Kroger Tests New E-Grocery Site

The Kroger Co., the nation's largest supermarket chain, has begun testing an e-commerce site, MNB has learned. The site eventually could be rolled out to all of its banners nationwide, though at the moment it is limited to a one-store experiment that started this week and is being used only by associates.

For the moment the site is called HomeShop, a name that has some resonance for Kroger since it has been used for a home shopping service offered by its King Soopers division on a limited basis for a number of years, even predating the internet. However, Kroger says that it is likely the name will change as the e-commerce program evolves.

Yesterday, the test site could be found at both Kroger.com/homeshop andKroger.com/comingsoon, but last evening, after MNB spoke with Kroger about the test, the sites were taken down. However, a screen grab of the HomeShop home page can be seen at left.

The test site makes it clear that Kroger is focusing on a store-pick/customer pickup model, calling it "Click & Collect," a name that has been used successfully by Harris Teeter, recently acquired by Kroger, in its Express Lane program.

Keith Dailey, Kroger's director of media relations and corporate communications, said last night that learnings from Harris Teeter jump-started its e-commerce technology and marketing plans. He also said that while Harris Teeter has used MyWebGrocer to power its e-commerce operations, Kroger is using a combination of internal talent and outside companies to develop its site, though he declined to name the outside firms involved. (Full disclosure: MyWebGrocer is a longtime and valued MNB sponsor.)

In an email, Dailey elaborated: "A shop online, pick up in the store model is an exciting opportunity for Kroger and our customers. As you know Harris Teeter has successfully scaled this model in their stores and we are learning a lot from them about it. Our approach with new technologies and systems is to test small and work out the kinks before scaling more widely. We are in the embryonic stages of a click and collect test at a Cincinnati-area store – so early in fact that we just started testing with our associates. We are excited about the potential here and the best I can tell you on timing is to stay tuned."

Kroger is not saying how many SKUs it is making available on the site. While Dailey said that there is a timeline and benchmarks by which Kroger will evaluate its successes, he declined to say what they are.

KC's View: This was not a matter of if. It always was a matter of when. Now we know.

I'm actually a little surprised that it took this long. Kroger had to be a little concerned that companies such as Amazon and Walmart were getting too much of a head start, but senior management at Kroger always has known that it was going to have to get into the e-commerce game, and it has been studying the competition for years, looking for points of opportunity and differentiation.

Lately, if you were paying attention, you could tell that the momentum was picking up … CEO Rodney McMullen was talking about the necessity of investing in e-commerce, the Harris Teeter acquisition put Kroger's online efforts on the fast track, and then the acquisition of Vitacost, an e-commerce site, put another arrow in Kroger's quiver.

What makes this interesting is the way in which Kroger is assembling the pieces of the omnichannel puzzle - it has a variety of bricks-and-mortar formats, it is testing click-and-collect services with a move toward expansion, and then the Vitacost element allows people to order online and have products shipped to their homes or offices via FedEx, UPS or the USPS. Options for everyone.

Add to this the fact that Kroger has an enormous amount of data collected via Dunnhumby, which will allow it to know precisely which customers will respond to which offerings. For example, if it knows the identity of customers that order 40 pound bags of dog food or enormous boxes of diapers, it can target those shoppers as potential online customers, but mix things up with other offerings - all in the quest to be relevant. It won't be the same for everybody, but that's okay with Kroger. In fact, it thrives on making different offers to different people.

That's pretty powerful.

It seems to me that retailers competing with Kroger now know what the task at hand is, because HomeShop - or whatever Kroger chooses to call it down the line - is coming. They better take a page from the omnichannel/relevance book and get busy, or define their other differential advantages clearly and explicitly.

I'm not even sure if it is enough to do it soon. They should have started doing it yesterday.

Just like Kroger.