Dive Brief:
- Kroger plans to extend its online grocery business to Oklahoma City through the addition of a "spoke" e-commerce center set to open later in 2022, the retailer announced on Thursday.
- The new facility will serve as a cross-dock, routing orders to customers after receiving them from an automated warehouse Kroger is building in Dallas in collaboration with Ocado.
- Kroger's new e-grocery site in Oklahoma will give it a foothold in another state where it does not currently have stores but is looking to win market share through online service.
Dive Insight:
The upcoming Oklahoma City expansion represents the latest development in Kroger's multi-year effort to build scale and market share in the online grocery space through its growing network of automated fulfillment centers.
The grocer's Oklahoma City spoke distribution center, at 8801 N. I-35 Service Road, will span 50,000 square feet and allow Kroger to reach customers as far as 200 miles away from its robotic hub in Dallas. The two cities are directly linked by Interstate 35, paving the way for trucks to efficiently travel between the two facilities.
Kroger is arriving in Oklahoma with an online-only playbook that resembles the approach it took when it put down roots in Florida, where it inaugurated service in several areas last year solely through e-commerce.
In Florida, where it does not have brick-and-mortar supermarkets, Kroger is providing grocery delivery around its Groveland robotic hub with spoke sites in Jacksonville and Tampa. The company is developing two automated fulfillment centers in South Florida, which will directly serve customers in that part of the state.
Kroger is also planning to use its hub-and-spoke method to bring groceries to customers in Louisville, Kentucky, where it expects to launch delivery service later this year using a facility served by its automated hub in Monroe, Ohio. In December, Kroger started providing service to e-commerce customers in Indianapolis through a spoke facility in that city that also receives orders prepared at the Ohio shed.
Kroger's decision to enter the Oklahoma City market is connected with the retailer's goal of doubling its online sales and profitability rate by the end of next year, according to the announcement. While the company's online sales have continued to grow at a fast clip in recent months, the pace has slowed as shoppers increasingly return to physical grocery stores.
When it reported its third-quarter earnings in December, Kroger said its digital sales rose 103% on a two-year stack. That was down from 114% for the same metric reported in the previous quarter.
