Kroger’s Belt Tightening Allows For Continued Tech Investment

By Tim Denman — March 16, 2017

Like much of the grocery market Kroger is suffering through a depreciatory environment which has halted its sales growth. Despite the less than ideal economic conditions the nation’s largest grocer is committed to continued tech investment designed to advance the customer experience.

To keep its market-leading position in both sales and technology the grocer is tightening its belt on operational expenditures and staffing and funneling those savings into its technological initiatives.

“We are lowering costs to invest those savings in our people, our business, and the technologies to position Kroger to deliver the value proposition customers are seeking today and in the future,” Rodney McMullen, CEO, Kroger said on a recent earning call with analysts. “One example of our efforts to control administrative cost is making the very difficult decision to extend the voluntary retirement offer for certain non-store associates that we announced in December. Approximately 2,000 non-store associates were eligible for the offer. And at this point, we estimate approximately 1,300 will accept it.”

Another area Kroger is exploring to reduce costs is inventory management. “We can do better on shrink, we can do better on store productivity in some areas, we can certainly do better on in stock in some areas,” said Mike Schlotman, EVP & CFO, Kroger. “And one of the great things about a company the size and breadth of Kroger is, there is not an initiative we have out there that we don’t already have, a very large group of stores achieving. We don’t have to go outside the company and point to competitor actually doing this, we are. Every metric we have out there for our storage to do better on, we already have a group of stores achieving those results, and as we get better at achieving those over a broader base of stores, that’s one of the things that we think is going to give us incremental fuel for the engine to continue to invest.”

A key component of Kroger’s tech investment strategy is focused on digitizing the shopping experience, particularly through its ClickList application. ClickList allows shoppers to shop online for over 40,000 items available in-store and reserve a time slot to come in to pick them up. In 2016 Kroger onboarded 420 new ClickList locations, bringing its total to more than 640.

“We're utilizing this rich data set [from wholly owned 84.51] to make decisions about where the right locations to offer ClickList,” McMull said. “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.”

The latest advancement to the digital shopping experience is home delivery fulfilled by Uber. The retailer is testing the service in a limited number of markets with plans to increase the service throughout 2017 if successful. The grocer is exploring other home delivery options as well, to add a greater level of service to its shop-from-home offering. 

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