Kroger Uses Partnerships, Digital Innovation to Transform Customer Experience

In a keynote session at Groceryshop in Las Vegas earlier this week, Yael Cosset, chief digital officer, Kroger, was interviewed by Heather Haddon, a reporter at The Wall Street Journal, about the different ways the grocery retailer is transforming its business, with a specific focus on growing its digital operations. Here are some of the highlights from that interview:

Brand Partnerships Strengthen Kroger

Kroger has been aggressive in seeking out partners to help fortify its business, including partnering with Alibaba to sell its products on the Tmall Global platform in China; partnering with British grocery delivery company Ocado to help automate its distribution centers in the U.S.; and acquired meal kit maker Home Chef, among other moves with an eye towards a digital future.

“We set out to redefine customer experience, and have been aggressive in finding potential partners to accelerate the customer journey,” Cosset said.

Cosset cited the Ocado deal as one example of how Kroger is working to accelerate the customer journey. Improving the efficiency of order fulfillment through science and innovation, and bringing that innovation to customers in a tangible way — the convenience of shopping for anything, anytime and anywhere, both in-store and online — is what will enable Kroger to sustain its position as the country's largest grocery retailer.

Regarding the Alibaba partnership, Cosset said Kroger is still in a learning stage. He noted that there's strong demand for natural and organic products in China, and Kroger is looking to meet that demand. Cosset said he is particularly excited to see what happens on Singles Day for Kroger's China sales.

Biggest Learning From Digital Initiatives

“You have to have a solid strategy to start, and then stick to it — technology, time, money investment,” Cosset advised. “It can be easy to get knocked off strategy.

Time and capital investment has to pay off to the customer and the company. For online, it's simplifying the experience.”

Cosset added that there's a constant dilemma of whether Kroger should be moving faster on certain technology innovations, or if it should pull back and let the customer get ahead of it.

“Do we accelerate or slow down? We have to be conscious of the fact that not all families are adopting technology at the same rate.”

How to Make Online Grocery Profitable

Cosset acknowledges this is a challenge, and not just for Kroger but the industry as a whole. At Kroger, the focus is efficiency and leveraging its 2,800 stores to make it a seamless, easy experience for the customer. And as Cosset noted, as you improve the relevance of the offering, it means higher frequency of visits — store and online.

“We’re seeing digital customers making more in-store visits,” said Cosset. “And not only higher frequency, but also higher incrementality. Shifting marketshare from competitors to Kroger. More engagement means more visits.

I'm most proud that we stayed true to our customer and our strategy. It’s paying off. Transformation makes it easy to get distracted. Customers are rewarding us with growth — frequency and incrementality.”

View of the Competition

“Kroger is well-positioned where it relates to our customers,” Cosset said. “They’re [customers] rewarding us with their loyalty. Don't get enamored with the technologies, capabilities — don’t let it become a distraction. That said, there are areas where we’re looking to innovate.

“Don’t be naïve to customer trends, but see how various retailers solve problems for their specific customers. If it’s relevant to our customers, then it’s our responsibility to bring that solution to our customers.”

Grocery Store of the Future

Cosset identified a couple of trends that he sees becoming more widespread in brick-and-mortar grocery stores as e-commerce gains further traction. First, he believes grocery stores will be a lot more experiential — e.g., food experiences such as cooking stations, wine bars, sit-down restaurants. Second, Cosset believes we will see a reallocation of the physical footprint, with more space dedicated for fulfillment of online orders as well as click-and-collect services.