For literally decades, Kroger has been determined to gather, combine, review, and use as much customer data as possible. It even funded and established a partner analytics firm called Dunnhumby, with the primary purpose of finding new ways to leverage the big data that just keep growing in volume and velocity. Those efforts gave Kroger some early benefits, including insights into shoppers’ in-store behaviors, coupon preferences, and brand loyalty. But as valuable as those outcomes were, they really were just the beginning.
Today, Kroger’s lengthy dedication to data has become a key source of its sustainable competitive advantage—or what its CEO Rodney McMullen calls a competitive moat. The extensive data it gathers and the careful methods it uses to analyze and process them enable Kroger to offer more personalized, precise promotions to every customer it encounters. Because shoppers know that any communication they get from Kroger will be relevant and interesting to them, its promotional emails prompt 18 percent more clicks to open than the average click rate achieved on direct emails sent by other grocers. In digital channels, a remarkable 95 percent of all interactions are personalized to the specific consumer. That is, when shoppers open the Kroger app or visit the website, they are going to see content that already has been curated and designed to appeal specifically to them.
Those personalized recommendations, delivered through a range of communication channels, numbered approximately half a trillion (that’s trillion with a T) in 2020. In response, consumers exhibited their preference for Kroger in various ways, according to nearly every metric that modern grocers use. Consider the following:
- Same-store sales rose by 14.1 percent.
- Online sales soared by 116 percent.
- Sales of Kroger private-label brands increased by 13.6 percent.
- Operating profits reached $2.8 billion.
Perhaps most remarkably, Kroger believes it can surpass even these astounding performance benchmarks. By expanding access to its delivery service, Kroger now can reach an estimated 98 percent of the households that shop with it, meaning that it has the capacity to grow profits in this convenient channel. Furthermore, the digital sales channels continued to expand and perform well, even as pandemic-related lockdowns eased, implying that room for growth also remains available in online, mobile, and other digital shopping channels. Kroger thus announced plans, seemingly attainable, to double its digital revenue by 2023.
Is there anything to stop it? Kroger is committed to a long-term plan, based in sophisticated customer data that it gathers better than any competitor. It already has vast resources, in the form of data warehouses, and its objective is to keep making them better.
Discussion Questions:
- Is Kroger’s head start with regard to data gathering and market analysis insurmountable? That is, how can other grocers compete with Kroger if it knows more than they do?
- What other metrics might be important for Kroger to consider, and how can data analytics help it achieve success in those terms as well?
Source: George Anderson, “Kroger CEO Says No One Has the ‘Data and Insights’ that It Has,” Retail Wire, April 2, 2021