Building on their existing strategic relationship, Kroger and Ocado are expanding their collaboration to include in-store fulfillment.
Improving channel economics
The extension of the partnership will see Kroger optimise Ocado’s in-store fulfillment solution. This includes proprietary software that supports associates in assembling orders, making it easier and more efficient to find products when fulfilling pickup orders. Using AI, it will help Kroger to improve the customer pickup experience. Driving incremental improvements in store processes has become a focus for retailers as they seek to improve channel economics against a backdrop of accelerated growth since the start of the pandemic.
Tenth CFC location
The two companies also announced a further location for their network of Customer Fulfillment Centres (CFCs). Although the exact location was not revealed, it will be placed in the South region. This is the tenth CFC to be announced. At 200,000 sq ft, it will be one of the smaller sites to be developed. The first two sites are set to open in 2021.
- Monroe, Ohio – this 335,000 sq ft facility will be located close to the retailer’s Cincinnati HQ and is set to become operational in early 2021 following a ground-breaking ceremony last summer. This is core Kroger territory
- Groveland, Florida – this 375,000 sq ft site is expected to become operational in 2021. It is unique among the locations announced to date as the retailer does not operate any stores in Florida. Recently it divested its stake in Lucky’s Market, a natural and organic specialist that had expanded in the region with Kroger’s support
- Atlanta, Georgia – 375,000 sq ft, expected to become operational in early 2022. Kroger has a strong physical presence in the region
- Dallas, Texas – 350,000 sq ft, expected to become operational in early 2022. Kroger has a solid presence in Texas overall, but significantly stronger in Houston than Dallas
- Pleasant Prairie, WI – 350,000 sq ft, expected to become operational in late 2022, core Kroger territory, driven by its acquisition of Roundy’s in 2015
- Frederick, Maryland – 350,000 sq ft, expected to become operational in early 2023. The retailer has a strong presence in Washington and Baltimore through its Harris Teeter business, but no real presence in the Philadelphia market
- Romulus, Michigan – 135,000 sq ft site, expected be operational in 2023 or earlier
- Pacific Northwest – 200,00 sq ft site, potential to sited in Washington state and to be operational in 2023 or earlier
- West – 300,00 sq ft site, potential to be sited in California and to be operational in 2023 or earlier
- South – 200,000 sq ft, expected to be operational in 2023 or 2024
Pandemic-driven growth affirms Kroger’s bold plan
These sites form part of Kroger’s plans to develop up to 20 CFCs as part of its strategic partnership with Ocado. The recent boost to grocery ecommerce given by the coronavirus pandemic, with digital sales up 127% in Q2, has provided affirmation to the retailer’s plans, which have often been considered bold in scope and ambition. Developing a range of fulfillment models is a key part of Kroger’s strategy to build a large, sustainable and profitable ecommerce business.
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