Kroger will open its second Customer Fulfilment Centre (CFC), as part of its strategic partnership with UK-based Ocado, in Groveland, Lake County, Florida.
Entering the market with an ecommerce-only model
Kroger announced in February that one of its first three CFCs would be in Florida, with other sites being developed in Ohio and the Mid-Atlantic region. The decision to site one of the CFCs in Florida is particularly interesting because the retailer does not currently operate any stores in the state. However, it does have a strategic relationship with Lucky’s Market which has been expanding at pace in the region.
Will determine feasibility of operating in the north east
Last year, Kroger formed a strategic partnership with Ocado to develop up to 20 CFCs. These will support the growth of its grocery ecommerce business which currently includes store pickup, same-day delivery in partnership with Instacart and a two-day consumables shipping programme, Kroger Ship. The 375,000 sq ft site in Florida is expected to become operational in 2021. The success of an ecommerce-only model in the state will determine where else the retailer could penetrate without opening any physical stores. The high density, yet competitive, north east is likely to be within the retailer’s sights.
Different models under development
Kroger is adopting a relatively unique approach to ecommerce fulfilment in the US through its Ocado partnership. Several other models are being piloted as retailers seek to build a cost optimal solution. Walmart, Ahold Delhaize and Albertsons are piloting hyper-local robotic fulfilment while most US grocers are partnering with third-party crowd-sourced delivery platforms for same-day delivery. Instacart, the leading operator in this space, will start to roll-out a store pickup model this year. With the channel forecast to hit $60bn by 2023, building a profitable and scalable model is critical for retailers aiming to maximise the sales growth opportunity.