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Kroger (KR) Launches New Highly Automated Fulfillment Center

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Growing digital dependency has propelled retailers such as The Kroger Co. (KR - Free Report) to come up with ambitious strategies to bolster online business model and omni-channel offerings. This well-known grocery retailer is launching a highly-advanced Customer Fulfillment Center (CFC).  The company’s new first-of-its-kind CFC in the United States is powered by Ocado’s leading e-commerce technology. The facility combines vertical integration, machine learning as well as robotics with efficient and affordable delivery services.

Efforts to Boost E-commerce Capabilities Bodes Well

The new CFC — based in Monroe, OH — measures 375,000 square feet and carries thousands of popular grocery products. The facility represents one of the models engineered for the flexible Kroger Delivery network. It also includes smaller facilities as well as spoke locations. The CFC is capable of supporting the fulfillment of pickup orders and can cater thousands of orders per day. The highly-automated fulfillment centre consists of more than a thousand bots that whizz around giant 3D grids through proprietary air-traffic control systems. The grid, also known as The Hive, consists of totes with products and ready-to-deliver customer orders.

Markedly, Kroger’s partnership with Ocado dates back to May 2018. Since then the companies have worked together for developing an advanced fulfillment ecosystem that helps meeting customers’ needs efficiently. The development of the new CFC in Monroe marks the next phase of this fruitful partnership.

We note that Kroger is scheduled to open a CFC in Groveland, FL, this spring. It also has plans to open CFCs in Dallas, TX; Frederick, MD; Phoenix, AZ and Forest Park, GA (Atlanta) among several others. The company is likely to keep adding facilities as its delivery network expands. Management highlights that its CFC network contributes toward developing a cost-effective supply chain and enhancing last-mile delivery solutions. Backed by efficient CFC operations, the company is expected to accelerate e-commerce capabilities and deliver a seamless customer shopping experience. Apart from these, the company plans to roll out components of its software solutions to stores to support fulfillment of curbside pickup orders.

Kroger recognizes its digital business as a crucial growth engine in this rapidly-evolving retail ecosystem. Markedly in 2020, the company’s digital business scaled up more than $10 billion, and achieved a record online sales increase of 116%. The continued momentum in digital demand makes its necessary for Kroger to strengthen fulfillment capabilities so that consumers’ needs are met efficiently.


 

In addition to the expansion of fulfillment centers, the company has been on track to boost online assortments, especially by adding more fresh items. Moreover, it focuses on expanding pick up in store facilities for online orders along with providing contact-free payment solutions like Scan, Bag and Go and Kroger Pay. It also provides digital coupons and smart shopping lists to attract greater online traffic. The company also started accepting Supplemental Nutrition Assistance Program (SNAP) benefits for pickup orders. It also makes use of Nuro’s fully autonomous, driverless vehicles for grocery delivery services. Other retailers, who have been focusing heavily on boosting omni-channel capabilities, are Target Corporation (TGT - Free Report) , Walmart Inc. (WMT - Free Report) and Best Buy Co., Inc. (BBY - Free Report) .

Clearly, Kroger is undertaking prudent steps to maintain its position as one of the leading omni-channel grocery retailers.  Through well-chalked investments, the company plans to convert the strong digital sales momentum witnessed amid the pandemic into long-term competitive advantages. Such efforts keep the company well placed for growth in the forthcoming periods. Shares of this Zacks Rank #3 (Hold) company have gained 10.5% in the past three months against the industry’s decline of 3%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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