Kroger Shifts E-Commerce Strategy by Closing Fulfillment Centers
Growth in E-Commerce Sales Kroger has experienced a 16% increase in e-commerce sales and has reported five consecutive quarters of double-digit growth in this sector. These centers were part of Kroger's initial foray into automated e-commerce fulfillment, launched in partnership with Ocado in 2018. Specifically, the facilities in Austin, San Antonio, and Miami will cease operations by the end of May 2024.
Kroger has announced plans to close three automated fulfillment centers in January, marking a significant shift in its e-commerce strategy. The company is redirecting its efforts towards in-store fulfillment strategies and expanding partnerships with third-party e-commerce providers.
Closure of Fulfillment Centers
The three fulfillment centers scheduled for closure are located in Texas and Florida. Specifically, the facilities in Austin, San Antonio, and Miami will cease operations by the end of May 2024. These closures are part of Kroger's broader initiative to optimize its e-commerce operations by focusing on in-store fulfillment options.
"Kroger is committed to adapting its business model to better meet customer needs and optimize operational efficiency," a company spokesperson stated regarding the upcoming closures.
Background on Fulfillment Centers
Each of the affected centers has been operational for a relatively short period. The Austin and Miami facilities opened in 2023, while the San Antonio location began operations in August 2022. These centers were part of Kroger's initial foray into automated e-commerce fulfillment, launched in partnership with Ocado in 2018.
The Groveland Customer Fulfillment Center (CFC), which opened in June 2021, and the Pleasant Prairie CFC, operational since June 2022, are also among the centers that will be closing. The Frederick CFC, opened as recently as June 2023, is included in the list of closures.
Shifting E-Commerce Strategy
Kroger's partnership with Ocado was established to enhance its e-commerce capabilities through the development of automated fulfillment centers. Despite the closures, Ocado plans to open two new CFCs by fiscal 2026, indicating ongoing collaboration between the two entities.
In addition to these changes, Kroger is set to pilot store-based automation, which is expected to streamline the process of fulfilling online orders directly from retail locations. This approach is intended to leverage existing store infrastructure to meet the growing demand for online shopping.
Growth in E-Commerce Sales
Kroger has experienced a 16% increase in e-commerce sales and has reported five consecutive quarters of double-digit growth in this sector. E-commerce sales were a significant contributor to the company's growth in the second quarter of the current fiscal year. The shift towards in-store fulfillment and expanded third-party partnerships is aimed at sustaining this upward trajectory.
As the company navigates these strategic changes, it remains focused on enhancing the customer experience and meeting the evolving expectations of online shoppers. The closure of the fulfillment centers is a decisive step towards realigning Kroger's resources in response to market trends and operational insights.