Grocery eCommerce: Kroger meets Ocado

Grocery eCommerce: Kroger meets Ocado

In 2018, the U.S. grocery market was worth $632 billion. In 2019, it went up to $700 billion.  And those sales are forecasted to double over the next four years.

While all of these statistics are impressive, perhaps the most surprising fact is that the top 7 U.S. grocers account for 81% of 2018 online sales. That’s right – online grocery shopping is not just popular – it’s thriving. By 2020, 70% of U.S. shoppers could be buying groceries online.[i]

While the ability for people to shop online is definitely not new, it’s quite a surprise to many that grocery shopping online has become so mainstream. But it makes perfect sense. The biggest global names in retail are all masters at ecommerce. It could even be argued that one of them, Amazon, is the reason that all successful retailers must have a large online presence. And the others have only survived because they, too, have become tech-savvy.

Most major U.S. grocery stores have the ability to shop online and pick up in store or have groceries delivered. This type of ecommerce is very successful. But it comes with a few inconveniences – food can be out of stock, and the brands you prefer may not be available.

In May of 2018, Kroger announced a partnership with a British supermarket, Ocado, to build a better omni channel shopping experience for Kroger in the U.S.[ii] While not groundbreaking in itself (no pun intended), what is notable is why Ocado is such a unique company – it is 100% online. That’s right – Ocado doesn’t have a single physical store anywhere in the world. And its success is clear – in 2019, Ocado’s revenue was £1.75 billion ($2.1 billion USD).[iii] Now, with Ocado’s help, Kroger hopes to have that same success in growing its business through ecommerce.

Together, the two companies will build 20 e-commerce facilities using Ocado’s Smart Platform, which offers capabilities in online ordering, automated fulfillment, and home delivery.

“It’s an end-to-end solution, rather than solving a particular problem along the spectrum of what you need to be able to do [online grocery],” says Mike Schlotman, EVP & CFO of Kroger. “It’s a proven technology in the U.K., and we’re very comfortable that we can export that technology to the U.S.”

To date, Kroger and Ocado have begun building five warehouses; they announced the location their sixth Customer Fulfillment Center (CFC) in November of 2019. Each of the 300-400k sq ft warehouses is being strategically placed to serve major U.S. cities and suburbs with full Kroger stock. [iv]



Will this be a game-changer for Kroger?

Most definitely. Ocado already has a 15% share of the United Kingdom’s online grocery market[vi], and Kroger’s online sales grew 58% in 2018 alone.[vii] If Kroger take full advantage of Ocado’s expertise in ecommerce, there is no way the two won’t be successful.

When Rogers heard about this partnership and the innovation it could bring to the industry, we were thrilled! We’re proud of the work we’ve done for major retailers all over the country, helping them break down barriers and find new ways to be innovative and successful. And we’re rooting for both Ocado and Kroger. We are continuing to grow our relationships in the grocery sector as well as efforts centered around last mile, fulfillment and distribution centers. Looking at our recent work and relationships with warehouse construction, remodeling, and maintenance, we see a huge opportunity for growth for other major grocers, and we have the power to help them get the job done!