Kroger seeks to transform grocery e-commerce with the introduction of first-of-its-kind technology in the U.S. developed by Ocado.
The Kroger Co., America’s largest grocery retailer, is launching the country’s first Customer Fulfillment Center (CFC), combining vertical integration, machine learning, and robotics with affordable, friendly, and fast delivery service for fresh food.
Located in Monroe, OH – a city north of Cincinnati – and powered by Ocado Group (LSE: OCDO), a world leader in technology for grocery e-commerce, the CFC is the first to open, transforming, and supporting the grocer’s thriving digital business.
“2020 was a pivotal year for grocery e-commerce, with Kroger’s digital business scaling to over $10 billion—and achieving a record digital sales increase of 116%,” said Rodney McMullen, Kroger’s chairman, and CEO. “We’re incredibly proud to achieve this milestone that advances our position as one of America’s leading e-commerce companies. The momentum we’re experiencing is well-timed with the evolution of Kroger Delivery, underpinning the permanent shift in grocery consumer behavior and the need for enterprising and modern e-commerce and last-mile solutions—today’s true competitive horsepower.
“It’s truly uplifting to reach this moment in Kroger’s history – better yet grocery industry history – with our partners at Ocado. We’re appreciative of Tim Steiner and Luke Jensen’s collaboration to accomplish the next step in the expansion of our seamless ecosystem.”
In May 2018, Kroger and Ocado formed an exclusive partnership to introduce to the U.S. for the first time proprietary technology solutions focused on artificial intelligence, advanced robotics and automation, and creative solutions to create more seamless and efficient fulfillment, picking and delivery capabilities to provide customers anything, anytime, anywhere and expand Kroger’s reach and products to new geographies.
“The introduction of the first Customer Fulfillment Center marks a historic milestone for grocery retailers in the U.S.,” said Tim Steiner, Co-founder, and CEO of Ocado Group. “Since signing our partnership in 2018, Ocado and Kroger teams have worked in tight-knit collaboration to lay the foundation to advance their state-of-the-art fulfillment ecosystem across the country, supporting Kroger to reach customers anywhere with anything, at any time.
“This moment marks the next phase of our partnership, and it comes against the backdrop of soaring demand for online grocery options in the U.S. and worldwide. In the coming years, we will open more automated CFCs across a range of sizes with Kroger. We will also roll out components of our software solutions to stores in collaboration with Kroger’s existing seamless platform to support the fulfillment of curbside pickup orders. The breadth of this fulfillment ecosystem will be crucial in helping Kroger to continue to win in e-commerce across the U.S.”
Inside Kroger’s Customer Fulfillment Center
Catch a glimpse Kroger’s robotics-driven warehouse inaugurates a new era for supermarket giant’s online grocery business
Kroger Delivery Operations
Kroger Delivery is a vertically integrated network, enabling coverage of up to 90 miles from the hub location and significantly more territory when spoke locations are integrated. In these highly automated Customer Fulfillment Centers, over 1,000 bots whizz around giant 3D grids, orchestrated by proprietary air-traffic control systems in the unlicensed spectrum. The grid, known as The Hive, contains totes with products and ready-to-deliver customer orders.
As customers’ orders near their delivery times, the bots retrieve products from The Hive and are presented at pick stations for items to be sorted for delivery, a process governed by algorithms that ensure items are intelligently packed. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the lowest number of bags, reducing plastic use.
After being packed, orders are loaded into a temperature-controlled Kroger Delivery van, which can store up to 20 orders. Powerful machine learning algorithms dynamically optimize delivery routes, considering factors like road conditions and optimal fuel efficiency.
The Monroe CFC measures 375,000 square feet, carries thousands of popular grocery products, and represents one of the models engineered for the flexible Kroger Delivery network, which will also include smaller facilities as well as spoke locations. The CFC can fulfill thousands of orders per day and has the capability to support fulfillment of pickup orders.
The Groveland, FL CFC – a city west of Orlando and a new geography for Kroger – is scheduled to open to customers this spring. Kroger has also announced plans to open CFCs in Dallas, TX; Forest Park, GA (Atlanta); Frederick, MD; Phoenix, AZ; Pleasant Prairie, WI; and Romulus, MI (Detroit); and Pacific Northwest and West regions. As the network expands, Kroger will announce additional locations.
“We’re excited to be building a distribution network that creates a more equitable food system by providing greater accessibility to fresh food through the power of innovation,” said Gabriel Arreaga, Kroger’s senior vice president and chief supply chain officer. “Kroger Delivery’s network of Customer Fulfillment Centers will accelerate our e-commerce capabilities, focusing on more cost-effective supply chain and last-mile delivery solutions, seamless customer experiences, and new career opportunities.”
Kroger Delivery Associate Experience
Talent on Kroger’s supply chain, technology and digital, data and analytics, human resources, operations, and merchandising teams are partnering to design the Kroger Delivery network.
“Kroger is uniquely positioned to transform grocery e-commerce because of our innovative and knowledgeable delivery associates’ commitment to providing fresh food and delivering a rewarding customer experience,” continued McMullen. “Kroger Delivery brings together the expertise of our team and the efficiency of technology to create an in-stock, fresh and friendly experience for every customer, every time.”
At every CFC, on-site associates will support delivery operations and help process, package, and load orders. The Monroe CFC will employ nearly 400 associates, with roles focusing on customer service and engagement, engineering, operations, inventory and quality management, and transportation. To view available careers, visit Jobs.Kroger.com.
Kroger Delivery Customer Experience
“We more than doubled our e-commerce business last year and through our industry-leading seamless ecosystem, we continue to provide fresh food to our customers in a way that fits the structure of their day—whether it’s coming to our stores, picking it up, delivering to a convenient location, or directly shipping products to their homes,” said Yael Cosset, Kroger’s senior vice president and chief technology and digital officer. “The Kroger Delivery network leverages our proprietary set of assets and enables us to increase customer reach, concentrating on availability, proximity, and convenience for communities in both existing and new geographies like Florida.”
Starting this spring, the Monroe and Groveland CFCs will begin fulfilling orders for customers. After placing an order via Kroger.com or the Kroger app, customers in regions where there is a CFC will have their groceries delivered by a knowledgeable Kroger Delivery associate in a temperature-controlled van. The Kroger Delivery associate will deliver industry-leading customer service, including ensuring order freshness and satisfaction, managing order changes, and informing customers of their loyalty membership benefits like earned fuel points and digital coupon savings. The Kroger Delivery network will also continue to leverage stores and third-party partners to deliver certain orders.
As part of Kroger’s commitment to provide a differentiated and affordable grocery delivery experience for customers, Kroger Delivery will offer variable delivery fees that do not require customers to provide a tip and are influenced by a number of factors like a customer’s loyalty, delivery window popularity, route optimization as well as the lead time of an order. Variable delivery fees will allow Kroger Delivery to provide additional discounted options where it has the flexibility, creating a personalized offering and delivering value to customers in ways that matter to them.