Dive Brief:

• Kroger has broken into the list of top 10 online companies ranked by annual sales, according to eMarketer. The company, which is the only conventional grocer in the list, occupies the No. 9 slot with $11.28 billion in estimated e-commerce sales for 2020.
• This is the first time Kroger, whose e-commerce sales will increase an estimated 79% this year, has made the top 10 list, eMarketer said. And it’s not the only one: Target now claims the No. 7 slot with more than $13 billion in sales, buoyed by the strong performance of its same-day services.
• “Kroger will benefit from two tailwinds this year: Eating at home continues to be in favor among Americans, and there’s been greater interest by consumers in ordering groceries online,” said Cindy Liu, eMarketer senior forecasting analyst at Insider Intelligence, in the announcement.

Dive Insight:

Kroger’s elevation among e-commerce retailers reflects the grocery industry’s fortunes during the pandemic. But it also reflects Kroger’s scale and the fact that it was well prepared to handle the dramatic spike in orders that began early this year and is still holding strong.

The Cincinnati-based grocer offers same-day delivery from more than 2,400 stores, representing the vast majority of its locations. It also, crucially, offered pickup from more than 2,000 stores at a time when many competing retailers didn’t offer the service at scale — a discrepancy many have moved swiftly to remedy. Altogether, Kroger’s same-day services reach 97% of its customers, Liu said.

Kroger’s large assortment and stores have become significant advantages as shoppers consolidate trips. The company’s digital ad revenue is also booming. Kroger Precision Marketing, which produces advertising and promotions for companies using customer data, saw sales increase 190% in the most recent financial quarter.

Digital sales increased 108% for Kroger during Q3, contributing to nearly half of the company’s same-store sales growth during the period as online sales interest remains high.

Online sales have grown across industries as consumers have tried to lower their exposure risk to the novel coronavirus, though grocery has become a standout performer. Kroger overtook Macy’s in eMarketer’s ranking as apparel sales declined while Target’s same-day offering, including Shipt delivery and pickup service that now includes fresh and frozen grocery items, powered its rise. The number one retailer by far in the ranking, Amazon, will bring in an estimated $309.58 billion in e-commerce sales, dwarfing nearest competitor Walmart at an estimated $46.2 billion in sales.

Kroger executives have said online channels, including its evolving ship-to-home service, have funneled new customers into its ecosystem, and that the company will fight to retain those customers as the pandemic subsides and food consumption habits shift. Kroger is also addressing the high costs of online fulfillment through technology and process changes like automation. Chief Financial Officer Gary Millerchip said during the company's Q3 earnings call that digital sales are incrementally profitable, though that calculation includes digital media sales, which are unrelated to fulfillment.