believe the future will be. It’s been very exciting for the company but also humbling that we were able to show up in that way.” 

To that end, Kroger finished 2020 with roughly 2,225 e-commerce pickup sites and about 2,500 delivery locations, which means that 98% of its shopper households now can utilize at least one of those options. Elsewhere, the first of 19 automated customer fulfillment centers that will roll out in conjunction with supply chain partner Ocado opened in April 2021. That partnership also boasts proprietary software in stores that will help employees pick and assemble online orders more efficiently for the shoppers using pickup services.

“A general guiding principle for us is [that] we want to own the relationship with the customer. We want to be able to build the solution and deliver that experience to them,” says Kalmbach, when asked about Kroger’s strategy for striking external partnerships. “But where we can feed in really unique, differentiated capabilities to better serve them, we’re all in.”

Innovation doesn’t begin and end with order fulfillment, of course, and Kroger is looking for ways to help customers solve their meal planning needs as well. Among recent activity is a partnership with Whisk, part of the Samsung Next food technology platform, in which Kroger customers can turn recipes from a variety of publishers, brands and apps into a smart shopping list for instant purchase from their local store. Another is an internally developed Twitter-based tool called Chefbot that gives customers recommendations based on snapshots from their fridges or pantries.

“At Kroger, we really embrace the culture of testing and learning. So there are very few things that we’re not willing to put in play in a pilot so that we can test and learn and continue to innovate,” says Kalmbach, pointing to the drone service currently being tested near Dayton, Ohio, that will deliver products anywhere the customer needs them. (“Imagine you’re at the park, you’re having an awesome barbecue, and you forgot your s’mores kit.”)

“It’s about having the mindset of being willing to … try things, knowing that many will fail,” she says. “But when you hit that experience that really resonates with the customer, then you have the ability to bring it to life.”

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Kroger Precision Marketing's Cara Pratt

Excellence, Old & New

Of course, omnichannel innovation isn’t complete without upgrades to the brick-and-mortar store environment, such as ongoing efforts with tech partner Microsoft to trial digital signage, cloud-supported in-stock management, and other enhancements. In another recent test, Kroger introduced KroGo, a smart cart (from New York-based Caper) that lets shoppers weigh produce, scan and bag items as they walk the store, then pay using on-cart technology and exit through the self-checkout area.

“I think there’s an expectation increasingly growing among customers – and we certainly saw this during the pandemic – of having digitally engaging experiences,” says Kalmbach. As far as “online vs. in-store” goes, “From a customer point of view, it’s one experience. … So, whether they’re in-store or online, how can we help simplify the experience for customers to have data and inspiration at their fingertips … using digital to drive the experience forward.”

Beyond technology, “there’s tremendous innovation happening from an assortment and a food and grocery perspective,” she says. “Think about meal solutions and how grocery is evolving to not just be the ingredients that you want to purchase, but everything through the spectrum of ready to prep, ready to heat, ready to eat – to that real restaurant-quality level of food. I think we’re going to continue to see massive innovation on that front because, again, the customer is expecting it.”

“The lines are already blurring with the in-store experience,” says Cara Pratt, senior vice president of Kroger Precision Marketing, before listing off such omnichannel tools as Kroger’s mobile app, digital shopping lists and offers, augmented reality, and digital screens. “Ultimately, we’re looking to help our shoppers get food on the table. And we can do that in really meaningful ways to make the experience even more fun, more engaging, and more helpful.”

Kroger’s thoroughbred entry into the retail media network race, KPM has been earning the same high praise for data expertise that its parent operation, in-house data shop 84.51, has enjoyed for years. In the Institute’s Trends Report, KPM received the highest scores of any retail media platform for targeting effectiveness, measurement capabilities, data sharing, ROI and sales growth.

“While the portfolio has evolved substantially over our first three and a half years in market, the reality is that our commitments have remained the same,” says Pratt. “We have commitments that are anchored in business outcomes, around the performant nature of media, accountability, transparency and brand safety – and also in consumer outcomes, which are really around inspiration and shoppable moments.

“We had over 500 billion personalized experiences that we exposed our shoppers to last year alone, and that’s sitting behind the power of all of the customer intelligence that we have,” explains Pratt. “Customers are more empowered than ever to make new decisions about how they shop, where they shop and when they shop, and we know that we need to continue to use that same intelligence to create the best experience for them – whether they’re walking in our stores or shopping online.” 

And where shoppers go, Kroger’s innovation is sure to follow.

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