Kroger, Microsoft Create Futuristic Grocery Store. Amazon, Take Note

The supermarket chain and technology giant are using the cloud to make it faster to navigate the grocery aisles and pick up online orders.


By Matthew Boyle and Dina Bass, Bloomberg

January 7, 2019


Kroger Co. and Microsoft Corp. are joining forces to bring the ease of online shopping to brick-and-mortar grocery stores.


Kroger, America’s biggest supermarket chain, has remodeled two stores to test out the new features, which include “digital shelves” that can show ads and change prices on the fly along with a network of sensors that keep track of products and help speed shoppers through the aisles. Kroger could eventually roll out the cloud-based system it developed with Microsoft in all of its 2,780 supermarkets.


The alliance is the latest example of how big U.S. retailers are deploying data-rich technology to improve the often-tedious ritual of food shopping and keep pace with Inc., which is bent on grabbing a bigger share of the $860 billion U.S. food retail market. For Microsoft the deal helps grow its cloud business, which lags behind Amazon’s but has found willing customers like Kroger and Walmart Inc., which are loath to line the pockets of Jeff Bezos. Kroger also hopes to sell the technology to other retailers, potentially opening up a new revenue stream with fatter profit margins than selling groceries.


“Together we can create something that, separately, we could not,” Kroger Chief Executive Officer Rodney McMullen said in a joint interview with Microsoft chief Satya Nadella.


The two companies have worked on projects before but deepened their collaboration over the last 18 months. The digital shelving system debuted in the fall and can now be found at the end of the aisles at 92 Kroger locations. At the two test stores, located near Kroger and Microsoft’s respective headquarters in Cincinnati and Redmond, Washington, customers using Kroger’s self-checkout app will be guided through the store to items on their shopping list. When they enter an aisle, the digital shelf will display a personalized icon chosen by the shopper—a  banana, say, or a pumpkin—below the relevant product.


Amazon already grabs about 50 cents of every dollar spent online, but that dominance doesn’t yet extend to groceries, which are still mainly bought in stores. To break into the market, Amazon acquired upscale grocer Whole Foods Market, a deal that sent Kroger’s shares plummeting. The e-commerce king now offers free grocery deliveries from Whole Foods stores for its Prime customers in 60 U.S. cities, and its growing network of cashierless Go convenience stores have also taken a bite out of supermarket sales.


At the test store 10 minutes from Microsoft headquarters, a little more than half of the shelves have been converted into digital displays that light up with a personalized icon when shoppers reach an item they put on the shopping list in the Kroger app. Ellipse-shaped black-and-white devices that look like a cross between a camera and a smoke detector are mounted on ceilings, crunching data and monitoring for out-of-stock items. In a refrigerated meat case, temperature sensors appear every few feet, automatically flagging workers if the case warms up too much, helping prevent  the roughly $10,000 worth of meat inside from spoiling.


The smart shelves light up to...