Kroger taps the brakes on automated fulfillment center rollout

Kroger taps the brakes on automated fulfillment center rollout

Kroger, one of the largest supermarket chains in the United States, is proceeding with caution in its ambitious automated grocery fulfillment project. The company, which partnered with UK-based robotics firm Ocado, is holding off on developing new facilities until it’s confident that its existing sites are operating efficiently.

Kroger Chairman and CEO, Rodney McMullen, highlighted the progress made in the growth of their e-commerce infrastructure during an earnings call. He mentioned that their focus is primarily on optimizing the performance of Ocado sites that are already operational, including Customer Fulfillment Centers (CFCs) and connected facilities known as spokes.

“We’re making progress, but we wouldn’t be to the point where we would start focusing on additional sheds until we make sure that we have a clear path on the ones we have,” stated McMullen.

Kroger’s partnership with Ocado, initiated in 2018, aimed to build automated order fulfillment centers. The first CFC opened in Ohio in March 2021, and since then, Kroger has introduced seven more, with the most recent one in Frederick, Maryland, launching in June.

In late July, Kroger unveiled a spoke facility in Independence, Kentucky, which complements its Monroe CFC. This facility network is at the core of Kroger’s strategy to strengthen its e-commerce capabilities.

This cautious approach aligns with the evolving landscape of online grocery sales. While they surged during the peak of the COVID-19 pandemic, recent data reveals a 7% decline in grocery e-commerce sales in July. Kroger’s digital sales, however, increased by 12% year-over-year during the second quarter.

Kroger’s CFO, Gary Millerchip, highlighted the growth in the pickup and delivery segments, stating that the company was in the process of enhancing the efficiency of its CFCs based on learnings from its Monroe center.

McMullen emphasized that Kroger had made significant strides in its pickup business during the second quarter, with a clear path to sustainable profitability. The company has been implementing hands-free technology and deploying automated pods and lockers to boost productivity in its e-commerce operations.

Kroger’s cautious approach to expanding its automated fulfillment centers reflects the changing dynamics of the grocery e-commerce market, where a focus on operational efficiency and sustainability is paramount.

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