Kroger redefines the grocery experience with Microsoft

Michele Caprini
07 Feb 2019

After 136 years in the business, Kroger is America’s largest supermarket chain and the third-largest retailer in the world.

Recently it has become a shining example of restructuring by combining the traditional chain of brick-and-mortar stores with online retail increasingly more effectively. This successful restructuring is epitomised by investments in the ClickList pickup service, a partnership with the Instacart, the leader in grocery delivery services, and by a partnership with Ocado for an automated warehouses project.

So the latest acceleration announced a few days ago should come as no surprise. Kroger has teamed up with Microsoft on a project for a connected store experience that differs greatly from the “Go” stores offered by its competitor Amazon.

Launching a counteroffensive against Amazon is the basis for the Kroger-Microsoft partnership. Amazon currently captures half of what is spent online, but not in the grocery sector which wants traditional brick-and-mortar stores to still be the consumers’ shopping destination of choice. By acquiring Whole Foods Market, Jeff Bezos planned to recoup Amazon’s position in one of its weak areas, and this was what caused Kroger’s stock to plunge in 2017.


Pilot stores

The two pilot stores in Monroe, Ohio, and Redmond, Washington, could be the starting point for a cloud-based system for the chain’s 2,780 supermarkets. They have digital shelves with displays that are updated in real-time to indicate prices, product information and current promotions. So no more old or illegible paper tags. Plus, personalised offers and advertisements can be presented based on customer profiles.

The Kroger app guides customers around the store to the items on their shopping list. As they approach the shelf, it displays a personalised icon under the product they are shopping for. Video analytics systems light up to alert staff when items are low on stock, and Kroger “smart shelves” can also help employees when picking to fulfil curbside pickup orders.

According to data provided by the retailer, 90% of their consumer target is near a location served by supermarkets which means they can benefit from the pickup services and the delivery of online orders.

Strategic objectives

The success of these pilot stores will determine when and how the programme is rolled out to other stores.

L’infrastruttura di supporto è il cloud Azure di Microsoft. Per quest’ultima il progetto ha un valore strategico, dato dal recupero del ritardo rispetto alle tecnologie di Amazon.

For Kroger this could be the stepping stone to a new role – selling technology to other retailers. The profit margins offered by this new business model would definitely be higher than with the traditional form of grocery retailing.