Kroger, the largest U.S. supermarket chain, has done what was once deemed impossible: expanding its business into its 36th state without opening any stores.
Instead of setting up a traditional brick-and-mortar store, the Cincinnati-based grocery chain with more than 2,700 U.S. stores opened up an industrial hub in Oklahoma City that will deliver groceries directly to customer's homes through online and app orders and delivery.
The hub — Kroger's first in Oklahoma — serves as a last-mile delivery facility that gets its good from an advanced robotics warehouse in Dallas about 200 miles away.
The new Ocado-automated facility, which opened in November at 8801 N. I-35 Service Road in Oklahoma City, is part of how Kroger plans to "step into a market" and could become a bigger part of the grocer's future, said Rita Williams, Kroger's director of economic development, during a panel at ICSC@Red River held at the convention center in downtown Dallas.
"We have fulfillment centers in various locations — right now we have over 10 fulfillment centers as we build out our ecosystem — the fulfillment centers will essentially put together an order in less than four minutes with the help of [artificial intelligence] and the baskets delivered on a refrigerated delivery trucks," Williams told the audience. "You can get your ice cream, along with your Cheerios. I've been doing it for two years and I don't know how I did it before home delivery."
Williams, who told CoStar News following the panel she expects it to be "business as usual" as Kroger moves forward in the process of merging with rival Albertsons, and her team are leading Kroger's supply chain expansion plans. Including the Oklahoma City facility, Kroger has automated so-called spoke facilities in Florida in Miami, Tampa and Jacksonville, and in Texas in Austin and San Antonio, as well as in Alabama, Indiana, Kentucky and Ohio.
The future of the grocery business is found in technology, Williams said, even as Kroger seeks to pair the ease of e-commerce for its customers with the experience of browsing for groceries and goods in the store. Kroger is also testing other innovations, including autonomous delivery of groceries in Phoenix and the possibility of drone delivery. However, Williams said the products could be limited given it would be difficult to fly a case of water bottles by drone to clients.
Douglas Munson, the founding principal at MTN Retail Advisors, who also spoke on the panel, said there's no one-size-fits-all answer to the future of the grocery industry. Some customers want to buy groceries at the same time they pick up dinner at a restaurant or have a craft beer at a beer garden, he said, while other customers with limited time to shop may rely more heavily on delivery or grocery pick up.
With grocery stores having the ability to pull in millions of visitors each week, Munson said, "as the grocery store goes, so does the shopping center," with the demand for grocery-anchored centers being an even greater draw since the beginning of the pandemic.
"The future will be technology, but I also see grocers going back to their fundamentals," Munson added.