How Kroger Plans to Increase Omnichannel Ecosystem

The Kroger Co. believes a strong omnichannel experience is key to serving customers in the future. During the company’s fourth-quarter and fiscal year earnings call, Chairman and CEO Rodney McMullen mentioned Kroger’s most profitable customers shop both in store and online. As a result, the company will continue to invest in digital and in new stores – both integral to its sales growth strategy.

“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,” said McMullen. “Customers who shop both in-store and online spend three to four times more compared to in-store-only shoppers. Personalization is also driving digital engagement and remains one of the primary ways we deliver value for customers beyond low prices.” 

In 2023, Kroger increased digitally engaged households by 18%. Digitally engaged households are extremely valuable to Kroger’s long-term growth model, as they spend more and help power its alternative-profit businesses like Kroger Precision Marketing.

McMullen also further explained the importance of personalization, saying “By offering personalized savings, we can ensure customers get the right promotions at the right time, allowing us to get the most important return on our promotional spend while enhancing loyalty." 

[RELATED: Why Customer Experience Is the Crux of Grocery Loyalty]

Kroger's digital business had strong results in 2023, delivering more than $12 billion in sales. For 2024, the company expects to deliver another year of double-digit sales growth. 

Meanwhile, Kroger is also focused on enhancing the customer shopping experience and increasing store investments. Fresh is an important influence on where customers shop. With end-to-end fresh in more than 2,100 stores, Kroger is seeing higher produce sales and improving share. Beyond adding days of freshness, McMullen said that Kroger is expanding its assortment.

“Customers love our convenient in-store fresh-cut fruit program, and we will continue to expand the offering by introducing regional specialties and seasonal favorites,” he noted.

Interim CFO Todd Foley said that the company is planning on completing 30 major store projects in 2024. This includes "new stores, relocations and expansions with a focus on investments in higher-growth geographies that have a track record of delivering strong ROIC,” he explained. "To improve margins, 2024 investments will also enhance our supply chain, including expanding distribution center capacity and utilizing data and technology to optimize network efficiency.” 

Additionally, Kroger is testing new initiatives like customer pickup lockers, drive-thru lanes and AI-enabled store routing technology that will allow pickup associates to be more efficient. 

Merger Update

During Kroger's earnings call, McMullen also provided an update on its pending merger with Albertsons Co. 

The FTC, joined by several states, has recently sued to enjoin the merger. Two states, Washington and Colorado, have also sued separately. McMullen noted that the merger can't close while these actions are pending. 

"While we were disappointed about the FTC's recent attempt to challenge our merger, we were not surprised, given the current political environment," he said. "Our track record in previous mergers is clear: Kroger lowered prices, invested in associates, improved the customer experience and deepened its connections with the communities we serve."

He continues: "The character of a company is clear in its actions, regardless of what others claim."

While hearing dates have not yet bet set, McMullen expects them to proceed in mid- to late summer.

"We are committed to defending the merger and litigation, because we believe this is the best outcome for America's families," he said.