In retail, as a general rule, big names attract massive headlines. Google any of the top ten retailers in the U.S, and you’ll pull up a slew of headlines. It’s not surprising. Big, just generally, gets the media’s attention.
Size attracting interest is expected; size not attracting interest, on the other hand, is a bit unexpected.
Which leads to the peculiar case of Kroger, the country’s largest supermarket chain by revenue, second-largest retailer in the U.S. and fifth-largest retailer in the world.
It has somehow managed to fly a bit below the radar in the era of connected commerce where everyone seems to be watching everything all of the time.
The 132-year-old supermarket grocery chain is massive, but it attracts very little national interest because it’s not a national retailer. It’s a massive regional chain.
But Kroger — despite its age — has always been something of a spry firm.
It was was the first grocery in the 1970s to use electronic scanners at checkout, back when they were a younger 90-year old chain.
And these days — given its massive footprint, impressive track record of success and quietly ambitious digital plans — Kroger probably deserves a serious second look as a potential sleeping giant as mobile payments is just starting to awaken.
Hard To Argue With The Numbers
Kroger is probably much bigger than most consumers are aware of, given the variety of regional chain names it operates. Depending on where one is shopping in the 35 states Kroger operates in, a consumer might be shopping in a Dillons, a Fry’s or a Harris Teeter (among many, many others). Despite the name, all of those stores belong to The Kroger Co.
All in, Kroger runs 2,620 supermarkets and multi-department stores, as well as 326 fine jewelry stores, 1,360 supermarket fuel centers and 37 food processing plants. It did over $100 billion in sales in 2014 and employs about 400,000 people.
A statement confirmed by Kroger’s recently released Q3 2015 earnings, which clocked in better than analysts expected. Kroger reported its epic forty-eighth consecutive quarter of positive identical supermarket sales growth, at 5.4 percent. That represents a winning streak of 12 years — the longest in retail by quite a long shot.
“We are very pleased with our 5.4 percent identical supermarket sales growth in the third quarter. It reflects the underlying strength of our core business and our associates’ growing connection with customers,” EVP and CFO Mike Schlotman said in a call with investors after the Q3 results were announced.
Walmart, by comparison, has had five straight quarters of growth, though in Q3 it saw its sales up only 1.5 percent.
Kroger has also shown great recent acuity in growing its consumer base and capturing new customer profiles. The store’s organic brand — Simple Truth — released to rival its premium competitors over at Whole Foods, has seen its sales grow to over $1 billion annually since its debut two years ago.
And while 48 consecutive quarters of growth is amazing and going from zero to over a billion is certainly eye-catching, it is not exactly shocking, because it indicates that Kroger is really good at selling groceries and leveraging its massive size to offer better prices.
But then 132 years of continuous existence would also indicate that it is good at these things.
And yet, there is more to this picture, because what is interesting about Kroger is not only what it is good at but also what it is getting good at and how that could change the mobile payments picture.
Kroger’s eCommerce Push
“We are highly focused on our omnichannel offering,” spokesman Keith Dailey noted. “And we take a very broad view of that and figuring out how we can interact with our customers in a way that they set the rules across our digital offerings.”
And that innovation can be a tall order, Dailey noted, as, depending on the offering, it may or may not be visible to the consumer. On the “visible innovation” spectrum, there are Kroger’s recent and highly concerted efforts to push into eCommerce. That push is both through internal efforts, like the development of the online ordering platform ClickList, and through acquisitions, like the 2014 grab of rival Harris Teeter. That acquisition not only brought along 200 new retail locations, it also brought HT’s proprietary online ordering platform, Express Lane. Using the system, which is still called Express Lane at Harris Teeter locations, customers can pay a $5 fee and pick up their entire grocery order curbside.
Some of the digital upgrades are invisible to consumers apart from their salutary effects.
In 2012, Kroger brought in the QueVision platform, which essentially counts every customer as they enter stores and then tracks movement patterns to feed store managers real-time data. As of the writing of this article, this is both the first and only use of this tech in U.S. retail.
The primary use of the technology is to predict line patterns and prevent pile-ups at the POS before they happen and enrage consumers. It also provides longitudinal data so managers can plan for days, weeks and months around traffic patterns.
The most notable effect? Wait times in line fell from four minutes to about 30 seconds, and consumers reported liking their cashiers better.
Kroger is also working to beef up its digital relationship with its customers, with hopes to add to the 17 million customers that already have digital accounts with Kroger and the 9 million users of its mobile app.
And within that app is perhaps one of Kroger’s more audacious moves to leverage mobile: making it possible for consumers to scan and bag items while they shop with their phone’s camera.
Instead of checking out at a check stand, customers instead finish off the sale by scanning a specialized barcode at the front of the store and going on their way.
“Customers tell us they love scanning and bagging and seeing their grocery bill while they shop,” said Dailey. “And they really love not waiting in line, so we are expanding the pilot to another 15 stores, as we try to figure out the best way to leverage this program.”
Dailey did not have any comment as to whether the program was going national.
The Fog Of Fragmentation
Kroger is many stores, and its eCommerce products and mobile services are rolling out gradually across them. And this sort of slow burn for innovations is very much Kroger’s style, testing ideas in the provinces and scaling them up across the chain as they take off.
Which may start to explain why Kroger attracts comparatively little national interest; its efforts are often so regional that they aren’t notable.
But Kroger, with 48 consecutive quarters of sales growth over 5 percent, clearly knows what it is doing when it comes to attracting customer dollars.
And the big advantage of no big national rollouts is no big national failures. If its reimagining of the POS onto consumers’ phones falls flat on its face, it means some bad press in Cincinnati followed by moving on to something else.
But if it catches on fire in Cincinnati and a few other large and medium markets, well, Kroger already has 17 million digital accounts, 9 million app users, 2000+ locations and a lot of customers it could potentially convert to the joys of the line-free grocery store.