New shopping options, new jobs: What you need to know about Kroger's home delivery business
Coming this spring: the future of home delivery of groceries by Kroger.
Kroger announced Wednesday that the first of 20 customer fulfillment centers planned nationwide will begin delivering groceries from Monroe, a northern suburb of Cincinnati, offering shoppers what it promises will be an improved, more reliable and ultimately less expensive service.
Kroger officials gave The Cincinnati Enquirer, part of the USA TODAY Network, a look inside the new facility that it hopes will upgrade customers' experience and power further digital sales.
"It's another piece – a critical piece – to serving our customers anywhere they want, whenever they want," said Kroger CEO Rodney McMullen.
A giant concrete box off Hamilton Lebanon Road in Butler County, Kroger's new facility is powered by robots and is set up to process thousands of digital orders within a 90-mile radius – as far away as Dayton, Columbus, Indianapolis and Louisville.
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Company officials say the $55 million facility will serve as a "hub" to "spoke" operations that will be established in those cities. It's all part of a larger plan – first announced in 2018 – to build with U.K.-based partner Ocado a nationwide network of robotic warehouses to grow home delivery.
Kroger plans to open similar facilities in: Atlanta; Dallas; Frederick, Maryland; Groveland, Florida; Phoenix; Pleasant Prairie, Wisconsin; and Romulus, Michigan. It is also eyeing locations in the Pacific Northwest and Western states. As the network expands, Kroger will announce additional locations.
Early this year, Kroger revealed its digital shopping business more than doubled in 2020 to $10 billion, making the company as big an eCommerce player as eBay. Kroger has promised to double that by the end of 2023.
While most of Kroger's current digital business is customers clicking online to pickup groceries later in the parking lot, home delivery is growing faster – more than 150% last year.
Kroger has been testing the facility for the last month, delivering groceries to family members of associates. On Wednesday, Kroger officials disclosed a similar "soft opening" had begun at its second such facility in Groveland, Florida, an Orlando suburb.
That facility signals how serious Kroger is about growing digital: Kroger has one Harris Teeter store in Florida, but the company envisions the new facility serving markets from Tampa to Miami.
What does it mean for Kroger shoppers?
Kroger shoppers can already get groceries delivered to their homes across the country. Currently, most of that service is provided through Instacart and other third-party partners.
What's changing is Kroger taking over a huge chunk of its own deliveries. With the switch, the company says, it will improve the consistency and quality of service.
For the customer, that means you're not expected to tip the delivery driver who will show up in a Kroger branded truck and a bright blue uniform.
Customers could also save money as Kroger takes a hard look at its $9.95 delivery fee. The company is mulling lowering that for deliveries a few days in advance.
Shoppers will be able to fill their pantries, refrigerators and freezers with everything from Corn Flakes to ice cream, fresh produce or wine.
That driver will also be able to make on-the-spot adjustments to your order. They broke an egg? They'll give you a discount. Don't want the Diet Coke they swapped out for your Coke Zero Sugar? They'll leave that off and adjust your order.
McMullen doesn't see home delivery replacing brick-and-mortar stores. Instead, he envisions many customers' shopping habits evolving to where they buy staples like cereal or toilet paper for home delivery while continuing to shop for items like produce in person.
"Very few of our customers are digital-only," McMullen said. "Most people prefer to engage in multiple ways."
Jobs coming, but robots do the heavy-lifting
The service switch also means more jobs at Kroger – the company is actively hiring for the facility that will ultimately employ about 400. Its partner, Ocado, will also have other workers stationed at the facility.
While the facility is heavily automated – with about 1,000 robots – the machines are literally in-change of the heavy lifting. They lift, sort and shift hundreds of pounds of groceries kept at the facility, while several "personal shoppers" will assemble individual orders from bins brought to work stations by the bots.
Kroger is also hiring drivers for all the delivery vans that will be stationed at the facility.
What's it look like inside the facility?
Kroger officials are closely guarding the technology secrets inside the new facility. They wouldn't allow outside cameras.
Fortunately, it's not that photogenic. A 375,000-square-foot warehouse, Kroger's online store is a box about a third larger than an IKEA store. Inside, it looks – well, like a warehouse – concrete walls, bare metal beams.
In the middle of the facility is a multi-story, cubical shelf – dozens of yards wide and deep – that Kroger officials have dubbed "The Hive." It's filled with large plastic tubs that contain grocery items from every part of a store. There are refrigerated and frozen sections as well.
The view at the top of the Hive is what gives you the best sense of how it works. That's where the robots are.
Up top hundreds of robots – each about the size of a dorm-room refrigerator – zip back and forth on the top, then dive below into The Hive to retrieve bins of groceries.
The bots deliver the bins to workstations where personal shoppers assemble grocery orders, three at a time. Completed orders are routed toward shipping areas along the sides of the facility, where they are loaded onto trucks.
Kroger officials are tight-lipped about how much volume they expect the facility to handle. Its processing operations are divided into seven "modules" the company says can handle $80 million to $100 million in orders apiece. That suggests the facility could handle as much as $700 million in sales once fully up and running – but the company wouldn't provide a timeline for that happening.
Kroger acknowledges each delivery van carries 20 or more orders, and they expect the facility to use 200 to 250 vans. Spoke facilities in surrounding major cities may use 150 or more vans apiece.
In addition to Kroger stores, the grocer operates several regional supermarket chains in 35 states, including Fred Meyer, Harris Teeter, Ralphs, Mariano's, Fry's, Smith's, King Soopers, QFC and others. The company has nearly 2,800 stores and employs nearly 500,000 workers.
For the latest on Kroger, P&G, Fifth Third Bank and Cincinnati business, follow @alexcoolidge on Twitter.
This article originally appeared on Cincinnati Enquirer: Kroger commitment to growing home delivery brings new shopping options
