Insights: Kroger’s new partnership allows it to ‘leapfrog’ Walmart and Amazon
The recently announced partnership with Kroger Co. and British online grocer Ocado illustrates a shift in online grocery retailing for both players. And it will give Kroger a head-start in realizing true profitability in online grocery in the United States.
Since 2014, Ocado has been exploring selling its technology and logistics expertise in a service model with an external retailer. The move now seems to have just hit its stride as it has partnered with Sobey, Casino and now Kroger in recent months.
The exclusivity of Kroger’s offer is unique because it keeps that technology out of competitors’ hands trying to get up to speed in the online grocery landscape in the U.S. This is a big win for Ocado — both because of the increased revenue but also the expanded international exposure.
This model — which is a pure-play retailer using its platform as service support — was very successful for Amazon a decade ago. And it could potentially be a similar game-changer for Kroger.
Ocado’s current logistics and technical expertise in supporting online grocery fulfillment in Europe allows Kroger to potentially leapfrog both Walmart and Amazon in this space. Not only does the knowledge make Kroger better positioned to succeed in e-commerce, but Ocado has also illustrated the ability to operate profitably in the e-commerce space, something yet to be realized in the U.S. across any major grocery retailer.
Kroger brings on big partner to fuel online grocery delivery
The nation’s largest supermarket company has entered into a deal that may give it an edge in the online grocery delivery wars.
Kroger Co. is extending its partnership with U.K.-based online grocery retailer Ocado, a company that has a reputation for fast deliveries, innovation, and high-quality customer service. Kroger will be Ocado’s exclusive partner in the United States, a move that will enable the grocer to leverage Ocado’s smart platform, which supports online ordering, automated fulfillment and home delivery capabilities.
Specifically, Kroger will leverage Ocado’s digital and robotics capabilities to automate and better manage warehouse operations, logistics and delivery route planning. The program coincides with Kroger’s Restock program, which focuses on the company’s accelerated commitment to digital and e-commerce efforts.
This year, Kroger and Ocado plan to identify the first three sites where it will develop new, automated warehouses. The partners will identify a total of 20 sites over the first three years of the agreement.
“We are actively creating a seamless digital experience for our customers,” said Rodney McMullen, Kroger’s chairman and CEO. “Our partnership with Ocado will speed up our efforts to redefine the food and grocery customer experience – creating value for customers and shareholders, alike.”
The deal augments Kroger’s existing relationship with the company. The grocer already had approximately a 1% stake in Ocado. Through the new deal, Kroger will increase its existing investment by 5% in a subscription rights agreement, bringing its total investment to more than 6%.
“The opportunity to partner with Kroger to transform the way in which U.S. customers buy grocery represents a huge opportunity to redefine the grocery experience of Kroger’s customers and create value for the stakeholders of both Kroger and Ocado,” said Tim Steiner, CEO of Ocado Group. “As we work through the terms of the services agreement with Kroger in the coming months, we will be preparing the business for a transformative relationship which will reshape the food retailing industry in the U.S. in the years to come.”
The deal marked the fourth such agreement that Ocado has struck with supermarket operators worldwide in just six months. These include Sweden’s ICA, Canada’s Sobey’s and French supermarket operator Casino, according to CNBC.
The partnership also gives Kroger more leverage to compete as the grocery war continues to heat up. For example, Amazon is expanding its breadth in the grocery segment through its $13.7 billion purchase of Whole Foods Markets in August 2017.
On Wednesday, Target announced that it is rolling out its next-day delivery service of household essentials, Target Restock, nationwide. It’s also reducing the delivery cost, with the service now free for all Target REDcard holders, and $2.99 for all other orders (down from $4.99) — with no membership fee.
Walmart is also testing grocery delivery. The discounter’s goal is to offer the service across 800 stores by the end of the year, a move that will serve more than 40% of U.S. households. The program, which is currently available in six markets, will grow to serve more than 100 metro areas across the country.
Report: Amazon has visited all contenders for new HQ
Amazon is getting closer to naming the hosting city of its new corporate headquarters, dubbed HQ2.
The online giant visited all 20 finalist locations, a move that indicates the company is closing in on the site of its new headquarters, reported NBC News. There is no indication if list has been narrowed down, or if there is a leading contender, according to the report.
The final 20 contenders are Toronto, Canada; Columbus, Ohio; Indianapolis; Chicago; Denver; Nashville; Los Angeles; Dallas and Austin, Texas; Boston; New York City; Newark, New Jersey; Pittsburgh and Philadelphia; Montgomery County in Maryland; Washington, D.C.; Raleigh, North Carolina; Northern Virginia; Atlanta, and Miami, Florida.
The report noted that several cities in the top 20 have experienced an uptick in interest from other companies by just making it onto Amazon’s list.
To read more, click here.