Kroger Woos Click-and-Mortar™ Shoppers Amid Digital Transformation

As Kroger grows its digital engagement, the grocery giant is setting its sights on omnichannel shoppers to boost spending.

On a call with analysts Thursday (March 7) discussing the United States’ leading pure-play grocer’s fourth-quarter and full-year fiscal 2023 financial results, CEO Rodney McMullen spoke to the opportunity that these digitally and physically engaged customers present.

“Customers value the ability to shop on their own terms with zero compromises, and we are increasing the number of omnichannel households in our ecosystem,” McMullen said. “Customers who shop both in store and online spend three to four times more compared to in-store only shoppers.”

The PYMNTS Intelligence study “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar Shopper and What It Means for Merchants,” commissioned by Visa Acceptance Solutions and drawing from a survey of nearly 14,000 consumers across seven countries, finds that 39% of consumers are now Click-and-Mortar shoppers, engaging across digital and physical channels.

Drilling down into this figure, 25% of consumers are digitally assisted in-store shoppers, using technology to improve their brick-and-mortar experience, and 14% are pickup shoppers, opting to buy online and collect their items at the store.

Given that the vast majority — 87%, per PYMNTS Intelligence research — of grocery transactions still occur in physical stores, much of this push centers on driving digital engagement.

Kroger reported significant growth in its digital sales, exceeding $12 billion annually, with eCommerce sales rising 10% year over year in the quarter. Plus, the grocer saw a 24% increase in delivery sales year over year in the quarter, driven by initiatives such as its Kroger Boost membership offering and its investments in first-party fulfillment through its automated distribution centers. This business is becoming more profitable.

“Digital is an important growth accelerator in our business, and in 2024 we expect to deliver another year of double-digit sales growth as we grow volume, particularly in our Kroger Delivery network,” McMullen said. “We expect our unit economics to improve and become a tailwind to our long-term financial model. We have a clear path to improving our digital margins, closing the gap with our traditional brick and mortar business over time.”

Additionally, digital coupons are driving Click-and-Mortar engagement. Over the course of the year, the grocer delivered over 4 billion coupons, up by 1 billion from 2022, as the company’s loyalty programs contributes to increasing customer engagement and sales.

“Moving promotions online allowed Kroger to take personalization to a new level, targeting customers more efficiently and increasing the breadth and depth of promotions during the fourth quarter,” McMullen said. “This led to an 18% increase in digitally engaged households.”

He noted that this growth is not only valuable because of the higher spend of these households but also because these shoppers contribute more data that the grocer can monetize through its retail media business.

Digital coupons are a high priority for U.S. shoppers, per the Global Digital Shopping Index study, which found that 75% of consumers in the country expect such deals to available for both in-store and online shopping.

Kroger’s efforts to personalize its coupons with customized offers can also go a long way, given the strong demand for these kinds of targeted deals. The report “Personalized Offers Are Powerful — But Too Often Off-Base,” a PYMNTS Intelligence study created in collaboration with AWS, finds that 71% of consumers received personalized offers and are interested in them, and another 12% did not receive personalized offers, but are interested in them.

Kroger’s focus on engaging both digitally and physically through its Click-and-Mortar approach is proving to be a significant driver of growth. As the company’s omnichannel initiatives continue to progress and resonate with consumers, it stands poised to further strengthen its position as a leader in the grocery industry.