Grocers' Digital Efforts have Mixed Results
By Victoria Campisi, The Food Institute
Mar 11, 2019
Food sellers are racing to keep up with competition from Amazon.com and Walmart, as well as discount chains like Aldi.
Ever since Amazon's acquisition of Whole Foods, grocers started increasing their tech investments to compete. Some companies have been posting strong profits, such as Target, reported The Wall Street Journal (March 7). The retailer's digital sales rose 31% during the fourth quarter of 2018, while business in-store increased 3%.
This was Target's best year in over a decade, with a strong holiday shopping season, reported CNN Business (March 5). Sales at stores open at least a year grew 5% in 2018, the company's best since 2005.
"We have built a successful, durable model," Target CEO Brian Cornell told investors. "Every piece of our strategy is working."
At about 1,000 locations, customers are able to drive up and have packages brought out to their cars. Online shoppers can go to any Target store and pick up purchases the same day at no extra cost. Additionally, the company remodeled more than 300 locations last year and plans to improve 300 more in 2019, with the goal of having overhauled over 1,000 by the end of next year, reported USA Today (March 5).
Target stands out from overall weaker-than-expected sales in the industry during the holiday season. It is among the retailers doing well in improving their stores, lowering prices and speeding up online supply chains, but some are struggling to stay relevant, said CNN.
"As the shakeout in our industry continues, the separation between those who can afford to invest and those who can't is real," Cornell said.
Meanwhile, shares of Kroger fell after it released a disappointing fiscal 2019 outlook, according to WSJ. The grocer invested hundreds of millions of dollars in online operations that are weighing on profitability as it faces pressure to keep prices low.
Kroger's shares suffered some of the steepest drop in investor stocks after it was revealed that Amazon is planning to launch urban grocery stores.
"We understand we have our work cut out for us," CEO Rodney McMullen said in an interview.
Kroger's digital sales rose 58% during its most recent fiscal year, and the company is offering delivery or online pickup at 91% of its stores. Mr. McMullen said Kroger's product quality, improved digital offerings and extensive network of stores are helping it compete with Amazon and other retailers. The company operates almost 2,800 stores in 35 states and Washington, D.C.
Additionally, Kroger's margins took a hit during its most recent quarter because it sacrificed profit to keep prices down.
The company's investments...
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