Kroger and Ocado will open the first of up to 20 planed Customer Fulfilment Centres (CFC) in Monroe, Ohio.

Optimising Kroger’s density in the region

Earlier this year, the retailers formed a strategic partnership to optimise Ocado’s technology solutions for its ecommerce operations. The first CFC will be located north of Cincinnati, where Kroger is based. The retailer has significant density in this area, including in the Cincinnati, Indianapolis, Columbus and Louisville markets and has been the location for several of its pilots. It was one of the first areas to test its store-based grocery pickup programme and is near the Walgreens stores which are testing the pickup of Kroger online orders. Commenting on the plans, Rodney McMullen, Kroger’s chairman and CEO, stated,

“Kroger is joining with the best partners in the world to co-innovate and leverage technology to redefine the customer experience. We are incredibly excited to partner with Ocado to transform the industry and deliver on our Restock Kroger vision to serve America through food inspiration and uplift. This Kroger shed, powered by Ocado, will accelerate our ability to provide customers with anything, anytime and anywhere."

Ecommerce sales forecast to exceed $5bn

The CFC will be an automated warehouse facility with digital and robotic capabilities, enabling for next-generation automated storage and retrieval. Kroger is investing $55m to build the first facility, which will measure 335,000 sq ft and is expected to generate more than 410 new jobs. It is likely to come on-stream in 2020. Kroger is investing across the business to drive its ecommerce operations, which are expected to generate sales in excess of $5bn this year. It has launched several new initiatives and pilots this year including a next-day, nationwide delivery program, Kroger Ship, driverless deliveries in partnership with Nuro and voice-enabled ordering. It has also expanded its store pickup programme to over 1,600 locations and has partnered with Instacart to offer same-day delivery. These align with its ‘Available, Accessible, Relevant’ three-pillar strategy for the channel.

Enhancing ecommerce operations with technology

The US ecommerce channel is seeing significant investment currently as retailers look to grow their operations and enhance the efficiency of their operations. Recently, Walmart launched a store-based automated facility for grocery ecommerce in New Hampshire while Ahold Delhaize and Albertsons are partnering with Takeoff Technologies to develop hyperlocal, automated mini-fulfilment centres within their stores. By 2023, we forecast the channel will account for 3.5% of the market, growing to almost $60bn.

In a bid to reduce food waste, Kroger is to launch a private label brand that focuses on imperfect fruit and vegetables.

Pickuliar Picks: ‘imperfect, but perfectly delicious’

Kroger has announced plans to introduce Pickuliar Picks produce into its store in Q1 2019. The brand focuses on produce that meets all taste and safety standards but would previously have been rejected for aesthetic reasons – including size, colour or shape.

Combatting 6 billion pounds of unused produce a year

At an event hosted by the US Chamber of Conmerce Foundation, Kroger’s Senior Innovation Manager Nicole Davis announced the launch: "When produce comes in or has grown and comes off the farm, if it doesn't meet a specific spec or colour or shape or size, it gets rejected. But if 6 billion pounds of produce … are too tiny or too bumpy – or [it] has freckles on the outside but still tastes delicious and [is] perfectly food-safe – why can't we capture some of that and use it to feed people?"

Zero Hunger, Zero Waste

Pickuliar Picks forms part of Kroger’s Zero Hunger, Zero Waste goals, which include:

• Advocating policy solutions to address hunger and divert food waste from landfills
• Achieving existing Zero Waste goals by 2020

Completely eliminating food waste by 2025

Following last month's announcement that it would be testing driverless ecommerce deliveries, Kroger has launched the first pilot at a store in Scottsdale, Arizona.

Flat fee charge of $5.95

Kroger announced in July that it would partner with Nuro, a company that makes fully unmanned vehicles, to trial the delivery initiative. The pilot has launched at single location of Fry’s Food Stores in Scottsdale, Arizona. Customers shop via the retailer’s website or app, scheduling orders for same-day or next-day delivery by Nuro’s fleet of self-driving vehicles. The retailer charges a flat fee of $5.95, with no minimum order.

Source: Kroger

Potential to improve cost efficiencies

Nuro will start the pilot using its self-driving Toyota Prius fleet before introducing its custom R1 driverless vehicle later in the year. The fully electric vehicles have locking compartments and shoppers will receive a code to unlock it when they place their order. Each vehicle weighs around 1,500 pounds and have cameras and sensors to allow them to drive autonomously. With last mile delivery typically the highest cost element within online grocery fulfilment, improving cost efficiencies in this area could provide significant operational savings for Kroger, helping it to scale its model.

Testing consumer acceptance of self-driving vehicles

The pilot aims to offer more customers “the convenience of affordable grocery delivery,” according to Kroger’s Chief Digital Officer, Yael Cosset. Customer acceptance of self-driving vehicles will be a key focus for the test. Kroger will not be alone in testing self-driving vehicles in Arizona. While Uber recently ended its test in the market to focus on California, Alphabet-owned Waymo has been testing in Phoenix for over a year. Recently it announced plans to partner with five companies in the city, including Walmart. Under this pilot, Waymo vehicles will transport the rider to and from a Walmart store to collect their groceries.

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