Kroger names the location of its first ‘high-tech’ fulfillment center
The nation’s largest supermarket company has made its first move to leverage its partnership with U.K.-based online grocery retailer Ocado — one that may give it an edge in the online grocery delivery wars.
Kroger Co. on Monday announced that it will open its first customer fulfillment center (CFC) in Monroe, Ohio. The warehouse, which will be an automated facility that will leverage digital and robotic capabilities, will be the first project that it is collaborating on with Ocado. The two companies forged an exclusive partnership in May, a deal that will enable Kroger to leverage Ocado’s smart platform that supports online ordering, automated fulfillment and home delivery capabilities.
Kroger is investing $55 million to build the first facility (which it refers to as a “shed”). The building will span 335,000 sq. ft., and is expected to generate more than 410 new jobs, according to the grocer.
“Ocado is a U.K.-based company with global ties and advanced digital and robotic capabilities. Working together, we will develop the strongest possible supply network to support a seamless customer experience that can serve every person in America,” said Alex Tosolini, Kroger’s senior VP of new business development. “It’s all about building a seamless supply chain to provide our customers with an amazing shopping experience.”
This is only the first step in the partners’ plan. Looking ahead, the automated facility will be replicated in other cities across America. Kroger and Ocado plan to open 20 CFCs, according to Kroger.
“We are delighted to be supporting Kroger in its efforts to transform the service and value it brings to U.S. customers,” said Luke Jensen, CEO of Ocado Solutions. “Today’s announcement of the first CFC is an important first step to making that happen. It’s all the more exciting that this CFC will serve Kroger’s hometown of Cincinnati.”
Prior to joining forces in May, Kroger already had approximately a 1% stake in Ocado. Through the new deal, Kroger increased its existing investment by 5% in a subscription rights agreement, bringing its total investment to more than 6%.
Kroger also expects the partnership to give the company an edge 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.
In June, Target expanded its same-day shipping and pickup services, Shipt and DriveUp, across stores in the Midwest and Southeast. This put the discounter more than halfway toward its goal of making these services available coast-to-coast in time for the holidays. Additionally, Target offers next-day delivery service of household essentials through its Target Restock program nationwide. The service is free for all Target REDcard holders, and $2.99 for all other orders (down from $4.99) — with no membership fee.
Meanwhile, Walmart now offers grocery delivery in 50 metro areas across the United States. The company is halfway to its goal of offering the service to 100 metro areas, which equates to 40% of U.S. households.
TechBytes: Four last-minute Black Friday prep tips
Every minute counts during the super-critical Black Friday shopping weekend, especially for retailers with digital channels.
Yet, some retailers are still scrambling to get their IT systems ready — even at this final hour. Every application that goes down during Black Friday weekend costs retailers an average of $38,855 per hour. Worse, the approximate time to resolve these problems for retail companies is five hours, according to new data from AppDynamics.
While making big sweeping changes isn’t possible at this stage of the game, retailers still must assess what’s in place and ensure that digital solutions and supporting services will be reliable and available this Black Friday weekend.
Here are a few strategies that can help:
Conduct large volume load tests. The best way to stay on top of potential glitches is to constantly test digital systems. While retailers conduct volume tests all year long, they should be conducting large load tests to ensure that networks can handle the increased volume expected this weekend.
Even just testing 20% beyond the highest volume online sites managed last year — and in short periods of time — will help administrators identify potential failure points, and understand the flexibility and scale of systems. It will also keep IT managers abreast of failover processes, as well as forecast the time and effort needed to recover from potential crashes.
Leverage application monitoring solutions. Knowing how well the business is performing “is the most important tool retailers can implement ahead of busy shopping periods,” according to Gregg Ostrowski, regional chief technology officer at AppDynamics.
This software not only ensures that digital applications stay online under heavy traffic, they also offer clear visibility into the entire customer journey in real-time from the moment customers open the application to the moment they check out. It is a conduit for IT and leadership teams to connect the performance of the application to the performance of the overall business, allowing them to resolve issues in real time before the customer, and in turn the business, is ever negatively impacted.
Make inventory visible across all channels. Consumers want more options to receive their merchandise, an issue that makes buy online, pick-up in-store (BOPIS) a pre-requisite service for all omnichannel retailers this year. However, the success of BOPIS lives and dies with inventory visibility.
A fully transparent and integrated system alleviates employee and customer frustration caused by out of stock or sold out merchandise. In addition to frustrating customers, unavailable merchandise is the quickest way to drive holiday shoppers into the arms of competitors.
Step up BOPIS order and staff training. According to FieldAgent’s “An Old-Fashioned, Omnichannel Christmas” study, 50% of customers plan to utilize BOPIS this holiday season. This means the department will be hopping — and there will be a constant rush of orders for store associates to manage.
Customers expect in-store pick-up to be a frictionless experience, especially during the holidays, so now is the time to review, and retrain staff, if necessary, on how orders are organized.
“During the hustle and bustle of the holiday season, any time a customer spends waiting is too long,” said Penny Lasater, senior product manager, automate product solutions, Package Concierge. “Quick access by the store associate in retrieving the order makes a difference.”
These perks will help retailers win Black Friday weekend shoppers
Incentives from flexible payment options to free shipping will make retailers more attractive to holiday shoppers — especially Millennials.
This is according to new data from installment payment solution provider Splitit, which revealed that retailers can draw consumers to their sites and away from industry behemoths like Amazon using a variety of incentives such as the ability to try out an item before paying for it (50%). Additionally, nearly 46% of consumers said that free shipping would encourage them to spend more money.
According to the study, 33% of shoppers are highly concerned about outspending their budgets (33%), and paying high shipping fees (23%). One way to solve both issues is to offer alternative payment options, such as deferred payment plans.
This option is so attractive to consumers that 67% of shoppers said they would be more likely to make bigger purchases, such as large electronics or furniture, if they are able to pay in monthly installments. Meanwhile, 33% of shoppers said they are more likely to make a purchase from a specific retailer if they offer an installment payment option at checkout.
These options could also help customers stay within their holiday budgets this year, especially Millennials. Nearly 40% of Millennials are most concerned about going over their budgets when shopping online this holiday season. Thirty five percent said they plan to spend less than $100 on holiday shopping, a stark contrast to older shoppers.
According to data, over 45% of millennial shoppers would be more likely to buy large electronics if offered an installment payment option, and that 20% of those under the age of 25 would be more likely to purchase clothing or shoes if installment payments were an option.
With more consumers planning to shop online on Black Friday (38%) than either Cyber Monday (32%) or Christmas (31%), deferred payments could be a key factor that retailers need to attract younger customers. Alternative payment options would make products more affordable and payment structures more flexible via, according to the study.
“With so much revenue at stake this holiday season, retailers must find ways to stand out and attract customers who will otherwise be shopping on Amazon,” said Gil Don, CEO and Co-Founder of Splitit. “They cannot afford to sit back and stick to their usual strategies during these highly competitive shopping periods. Online merchants need to offer incentives that recognize customers’ unique needs, no matter the holiday, and lend them flexibility without increasing their debt.”