Kroger CEO on the future of retail: 'People will always eat, but the way people will eat will always change'
"We knew at some point that Amazon was going to do something in the physical world. We knew we needed to accelerate where we were," McMullen told delegates at the NRF (National Retail Federation) 2019 show.
And accelerate Kroger has. Last year was busy for the retailer as it struck a partnership with Ocado and acquired meal kit company Home Chef for $200m, bringing meal kits into brick and mortar locations. This past week, Kroger announced a partnership with Microsoft to create a tech-enabled store solution that can be packaged and sold to other retailers. Kroger is currently testing the solution in two pilot stores in Washington and Ohio, which feature an enhanced version of Kroger’s Edge display powered by Microsoft Azure, which digitally show prices, sales and nutritional information.
"All of those will significantly accelerate the journey to be able to offer the customer a curated experience and an incredibly efficient experience as well," said McMullen.
"There's never an easy time to do anything, once you can obviously see it, then it's too late so you better be predicting and anticipating where the customer is going."
Here are five more industry shifts, Kroger is keeping an eye on:
1. Retail won't go away
The industry experiences disruption and transformation every few years, but the pace of change has accelerated, according Kroger.
“Leaders in the industry must be willing to not only accept and react to change, but also transform their growth model,” the retailer said.
2. Retail will be digital and physical
Technology and digital are already mainstays of today's retail; however, in the future of retail, customers will not spend meaningful time thinking about physical vs. digital, according to Kroger.
"Customers will always choose the shopping modality – whether physical or digital – that will deliver anything, anytime and anywhere," the retailer forecasted.
3. Retail will offer new solutions to customers
Retailers will create solutions on customers' terms, Kroger predicted.
“If you think about customers, they want anything they want, any time they want, anywhere they want,” McMullen said.
Kroger is building an ecosystem that offers a variety of modalities, including brick and mortar, delivery, pick up and ship.
“Our test with Walgreens will allow us to accelerate the number of places where customers can pick up and get a Kroger express experience,” McMullen added.
4. Retail will be purpose-driven
Retail will solve problems not only for customers, but also for communities and the planet.
"Stakeholders are increasingly deciding which businesses to support based on shared values and clarity of purpose. Because of Kroger's Zero Hunger | Zero Waste commitments by 2025, the company decided to phase out use-once, throw-it-away plastic bags and transition to reusable bags in its stores on the same timeline," Kroger said.
5. Retail will disrupt the ad industry
Advertisers spend $100bn annually today, and retailers are uniquely positioned to know how customers behave and react to those marketing messages, added Kroger.
Taking note of this industry trend, Kroger introduced Kroger Precision Marketing, powered by 84.51°. Kroger Precision Marketing provides consumer packaged goods (CPG) advertisers the ability to reach Kroger's more than 60 million customers through its ecosystem more precisely with measurable results.
McMullen also emphasized Kroger's private label "Our Brands" product portfolio which has become one of the most profitable parts of Kroger's business.
Kroger's Simple Truth brand launched six years ago and has now become the largest natural and organic brand in the US, topping more than $2bn in sales annually, according to the retailer.
McMullen added that Kroger will continue to seek out partnerships with other industry stakeholders in order to anticipate consumers' retail needs.
“We are in the middle of transforming the business to a growth company. It’s one of things you can’t do over night," McMullen said.
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