Kroger's Decline

Early in 2019, Kroger’s was listed by a top retail research firm as the fourth-largest grocer in the world. Yet, the year that began with such a proud status, has seen the brand endure a difficult period in the US. The company announced plans to lay off hundreds of employees with concerns that the turnaround plan presented earlier in the year may not drive the needed changes. 

Looking at Kroger visits nationwide from September 2017 through September 2019 only reinforces the notion. Comparing visits to the baseline for the period shows significant dips throughout 2019. Yet, there are promising signs. Kroger visits in August 2019 were 2.2% above the baseline for the period, beating out August 2018’s 0.4%. 

Interestingly, digging into specific locations shows a key element that could potentially help the brand recover - location optimization. We analyzed several different locations with the same key competitor and found that brand dominance was evenly split. The key differentiator? How close the Kroger location was to its target audience. When Kroger saw an advantage in the number of visitors that came within a tighter True Trade Area, it had more overall visits. When this advantage was flipped, the competitor had a higher rate.

One example below shows a scenario in Ohio where Kroger sees just 6.1% more traffic than a key competitor over the measured period. They see similar breakdowns of Household Income and Family Size among other key metrics but see the biggest difference in distance traveled. In this case over 52.7% of visitors live within 2 miles of the Kroger location, whereas only 38.3% do for the competitor. And the difference becomes more pronounced in visit leads as the travel distance comparison becomes more pronounced.

Conclusion

As with many brands that go through a difficult period, the image created can sometimes make it seem like there is no way out. Yet, the data strongly indicates that the Kroger brand still resonates powerfully and that a return to glory is by no means off the table. Instead, there are strong indications that the key to its future success will rest on its ability to optimize its retail footprint. Identifying the right locations to expand and then focusing on an allocation that emphasizes finding these right traits may be the key to the turnaround.