As the operator of several supermarket chains nationwide, Kroger is a household name in grocery. And with significant investment in omnichannel strategy, the Kroger brand has become a leader in online grocery as well. As Kroger rolled out more delivery fulfillment centers and a new loyalty program, we took a closer look at the brand’s two largest grocery chains – Kroger and Ralphs – and how these omnichannel initiatives impact the brand’s brick-and-mortar foot traffic.
Kroger’s Omnichannel Evolution
Early in 2022, the grocery sector’s offline visit growth slowed as inflation and high gas prices strained many consumers’ budgets. Yet foot traffic data for Kroger and Ralphs shows visits in recent months approaching or exceeding pre-pandemic levels.
Kroger’s omnichannel strategy is at the core of its visit growth. The brand's e-commerce customers doubled between 2019 and 2020, and according to CEO Rodney McMullen, 90% of delivery and pickup customers also shop in-store. This demonstrates how Kroger’s digital engagement can drive brick-and-mortar visits.
In July 2022, Kroger furthered its omnichannel strategy with the nationwide launch of the Boost loyalty program, which offers unlimited free delivery and other benefits both in-store and online. In the same month, year-over-three-year (Yo3Y) visits were down only 1.3% for the Kroger chain and up 3.6% for Ralphs, the smallest Yo3Y visit gap and largest Yo3Y visit increase since March, respectively. The data suggests that the Boost loyalty program is not cannibalizing Kroger’s in-store visits.
Yo3Y visits in August 2022 dipped slightly to -4.1% for the Kroger banner as the brand shuttered some locations – but visits remained positive for Ralphs, with August foot traffic up 3.4% relative to August 2019, indicating that the digital push is not at the expense of the company’s in-store performance.
Comparisons to Strong 2021
2021 was a year of exceptionally strong performance for the brand. So while foot traffic data shows a year-over-year (YoY) decline, the numbers likely reflect that comparison rather than any prevailing headwinds.
Customer Fulfillment Centers: Grocery Beyond the Store
Perhaps Kroger’s most significant investment in digital growth has come in the form of its proprietary, highly-automated Customer Fulfillment Centers (CFCs) which allow Kroger to fulfill online orders in regions without brick-and-mortar stores.
Kroger currently operates six fulfillment centers with more than double that number slated for the near future. The CFCs work as hubs for smaller spoke facilities that extend delivery reach. With the help of this network, Kroger added half a million digitally engaged households in Q1 2022.
The first CFCs opened in Ohio and Florida in April and June of 2021, respectively. We compared visits to the two centers to a June 2021 visit baseline to see how employee foot traffic is ramping up as demand for online orders grows.
Monthly visits to the CFCs grew 151.0% for the Ohio facility and 220.8% for the Florida facility between June 2021 and August 2022. The Ohio CFC had an uptick in foot traffic in May 2022 that corresponded to the opening of a spoke facility in Central Ohio, and foot traffic to the Florida CFC spiked in June 2022 the month a spoke facility opened in Miami. The Florida CFC’s visit growth in August 2022 is likely the result of continued online delivery adoption in the large Miami market. Both CFCs had an increase in employee foot traffic as they worked to support the demand for online orders fulfilled by the new spoke facilities.
With the addition of the Boost loyalty program, customers can take full advantage of the delivery network Kroger is building. As Kroger plans to double its digital business by 2023, it’s clear that CFCs and the delivery fulfillment network will play a large part in reaching that goal.
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