Despite sales increases in the fourth quarter and full fiscal year, Kroger CEO Rodney McMullen was disappointed by the company’s identical supermarket sales number in the fourth quarter and performance on several other KPIs, including FIFO operating margin and return on invested capital, which were driven by the deflationary environment.
“Kroger is always focused on executing against our long-term strategy,” McMullen said during the company’s recent earnings call. “We are lowering cost to invest those savings in our people, business, and the technologies to position Kroger to deliver the value proposition customers are seeking today and in the future.”
One example Kroger’s efforts to control administrative cost is to extend the voluntary retirement offer for certain non-store associates. Approximately 2,000 non-store associates were eligible for the offer and, McMullen noted, about 1,300 will accept it.
“As our customers change and evolve, we are taking steps to meet them where they are and more importantly where they are going,” McMullen explained. “We’re making meaningful investments in digital. We feel great about these investments because customers tell us they are important to them.”
Kroger aggressively added more than 420 ClickList and ExpressLane locations in 2016, bringing its total online ordering locations to more than 640.
“This effort was based on learnings from our merger with Harris Teeter,” McMullen said. “We are also experimenting with ways to solve the last mile equation. We’re testing with Uber delivery in several locations with plans to expand in 2017 where our customers can order through ClickList and choose to have their groceries delivered by a local Uber driver. We have a couple of other home delivery tests as well.”
Kroger is building its digital experiences today “so that customers can engage and shop for anything, anytime, anywhere with us in the future,” McMullen said. “The excellent service they get from our associates in the stores will carry over seamlessly to the digital platforms whether shopping online, finding great promotions and recipes that are personalized and relevant to them or downloading one of the more than 1 billion digital offers loaded through shopper cards each year.”
More customers are connecting digitally with Kroger.
“We are leveraging refined customer insights from 8451 as well as years of online shopping experience from both Vitacost.com and Harris Teeter to develop a sophisticated understanding of our customers’ behavior when shopping with us online, in store, and both,” McMullen said. “We’re utilizing this rich data set to make decisions about where the right locations to offer ClickList, what are the right assortments and promotions to engage customers online and how can we offer the quality and convenience online that customers’ have come to expect from a Kroger brick-and-mortar location.”
Evan Magliocca, brand marketing manager for Baesman Insights & Marketing, offered his thoughts about Kroger’s digital commitment.
“It’s great to see grocery chains investing in digital and data, but they have a lot of catching up to do with other industries,” Magliocca explained to Loyalty360. “The biggest opportunity for grocery stores is personalization. It’s a massive opening that has been largely untouched to this point given the massive trove of customer data they’re sitting on. They can utilize a scalpel instead of a sledgehammer on their weekly promotions simply by understand their customer’s behavior and what affinity they have with specific items. Grocers could increase their effectiveness and keep a strong percentage of their margin by investing in personalized content and promotions.”