We look at some of the latest ecommerce initiatives in the US as retailers develop alternative fulfilment models.

Store fulfillment: Ahold Delhaize’s Giant Food rolling out grocery pickup

With many of the leading US grocery retailers focusing on developing their delivery capabilities last year, store-based pickup has become a growing focus this year. This month, Ahold Delhaize’s Giant Food has started to roll-out it’s store-based pickup service, Giant Pickup. Customers using the service can choose same-day or next-day pickup. The retailer plans to roll-out the service, which is powered by its Peapod division, to 100 stores by the end of the year.

Dark store: Walmart opens dark store facility for online and pickup orders

Walmart has opened a 40,000 sq ft dark store facility in Lincolnwood, Illinois. The former Dominick’s supermarket has been converted to fulfill delivery and pickup orders. Customers can order from Walmart’s range of grocery items, consumables and health and wellness products. This is the retailer’s second dark store facility for grocery ecommerce, following the launch of a pilot 10,000 sq ft facility in Bentonville. It has also tested a dedicated pickup only point in Metairie, Louisiana and an automated pickup unit in Oklahoma City. These tests align with Walmart’s broader omnichannel strategy which aim to optimise its physical and digital capabilities.

Centralised fulfillment: Kroger and Ocado outline plans for fourth Customer Fulfillment Center

Kroger and Ocado will develop a fourth Customer Fulfillment Center (CFC) in Forest Park, Georgia. As part of the strategic relationship between the two companies, they are committed to building 20 CFCs to accelerate Kroger’s grocery ecommerce ambitions. Last month, Kroger broke ground on the first CFC in Monroe, Ohio, while plans have also been announced to build CFCs in Florida and the Mid-Atlantic region. The new facility will enable Kroger to target the online grocery market in Atlanta, a key stronghold for the retailer. It is expected to become operational in 2021 and will be located adjacent to an existing Kroger distribution centre.

Source: Kroger

Testing models to improve efficiencies and profitability

These various initiatives highlight the diversity of models being developed in the US as retailers continue to increase their investments into the channel. Alongside these more conventional models, several retailers, including Ahold Delhaize, Walmart and Albertsons, are also piloting automated hyper-local fulfillment. These systems blur the above models through automating store-based picking within the store backroom. With the channel forecast to grow to $60bn by 2023, retailers are focusing on improving the efficiency and profitability of their models, especially as most expect to scale-up their operations over the next few years.

Join a Retail Safari with our experts

Use our expertise to unlock store, category and digital innovation across leading European and North American cities through our analyst led study tours.

Find out more »

As part of its plans to develop a flagship store in Cincinnati, Kroger’s new concept will feature a food hall incorporating its own, and external foodservice brands.

Downtown store to tap into different meal occasions

The 45,000 sq ft store is scheduled to open in September and will be more than twice the size of its existing store in the downtown area. The central element of the store, which will form part of a mixed-use development, is a new food hall. This will feature a range of operators on the second floor, including Kroger’s own standalone restaurant concept, Kitchen 1883 Café and Bar. External partners will include Eli's Barbecue, Dope Asian Street Fare, Django Western Taco and Queen City Whip. The store will also feature a Starbucks and Murray’s Cheese counter.

Source: IGD Research

Enhancing its foodservice capabilities

While this will be a new concept for Kroger, it has been developing its foodservice capabilities over the last four years. Following the acquisition of Chicago-based Mariano’s in 2015, it has enhanced several of its existing formats. Many of its stores have added wine and beer bars while it has also been testing external foodservice partners. Several of its larger stores feature Eli’s Barbecue, a concept which will feature in the new food hall. Kroger has also developed the ‘Kroger Fresh’ app which enables customers to order food-to-go ahead, and pick-up in-store, and acquired Home Chef, a meal kits company.

Get set for more food halls in food retail

Food hall type developments are becoming of increasing interest to food retailers. The increased blurring of retail and foodservice is driving the development of food formats which resemble food halls. The format is being developed at a rapid pace in many regions. Both independent operators and groups such as Time Out are investing heavily in new developments. By the end of the year, Time Out, plans to have six food halls operating across three different markets, building on its successful first venture in Lisbon. Last month, it launched a new food hall in Boston. We expect to see more retailers follow Kroger’s lead and develop similar concepts that blend external and internal foodservice concepts, enhancing the destination status of their stores and helping them to capture a greater share of their customers’ total food spend.

Join a Retail Safari with our experts

Use our expertise to unlock store, category and digital innovation across leading European and North American cities through our analyst led study tours.

Find out more »

We review Kroger’s first quarter results and the factors driving growth at the world’s second largest food retail business.

Identical store sales behind expectations

Kroger’s first quarter sales fell by 1.2% to $37.3bn, reflecting the divestment of its convenience business last year. Total sales, excluding fuel and the impact of selling the convenience store business, increased 2.0%. Identical store sales over the period increased 1.5%, excluding fuel. This is below the run-rate required to meet its full-year guidance, with several initiatives underway to try and accelerate its performance. The work undertaken on space optimisation last year is expected to generate a tailwind for the business going forward.

Source: IGD Research

Investing to redefine the customer experience

Kroger remains a business in transformation, driven by its strategic plan Restock Kroger. Central to this is its goal to increase operating profit by $400m over a three-year period, driven mainly by alternative profit streams. This will enable the business to continue to invest in the customer experience, including its ecommerce and private label operations. The business remains confidence on achieving this, with alternative profit streams expected to contribute an estimated incremental $100m this year. The retailer has made several appointments across its media and data business units to enhance its capabilities in these areas.

Ecommerce sales up 42%

Ecommerce sales increased 42% in the quarter as it expanded grocery pickup to 1,685 locations and delivery to 2,126 locations. It also started to test a 30-minute delivery service, Kroger Rush, in the Cincinnati area. The retailer made further progress with its private label business, launching over 200 new products. These contributed to sales growth of 3.3%, helping unit share to increase to 28.9% in the quarter. Its Simple Truth and Private Selection ranges performed particularly well, delivering double-digit sales growth.

Partnerships underpinning transformation

Partnerships are an important part of Kroger’s transformation. During the quarter it formed PearlRock Partners with private investment firm Lindsay Goldberg. This is a new platform to identify, invest in and help grow the next generation of leading consumer product brands. It also formed a new direct relationship with Pinterest, further enhancing its Kroger Performance Media division. The retailer also broke ground on the first customer fulfillment centre that is being developed as part of its partnership with Ocado. Developing these types of partnerships has become a much stronger focus throughout the food retail industry as retailers look to move at pace and bring new capabilities and thinking into their businesses.

Join a Retail Safari with our experts

Use our expertise to unlock store, category and digital innovation across leading European and North American cities through our analyst led study tours.

Find out more »